New Ontario regulation exempts COVID-19 wage and hours reductions from ESA layoff and constructive dismissal provisions

On May 29, 2020, a new regulation to Ontario’s Employment Standards Act (ESA) was introduced exempting COVID-19-related temporary hours or wage reductions from the usual layoff and constructive dismissal provisions.

These changes provide welcome clarity and relief to employers that have faced difficult decisions in the face of COVID-19 shutdowns. Many employers, particularly those deemed to be non-essential, have had to reduce employee hours or wages, and in some cases, lay off staff, taking on the risk of constructive dismissal claims under the ESA. For employers covered by the new regulation, that risk of statutory non-compliance has now been eliminated. The regulation is expected to curb a potential rise in constructive dismissal complaints under the ESA.

What you need to know

• Who: The regulation applies primarily to non-unionized employees.
• When: The regulation applies to wage and hours reductions that occur between March 1, 2020 and the date that is six weeks after the day that the emergency declaration in Ontario is terminated or disallowed (the COVID-19 Period).
• What: The regulation establishes that, with certain exceptions:
  • a temporary reduction in, or elimination of, an employee’s hours of work during the COVID-19 Period for reasons related to COVID-19 (a COVID-19 Hours Reduction) or a temporary reduction in an employee’s wages during the COVID-19 Period for reasons related to COVID-19 (a COVID-19 Wage Reduction) will not amount to either constructive dismissal or a temporary layoff under the ESA.; and
  • employees who experience a COVID-19 Hours Reduction are deemed to be on an Infectious Disease Emergency Leave.

Details

COVID-19 Hours or Wage Reduction does not constitute layoff or constructive dismissal under the ESA

The regulation establishes that neither a COVID-19 Hours Reduction nor a COVID-19 Wage Reduction will constitute a layoff or a constructive dismissal under the ESA. For the purpose of the regulation, a “reduction” in hours or wages is considered to have occurred if:

• for employees with a regular work week, the employee works fewer hours and/or earns less regular wages in the work week than they worked and/or earned in the last regular work week before the COVID-19 Period; and
• for employees without a regular work week, the employee:
  • works fewer hours in the work week than the average number of hours they worked per week in the 12 consecutive work weeks preceding the COVID-19 Period; or
  • earns less regular wages in the work week than the average amount of regular wages they earned per week in the 12 consecutive work weeks preceding the COVID-19 Period.

Employees with reduced hours deemed to be on an Infectious Disease Emergency Leave

An employee who has experienced a COVID-19 Hours Reduction and who, as a result, does not perform the duties of their position during the COVID-19 Period, is deemed to be on an Infectious Disease Emergency Leave (a statutory leave of absence). Such employees are subject to the same rights and obligations as other employees on a statutory leave of absence, subject to the following exceptions:

• affected employees are not required to advise their employer that they are taking the leave;
• if the employee stopped participating in benefit plans as of May 29, 2020, the employee is exempt from the right to continue to participate in such benefits plans during an Infectious Disease Emergency Leave; and
• if the employer stopped making employer-side contributions to the employee’s benefit plans as of May 29, 2020, the employer need not reinstate those contributions during the COVID-19 Period.

ESA complaints deemed not to have been filed

Any complaint filed by an employee with the Ministry of Labour which alleges that a COVID-19 Hours Reduction or COVID-19 Wage Reduction constitutes the termination or severance of their employment is deemed not to have been filed.

Important exceptions

The regulation is subject to the following exceptions:

• Applies only to non-unionized employees. The regulation applies primarily to non-unionized employees (including assignment employees, with necessary modifications).
• Earlier terminations unaffected. Employees are not exempted from the layoff and/or constructive dismissal provisions of the ESA if:
  • they were subject to a layoff during the COVID-19 Period resulting from the permanent discontinuance of all of the employer’s business at an establishment;
  • before May 29, 2020, the employee’s employment had already been deemed terminated under the ESA as a result of an earlier layoff;
  • before May 29, 2020, the employee resigned following a constructive dismissal under the ESA;
  • the employee resigned from their employment after being provided with notice of the termination of their employment during the COVID-19 Period; or
  • the employee was terminated from their employment during the COVID-19 Period.

Impact on common law constructive dismissal claims

Although the regulation provides statutory protection to employers who seek to impose hours and/or wage reductions as a result of COVID-19, it may not entirely eliminate the risk of a common law constructive dismissal claim. It remains to be seen how courts will address constructive dismissal claims in light of COVID-19, or how this regulation may impact the court’s analysis. We expect that employers will rely on this regulation in defending any common law constructive dismissal claims that may arise in the future.

Read all our coronavirus-related updates on our COVID-19 guidance for organizations resource page.