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Throughout the COVID-19 pandemic, many employers have been forced to temporarily lay employees off because of unexpected business disruptions and/or shutdowns. After over a year of media articles, commentary and legal webinars, employers are likely aware that a temporary layoff is presumptively a “constructive dismissal” at common law, which means potential employee lawsuits seeking pay in lieu of reasonable notice of termination.

Arguably in an attempt to address that issue, the provincial government issued a regulation which stated that employees on temporary layoffs were deemed to be on a new category of job-protected leave of absence (infectious disease emergency leave, or “IDEL”) under the Employment Standards Act, 2000 (the “ESA”), and which effectively stated that an employee on a temporary layoff was not constructively dismissed (the “Regulation”). However, the question was whether this legislation limited an employee’s ability to allege constructive dismissal at common law, or whether it only applied to allegations of constructive dismissal under the ESA. Employment lawyers discussed and debated the effect of this legislation for months while we waited for the first court decisions. Well, the first two decisions have rolled out and they come to exact opposite conclusions.

My colleague discussed the first such decision, Coutinho v Ocular Health Centre Ltd, 2021 ONSC 3076, in a blog published last month. In that case, Justice Broad of the Superior Court ruled that the Regulation did not explicitly modify or remove employees’ common law rights, and as such, the default common law presumption that a temporary layoff constituted a constructive dismissal was unchanged. As such, the Court concluded that the laid-off employee had been constructively dismissed at common law, and was entitled to pay in lieu of reasonable notice, despite the fact that she deemed to be on IDEL, and not on a temporary layoff, as a result of the Regulation.

However, on June 7th, 2021, Justice Ferguson of the Superior Court came to precisely the opposite conclusion in Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135. She concluded that the analysis in Coutinho rendered the Regulation effectively meaningless, which would be inconsistent with principles of statutory interpretation. As such, the Court held that an employee on a deemed IDEL cannot simultaneously have been constructively dismissed at common law. Relevant extracts below:

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. 

The employee cannot be on a leave of absence for ESA purposes and yet terminated by constructive dismissal for common law purposes.  That is an absurd result.

the Regulation can and did change the common law. Effectively, “in these circumstances (COVID-19), you are not laid off, not constructively dismissed, and you are on statutory leave of absence”

[22]          …. exceptional situations call for exceptional measures. The Ontario Government recognized the inherent unfairness in subjecting employers to wrongful dismissal claims as a result of the government imposing a state of emergency. If they did not take action, these claims would only serve to make the economic crisis from the pandemic even worse. It is just common sense.

My view is that Justice Ferguson’s analysis is compelling and gives effect to the apparent intent of the Regulation. However, with the legal rights of thousands of Ontario employees and employers at stake, this is unlikely to be the final chapter in this developing area of law. It is very possible that the Court of Appeal may be asked to weigh in on either this decision or Coutinho, and we can likely expect further trial and summary judgment decisions in the coming months on the same issue as well.

In the meantime, this is likely a positive decision for everyone (except maybe employment lawyers!). If it stands, employers and employees will spend less time and money litigating in court and can focus on getting back to work as Ontario hopefully continues on the path to normalcy. We will continue to monitor developments in this area and will post further updates on our Blog.

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