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May 16, 2022

Ontario Court of Appeal Dodges Determining Whether IDEL Layoff is Constructive Dismissal

Author Todd Weisberg

Ontario employers have been waiting for certainty on whether the Infectious Disease Emergency Leave (“IDEL”) displaces laid off employees’ rights to claim constructive dismissal under the common law. Unfortunately, employers will have to continue to wait as the Ontario Court of Appeal (“ONCA”)  in  Taylor v. Hanley Hospitality (“Hanley”), declined to address the substantive issue of whether employees placed on IDEL can claim common law constructive dismissal.  

The IDEL was introduced in May 2020 by Ontario Regulation 228/20 (“Regulation”), under the Employment Standards Act (“ESA”) in response to the economic shutdowns caused by the COVID-19 pandemic. When an employee is deemed to be on IDEL under s. 50 of the Regulation, they are not considered to be laid off or constructively dismissed under the ESA. However, whether the Regulation also means that an employee is not considered constructively dismissed under the common law has remained a topic of debate.

As we have written about previously, Ontario courts have dealt with the IDEL as a constructive dismissal question twice thus far.  Once in Coutinho v. Ocular Health Centre Ltd. (“Coutinho”) where the Ontario Superior Court found that the Regulation did not impact employees’ ability to claim common law constructive dismissal.

Conversely, in the Superior Court decision in Hanley, the Ontario Superior Court came to the opposite conclusion in finding the Regulation did in fact supersede employees’ common law rights. In Hanley, the employee Candace Taylor (“Taylor”) had been temporarily laid off in March 2020 as a result of the COVID-19 pandemic and was recalled in September 2020. Taylor argued that the temporary layoff constituted a constructive dismissal under the common law. The employer brought a Rule 21 motion (which allows for the determination of an issue before trial) to decide whether the action was precluded as a result of the Regulation. The motion judge found that the layoff did not constitute a constructive dismissal at common law. Taylor appealed this finding.

ONCA Decision

The appeal decision in Hanley concerned whether the motion judge had erred in dismissing the action on a Rule 21 motion and in interpreting the Regulation as displacing Taylor’s common law right of action for constructive dismissal.

The Court of Appeal concluded that the motion judge had erred in dismissing the case under Rule 21, and therefore allowed the employee’s appeal. The Court found that the motion judge had failed to assume facts as pleaded in the statement of claim were true, made incorrect findings on the impact of not serving a reply to a statement of defence, and improperly took judicial notice of facts that were controversial.  As a result, the Court found it “inappropriate to rule on the issue of whether the amendments to the ESA and associated regulation affect common law rights”. The Court of Appeal decided that the interpretation of the IDEL issue should be remitted to the Superior Court for determination on a full evidentiary record, including potential submissions from the Attorney General of Ontario.

Takeaways for Employers

As the issues in Hanley return to the lower court to be determined on the merits, the law on the impact of IDEL on common law constructive dismissal claims remains uncertain.  As it stands, employees who have had a temporary reduction or elimination of hours of work or wages can still potentially make successful claims for common law constructive dismissal, even if they fall under the IDEL exemption in the Regulation. Employers should be mindful of potential liability for reasonable notice entitlements of employees placed on temporary layoffs, particularly with the current extension of the Regulation’s applicability expiring on July 30, 2022.
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.

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