Court Rules COVID-19 Layoffs Not Grounds for Constructive Dismissal

COVID-19 Layoffs does not constitute constructive dismissalSince the introduction of the Infectious Disease Emergency Leave (IDEL) on May 29, 2020, there has been significant uncertainty surrounding its interaction with the common law. Unilateral impositions of layoffs are traditionally grounds for claims for constructive dismissal, entitling the laid off employee to pay-in-lieu of notice. 

With the introduction of Ontario Regulation 228/20 under the Employment Standards Act, 2000 (ESA), the government of Ontario introduced a number of COVID-19 relief measures for employers, including IDEL. Under IDEL, employees who have had their hours of work reduced or eliminated because of COVID-19 during the COVID-19 Period are deemed to be on an IDEL rather than a layoff. Furthermore, the Regulation also states that such a reduction or elimination in the employee’s work does not constitute a constructive dismissal under the ESA.

It remains unclear if this deemed conversion of a layoff to an IDEL ousts the common law and prevents laid off employees from bringing claims for constructive dismissals and pay-in-lieu of notice.

In late April 2021, the Ontario Superior Court of Justice (the “ONSC”) provided its first ruling on the matter in Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 (“Coutinho”), which we previously covered here, in which Justice Broad held that the IDEL did not overturn the common law. 

The same Court has now released its second decision on the matter, reaching the opposite conclusion. In Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135, (“Taylor”), Justice Ferguson disagreed with Coutinho and held that employees deemed to be on IDEL have not been constructively dismissed and are instead on a legislative leave. As such, employees on the IDEL have not been constructively dismissed and cannot claim for notice or pay-in-lieu.

The facts are quite simple. The plaintiff, Candace Taylor, was temporarily laid off March 27, 2020, from a Tim Hortons operated by the Defendant, due to COVID-19 related operating restrictions.

While she was recalled to work on August 8, 2020, Ms. Taylor nevertheless claimed that she had been constructively dismissed by way of the imposed layoff and that the IDEL did not displace the common-law principle that a unliterally imposed layoff is a constructive dismissal.

The Defendant brought a Rule 21 motion to strike Ms. Taylor’s claim, arguing that the Employment Standards Act, 2000, (the “ESA”) and Ontario Regulation 228/20 had displaced the common law doctrine surrounding layoffs and that consequently, Ms. Taylor’s layoff was not grounds for a constructive dismissal.

In her reasons, Justice Ferguson explicitly rejected how section 8(1) of the ESA had been read in Coutinho, which interpreted section 8(1) to mean that no civil remedy (i.e., the common law) available to an employee would be affected by any provision of the ESA. Justice Ferguson found that statutes enacted by legislation can and previously have displaced the common law, and that in the present case that the COVID-19 Regulations which introduced IDEL had effectively changed the common law as it applied to layoffs during the COVID-19 Period. She held that ruling otherwise would render the legislation meaningless.

Furthermore, she stressed the context under which IDEL was introduced. She contextualized IDEL as a legislative solution to a problem created by legislation when employers were forced to reduce or cease their operations, unfairly exposing employers to wrongful dismissal claims and worsening the economic impact of the pandemic. 

Notably, unlike Coutinho, this decision did not review the Ministry of Labour’s Policy and Interpretation Manual, which explicitly states that the COVID-19 Regulations “affect only what constitutes a constructive dismissal under the ESA. These rules do not address what constitutes a constructive dismissal at common law.”

This is a welcome decision for employers, many of whom have had to significantly reduce staff over the last year to respond to operational restrictions and reductions in business. However, given Coutinho and the inconsistency between both cases, this is a matter which will likely be decided by higher Courts.

In light of the uncertain legal landscape surrounding layoffs during the COVID-19 Period (which currently runs from March 1, 2020, until September 25, 2021), we encourage both employees and employers to tread carefully when addressing workplace layoffs.

If you have any questions regarding this case and how it may impact you or your organization, please do not hesitate to contact the team at Rodney Employment Law at [email protected] or complete our contact form here.