As discussed previously on our blog here, on May 29, 2020, Ontario Regulation 228/20 (“the Regulation”) was passed under the Employment Standards Act, 2000 (“ESA”), which provides that temporary layoffs, including a temporary reduction or elimination of hours or a reduction of wages due to COVID-19 during the COVID-19 period, does not constitute a constructive dismissal under the ESA.
However, on April 27, 2021, the Superior Court of Justice, in Coutinho v Ocular Health Centre Ltd., (“Coutinho”) found that the Regulation does not affect an employees’ rights under the common law to claim constructive dismissal for unilaterally imposed temporary layoffs. This was discussed previously on our blog here.
On June 7, 2021 the Ontario Superior Court of Justice in Taylor v Hanley Hospitality (“Hanley”), contradicted the decision in Coutinho by ruling that an employee deemed to be on an Infectious Disease Emergency Leave (IDEL) under the Regulation has not been constructively dismissed at common law. As a result, the Court in Hanley found that the Regulation displaced the common law which provides that in most cases a temporary layoff is a constructive dismissal. As a result of Hanley, we now have two competing decisions in Ontario regarding whether the Regulation displaces the common law of constructive dismissal as it pertains to temporary layoffs that are deemed to be IDEL.
On March 27, 2020 Candace Taylor (“Taylor”) was temporarily laid off from her employment with Hanley Hospitality. On September 3, 2020 Taylor returned to her employment with Hanley Hospitality after being recalled. There was no disagreement that the reason for the unilaterally imposed layoff was due to the impact of COVID-19. Taylor argued that her temporary layoff should be deemed a constructive dismissal because the Regulation does not displace the common law doctrine that a layoff is a constructive dismissal.
Hanley Hospitality, relied on the Regulation and its provision that a temporary reduction or elimination of an employee’s hours for reasons related to COVID-19 during the COVID-19 period does not constitute a constructive dismissal. Furthermore, Hanley Hospitality argued that the court is not bound by Coutinho as it is wrong in law in finding an employee on IDEL under the Regulation was constructively dismissed.
As mentioned above, Justice Ferguson agreed with Hanley Hospitality and found that the layoff did not constitute a constructive dismissal at common law. In coming to this conclusion, Justice Ferguson held it would be wrong to follow the position in Coutinho as the Ontario government, in passing the Regulation, recognized the inherent unfairness in subjecting employers to wrongful dismissal claims as a result of the government imposing a state of emergency.
Implications for Employers
The decision in Hanley is persuasive in confirming that the Regulation precludes an employee from claiming that they have been constructively dismissed at common law when an employer imposes a temporary layoff under IDEL for reasons related to COVID-19 during the COVID-19 period. However, given the two (2) conflicting decisions, there is still uncertainty regarding the law on this issue. Accordingly, employers will need to wait for an appellate decision before they can determine the potential liability they may face when considering temporary layoffs, or reducing employees’ working hours or pay for reasons related to COVID-19.
The foregoing is for informational purposes only and should in no way be relied upon as legal advice. For legal advice tailored to your circumstances and business, please contact any of SOM LLP’s lawyers by email or telephone.