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The law of constructive dismissal remains murky amidst COVID-19

Following the introduction of Ontario’s Infectious Disease Emergency Leave (the “IDEL Regulation”) under the Employment Standards Act, 2000 (“ESA”), the common law of constructive dismissal – during the COVID-19 period – has been uncertain as a result of conflicting Ontario court decisions.

Employees who are temporarily laid off for reasons related to COVID-19 are exempt from constructive dismissal claims under the ESA, however the law has been unclear on whether such employees are also precluded from pursuing claims for constructive dismissal in court.

Many Ontario employers had hoped for answers to this question in the much-anticipated decision recently released by the Ontario Court of Appeal (“ONCA”) in Taylor v. Hanley Hospitality Inc. [Taylor]. Unfortunately, Ontario employers must continue to wait as the ONCA declined to decide whether the IDEL Regulation precludes constructive dismissal claims at common law (judge-made law).

What does this mean for employers who have been looking forward to some certainty on this very contentious issue?

Background

On May 29, 2020, the IDEL Regulation was passed, which states that non-unionized employees who had their hours reduced or eliminated due to COVID-19 are deemed to be on an Infectious Disease Emergency Leave, pursuant to the ESA. As reflected in section 50.1 of the ESA, a temporary reduction or elimination of an employee’s work hours and/or wages due to COVID-19 does not constitute constructive dismissal during the COVID-19 period, which began (retroactively) on March 3, 2020, and is currently set to expire on July 30, 2022.

Typically, in order for the common law to be altered by statute, there would need to be express language in the statute to that effect. As expressly stated at section 8(1) of the ESA, “no civil remedy of an employee against his or her employer is affected by this Act”. The IDEL Regulation does not contain any language which would modify this section of the ESA, leaving many to wonder how the courts would interpret and apply the IDEL Regulation.

Ontario Decisions

In Coutinho v. Ocular Health Centre Ltd. [Coutinho] released on April 16, 2021, the Ontario Superior Court of Justice (“OSCJ”) found that Ms. Coutinho was constructively dismissed following the employer’s unilateral decision to lay her off. The Judge further ruled that the IDEL Regulation did not bar Ms. Coutinho from bringing a civil action pursuant to the common law. A similar conclusion was held in the earlier case of Fogelman v. International Financial Group Ltd. [Fogelman].

In contrast to the Coutinho and Fogelman decisions, the OSCJ in Taylor v. Hanley Hospitality Inc., a decision which was released 5 days after the Coutinho decision, disagreed with the Coutinho ruling and determined that an employee on IDEL had no right to claim constructive dismissal at common law. The Taylor decision was appealed.

These conflicting decisions brought much uncertainty to the law, which employers were hoping would be resolved by the Ontario Court of Appeal. It is unfortunate that the ONCA in the Taylor matter declined to decide on the bigger issue of the IDEL Regulation. Instead, the ONCA remitted the matter back to the OSCJ to determine this issue. This uncertainty will now go on for an extended period of time until the OSCJ makes a ruling.

Bottom Line

Unfortunately, employers can no longer rely on the Taylor decision as a defence to constructive dismissal claims at common law by employees who were laid off for reasons related to COVID-19. However, since this issue is being remitted to the OSCJ, there is still legal uncertainty as to whether the IDEL Regulation prevents common law constructive dismissal claims. As such, there is still hope that the courts will ultimately interpret the IDEL Regulation in the same employer-friendly manner that the OSCJ did in the original Taylor decision, but only time will tell.

Notably, if the IDEL Regulation is not extended beyond July 31, 2022, employers will only be able to keep employees on a COVID-related leave subject to the pre-pandemic temporary layoff rules under the ESA (that is, for a maximum of either 13 or 35 weeks, depending on the circumstances).

It is strongly recommended that employers consult with experienced counsel when dealing with employees claiming constructive dismissal for a COVID-related leave, in addition to consulting with counsel on the appropriate process for recalling employees who are currently on a temporary layoff.

John Hyde is the managing partner at Hyde HR Law in Toronto. He advises management on all aspects of employment and labour law, including representation before administrative tribunals, collective agreement negotiation, arbitrations, wrongful dismissal defence and human rights.