Canada: Constructive Dismissal In The COVID-19 Era

On June 7, 2021 the Ontario Superior Court of Justice released its second decision in a matter of months interpreting Ontario Regulation 228/20: Infectious Disease Emergency Leave ("IDEL Regulation")¹ as it relates to common law constructive dismissal claims in Ontario. However, the decision may have confused, rather than clarified the law.

The IDEL Regulation came into force on May 29, 2020, under Ontario's Employment Standards Act (ESA).² The IDEL Regulation establishes, with certain exceptions, that a temporary reduction or elimination of an employee's hours of work for reasons related to COVID-19 during the prescribed COVID-19 period³ will not be considered a layoff or constructive dismissal under the ESA.⁴

The interpretation of the IDEL Regulation as it relates to common law constructive dismissal claims has been considered in two decisions of the Ontario Superior Court of Justice: Coutinho v Ocular Health Centre Ltd⁵ released on April 27, 2021; and Taylor v Hanley Hospitality Inc⁶ released June 7, 2021. In Coutinho the Court held that the IDEL Regulation did not preclude a claim for constructive dismissal at common law, but the Court in Taylor came to the opposite conclusion. We review both cases below.

Coutinho

On May 29, 2020, the day the IDEL Regulation was filed, the plaintiff, Jessica Coutinho, was told that she was being temporarily laid off by her employer, Ocular Health Centre Ltd. By that point her office, an ophthalmic clinic, had been closed for almost a month. Coutinho subsequently sued Ocular Health, seeking damages for constructive dismissal and punitive or aggravated damages.

On a motion for summary judgment, Ocular Health argued that it closed its office due to legitimate concerns that its doctors were not complying with physical distancing guidelines, which resulted in the elimination of Coutinho's hours of work. It further argued that this constituted a temporary elimination of work for reasons related to COVID-19 for the purposes of the IDEL Regulation, and that it could not constitute a constructive dismissal. Coutinho maintained that the IDEL Regulation could not override her common law rights and that her constructive dismissal claim was valid.

The Court found that the IDEL Regulation did not affect Coutinho's right to pursue a claim for constructive dismissal against Ocular Health at common law. The Court cited subsection 8(1) of the ESA to support its conclusion. Subsection 8(1) states that "... no civil remedy of an employee against his or her employer is affected by this Act."⁷ The Court also consulted an Ontario Ministry of Labour, Training and Skills Development Guide as extrinsic evidence of the Ministry's intention for promulgating the IDEL Regulation. In the Court's view the following passage from the Guide regarding the IDEL Regulation supported its conclusion: "[t]he rules affect only what constitutes a constructive dismissal under the ESA. These rules do not address what constitutes a constructive dismissal at common law."

The Court held that the layoff notice provided to Coutinho constituted a constructive dismissal and Coutinho was not barred by the IDEL Regulation from bringing an action against Ocular Health at common law.

Taylor

In Taylor, Candace Taylor was temporarily laid off from her employment at Tim Hortons (run by the defendant, Hanley Hospitality) beginning on March 27, 2020. She was recalled and returned to work September 3, 2020. Taylor brought a constructive dismissal claim against Hanley Hospitality due to her temporary layoff. Like Coutinho, Taylor argued that the IDEL Regulation did not displace the common law and did not preclude a common law constructive dismissal action. Hanley Hospitality disagreed and brought a Rule 21 motion.

The Ontario Superior Court of Justice found for Hanley Hospitality and dismissed the action. The Court held that Coutinho was "wrong in law" and was not binding. The Court stated that all temporary layoffs relating to COVID-19 are deemed to be IDELs during the COVID-19 period. As a result, Taylor was deemed not to be laid off for all purposes and was not constructively dismissed for all purposes. The Court noted that it would be an absurd result if an employee could be on a leave of absence for ESA purposes pursuant to the IDEL Regulation, but terminated by constructive dismissal for common law purposes. Taylor's common law constructive dismissal claim consequently failed.

The Court also considered subsection 8(1) of the ESA in its reasons, and stated that it should not (and has never been, before Coutinho) interpreted as preventing the ESA from displacing the common law. The subsection merely confirms that the ESA is not the exclusive forum to address matters set out in the ESA. Furthermore, the Court held that the IDEL Regulation was designed to solve the problem created when the state of emergency was triggered, requiring employers to close or curtail their operations as a result of COVID-19. The result would have been many temporary layoffs and employer exposure to countless constructive dismissal claims. In the Court's view, the intention was for the IDEL Regulation to eliminate the employers' exposure by converting temporary layoffs related to COVID-19 into leaves of absences.

Next Steps

Ontario now has two conflicting opinions regarding whether the IDEL Regulation precludes a common law constructive dismissal claim. Furthermore, neither decision is binding on other Superior Court judges. Therefore, it may be up to the Court of Appeal to bring clarity to the law.

To find the latest constructive dismissal decisions in Ontario and throughout Canada, consult Blue J's Constructive Dismissal Decision Finder on our Blue J L & E platform.

Footnotes