For what is not the first time and will not be the last time in Ontario employment law, two different judges of the Ontario Superior Court of Justice have issued conflicting decisions – this time with respect to whether reducing or eliminating an employee's wages and/or hours during the COVID-19 pandemic, in response to the pandemic, amounts to a constructive dismissal under the common law.
In Ontario, termination entitlements are determined via two sources: legislation or the "common law" (if an employee's entitlements have not validly been limited to statutory minimums). The common law is not based on written guidelines but instead on prior decisions. On May 29, 2020, the Ontario government enacted O. Reg. 228/20 Infectious Disease Emergency Leave(the "IDEL Regulation"), a regulation that retroactively established an Infectious Disease Emergency Leave ("IDEL") during the "COVID-19 period" (i.e. from March 1, 2020, and most recently extended to September 25, 2021). Ontario's minimum standards legislation, the Employment Standards Act, 2000, S.O. 2000, c. 41, was amended to preclude a claim for a statutory constructive dismissal during an IDEL. Therefore, while it was clear that an employee could not pursue a constructive dismissal claim under the ESA for COVID-related reductions in wages and/or hours, it was unclear whether they could still pursue one under the common law.
On April 27, 2021, Justice D.A. Broad of the Ontario Superior Court rendered Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 [Coutinho], a summary judgment decision favourable to employees. After reviewing the relevant IDEL Regulation and ESA provisions, Justice Broad found that the IDEL regulation would apply if the following five conditions were satisfied:
- The employee is not represented by a trade union;
- The employee is subject to a temporary reduction or elimination in hours of work and/or wages;
- It must be the employer that temporarily reduces or eliminates the employees' hours of work and/or wages;
- The temporary reduction or elimination of the employees' hours of work and/or wages must have occurred for reasons related to COVID-19; and
- The above four conditions must occur during the defined COVID-19 period.
In our opinion, based on the wording of the statute, the above five conditions to trigger an IDEL will likely be upheld.
Justice Broad in Coutinho held that absent an agreement to the contrary, a unilateral layoff by an employer amounts to a constructive dismissal. He relied on:
- Section 8(1) of the ESA, which says that "subject to section 97 [when employees cannot commence civil proceedings for the same matter], no civil remedy of an employee against his or her employer is affected by this Act";
- An online publication of the Ontario Ministry of Labour, Training and Skills Development which explicitly noted that the IDEL Regulation affects "only what constitutes a constructive dismissal under the ESA"; and
- The pre-COVID-19 decision Elsegood v. Cambridge Spring Service 2002 Ltd., 2011 ONCA O.J. No. 6095, which held that absent an agreement to the contrary, an indefinite leave can amount to a termination under the common law.
In Coutinho, despitefully mitigating (i.e. eliminating) her common law damages, the employee was entitled to her statutory minimums for termination.
In contrast, on June 7, 2021, Justice J.E. Ferguson of the Ontario Superior Court of Justice rendered Taylor v Hanley Hospitality Inc., 2021 ONSC 3135 ("Taylor") which explicitly and firmly rejected Coutinho and held that an employee could not pursue a common law claim for constructive dismissal if the employee had properly been placed on an IDEL at any time during the COVID-19 period (as the amendments applied retroactively).
Justice Ferguson relied on the following:
- He was of the view that the IDEL Regulation was enacted to ameliorate the impact of the government's own legislation causing businesses to temporarily close or cut back their operations due to an unprecedented modern pandemic;
- Elsegood held that statutes can displace the common law and the common law does not operate independently of the ESA;
- If the common law was independent, he believed that the common law should evolve due to the unprecedented regulations and impact on businesses; and
- He dismissed s.8(1) of the ESA as merely confirming that the ESA was not the exclusive forum to seek redress for ESA violations.
Notably, Justice Ferguson did not address the Ministry's online publication. Accordingly, all temporary layoffs relating to COVID-19 (retroactive to March 1, 2020) were deemed to be a statutory leave (IDEL) and therefore subject to leave related rights (e.g. reinstatement rights, benefits continuance). If the conditions for an IDEL leave were met, a common-law termination did not occur.
While employers and management personnel will no doubt be happy with the Taylor decision, we would advise organizations to proceed with caution until the Ontario Court of Appeal provides some much-needed clarity and guidance. It does not appear that either decision has been appealed yet.
The Superior Court of Justice has now rendered directly conflicting decisions.
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