Last month, we reported that an Ontario court determined employees deemed to be on a statutory infectious disease emergency leave (“IDEL”) following a temporary reduction or elimination in hours of work or wages for reasons related to COVID-19 could still sue for constructive dismissal at common law. Well, a different Ontario judge says that decision was just plain wrong…

In a new decision in Taylor v. Hanley Hospitality Inc., the judge held that employees who experience a temporary reduction or elimination in hours of work or wages for reasons related to COVID-19 between March 1, 2020 and September 25, 2020 (the “COVID-19 period”):

  • are on a deemed IDEL for all purposes;
  • are not considered to be laid off under the Employment Standards Act, 2000 (“ESA”) or at common law;
  • are not considered to be constructively dismissed, whether under the ESA or at common law.

This is huge.

Facts

On March 27, 2020, the employee was temporarily laid off from her employment at a restaurant. The layoff was a business decision made by the company in response to the negative impact of the COVID-19 pandemic. This included the impact of Ontario government measures requiring the employer to operate in a take-out only capacity.

In June of 2020, the Ontario government published O. Reg 228/20: Infectious Disease Emergency Leave (the “Regulation”) under the ESA to help relieve non-unionized employers from constructive dismissal liabilities. The Regulation provides that, during the COVID-19 period, a non-unionized employee whose employer has temporarily reduced or eliminated their hours of work or wages for reasons related to COVID-19 is deemed to be on a job-protected IDEL and is not considered to be laid off for the purposes of the ESA. The Regulation states that the temporary reduction or elimination of an employee’s hours of work or wages for reasons related to COVID-19 is not considered to be a constructive dismissal under the ESA.

In light of the Regulation, the employee was considered to be on a deemed IDEL.

The employee took the position that the Regulation did not displace the well-known common law principle that a layoff is a constructive dismissal unless the parties have agreed otherwise. She argued that, while she might be on a statutory leave of absence under the ESA, she had clearly been constructively dismissed at common law. The judge disagreed.

The Decision

The judge reviewed the April 2021 court decision in Coutinho v. Occular Health Centre Ltd. In that case, the court said that an employee on a deemed IDEL for the purposes of the ESA can still sue an employee for constructive dismissal at common law.

The judge stated that the court’s decision in Coutinho was absurd. The judge put it simply: an employee cannot be on a deemed leave of absence for the purposes of the ESA, but terminated by constructive dismissal for common law purposes. This result would fly in the face of common sense. The judge held that the Regulation was intended to recognize the inherent unfairness of subjecting employers to wrongful dismissal claims as a result of the government-imposed state of emergency. She determined that the Regulation displaced the common law principle that a unilateral layoff that is not agreed to between an employer and employee is a constructive dismissal.

As a result, the employee was on a statutory leave of absence for all purposes, including at common law, and had no entitlement to damages for constructive dismissal.

Key Takeaways

This decision is hugely important for Ontario employers. In my opinion, it is the right one. It confirms what the Regulation was intended to do: provide employers with a measure of protection from constructive dismissal claims resulting from layoffs required by government-imposed public health measures.

However, a word of caution is required. The judge’s decision in Taylor is in direct conflict with the earlier decision in Coutinho. The decision in Coutinho has not been overturned (although it is currently under appeal). Both decisions come from the same level of court. As a result, it is possible that judges in future cases could follow the decision in Coutinho unless and until an appeal court decides the issue.