Ontario Court Protects Right of Employers to Put Employees on COVID-19 Leave Without Triggering Dismissal

In order to address the economic impact of COVID-19 on Ontario’s businesses, in June 2020 the Ontario government created a special leave called “infectious disease emergency leave” (IDEL) through Ontario Regulation 228/20 (O. Reg. 228/20). The purpose of that leave was, among other things, to deem that:

1. employees whose hours or pay have been temporarily reduced will not be deemed to have been discharged or constructively dismissed under the Employment Standards Act, 2000 (ESA);
2. employees who have been laid off—either completely, or by having their hours reduced by more than half in one week—because of the pandemic will be considered to have been on leaves of absence, rather than having been laid off; and
3. claims filed with the Ministry of Labour alleging constructive dismissal due to a temporary reduction in hours or pay during the COVID-19 period are automatically dismissed.

Because O. Reg. 228/20 was a regulation made under the ESA, a question remained as to whether Ontario employers that had placed employees on IDEL could be subject to constructive dismissal claims. The Ontario Superior Court of Justice in Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135, recently ruled against such constructive dismissal claims on the basis that placing an employee on an IDEL is not a constructive dismissal.

Background

The plaintiff, Candace Taylor, worked for Hanley Hospitality Inc., and on March 27, 2020, she was temporarily laid off due to the business conditions created by COVID-19. She was given notice that she was to be recalled to employment effective September 3, 2020. She brought a claim for constructive dismissal on the theory that O. Reg. 228/20, implemented under Chapter 41 of the ESA, “does not displace the common law doctrine that a layoff is a constructive dismissal.”

The Court’s Decision

Justice J. E. Ferguson reviewed section 50.1(1.1) of the ESA together with O. Reg. 228/20, which establishes unpaid IDEL based on certain enumerated reasons, and examined how the regulation excludes certain employees from being considered laid off under the ESA. Justice Ferguson also reviewed section 7(1) of the regulation and how it precludes employees whose hours or wages have been reduced because of the pandemic from being considered constructively dismissed. Justice Ferguson found that Taylor was not laid off but was, rather, lawfully placed on IDEL and therefore could not claim constructive dismissal:

All temporary layoffs relating to COVID-19 are deemed to be IDELs, retroactive to March 1, 2020 and prospective to the end of the COVID-19 period. As such, the plaintiff’s layoff is no longer a layoff. It is an IDEL and the normal rights for statutory leaves are applicable (e.g., reinstatement rights, benefit continuation). This means any argument regarding the common law on layoffs has become inapplicable and irrelevant. (Emphasis added.)

Justice Ferguson then addressed the earlier decision of Coutinho v. Ocular Health Centre Ltd, 2021 ONSC 3076, which seemingly allowed common law constructive dismissal claims to be made while a person was on IDEL. Justice Ferguson found that the decision in Coutinho had failed to address the issue of how such a conclusion would render O. Reg. 228/20 meaningless. On reviewing that decision, she concluded that O. Reg. 228/20 and the other changes to the ESA permitted employers to place employees on IDEL, and that doing so did not constitute a layoff or constructive dismissal at common law.

In dismissing the employee’s claim, Justice Ferguson remarked that “[i]t is just common sense” that the government took action in light of government-imposed emergency measures to protect employers from such claims, because they “would only serve to make the economic crisis from the pandemic even worse.”

Key Takeaways

This decision should come as a relief to employers after months of concern that a barrage of constructive dismissal claims from employees could be arriving in the near future. The court’s rejection of Coutinho, and its finding that employees placed on IDEL are not laid off or constructively dismissed, is a commonsense recognition of the economic hardships that employers have faced during the COVID-19 pandemic.

Ogletree Deakins will continue to monitor and report on developments with respect to the COVID-19 pandemic and will post updates in the firm’s Coronavirus (COVID-19) Resource Center as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.

Michael C. Comartin is a partner in the Toronto office of Ogletree Deakins.

John T. Wilkinson is a law student, currently participating in the summer associate program in the Toronto office of Ogletree Deakins.