Infectious disease emergency leave is not common law constructive dismissal

Ontario Court finds Regulation 228/20 applies to both statutory and common law claims for constructive dismissal

In May 2020, Ontario Regulation 228/20 was introduced to Ontario’s Employment Standards Act (ESA), exempting COVID-19-related temporary hours or wage reductions from the usual layoff and constructive dismissal provisions. We published a detailed bulletin on the new  regulation last spring. At that time, while it was clear that the Regulation provided statutory protection to employers who sought to impose hours and/or wage reductions as a result of COVID-19, it was less clear how the Regulation would affect claims for common law constructive dismissal. On June 7, 2021, the Ontario Superior Court provided some long-awaited guidance on this issue.

In Taylor v. Hanley Hospitality Inc.1, Justice Ferguson granted the defendant employer’s Rule 21 motion to strike the employee’s claim for constructive dismissal on the basis that the Regulation applies not only to statutory constructive dismissal claims, but also to common law constructive dismissal claims. The Court specifically held that, pursuant to the Regulation, all temporary layoffs relating to COVID-19 are deemed to be Infectious Disease Emergency Leaves (IDELs), retroactive to March 1, 2020. As such, the employee’s layoff is no longer a layoff, and is in fact an IDEL, and the normal rights for statutory leaves are applicable. The Court held this means any argument regarding the common law on layoffs has become inapplicable and irrelevant to these types of scenarios under the Regulation.

What you need to know

  • Regulation deems any COVID-19 layoff to be an IDEL: The Court held that an employee cannot be on a leave of absence for ESA purposes and yet terminated by constructive dismissal for common law purposes. That would be an “absurd result.” Therefore, the Regulation must be interpreted to apply to all constructive dismissal claims.
  • The Regulation does not prevent the ESA from displacing the common law: The Court noted that there was nothing in the Regulation that prevented the ESA from displacing an employee’s common law rights. In fact, the Court of Appeal has previously held that statutes displace common law in a case involving the ESA.
  • Context of the Regulation is important: The Court noted that it was important to remember the context of IDEL and the Regulation. Specifically, that the legislature first created a “problem,” when triggering a state of emergency, forcing employers to cease or curtail their operations. In doing so, the legislature exposed employers to claims of common law constructive dismissal. To avoid those consequences, the legislature amended the ESA to create IDEL and the Regulation. Based on this context, it should be obvious what the legislature’s intention was by doing so.
  • Coutinho held to be “wrong in law”: The Court considered, at length, the recent Ontario Superior Court decision in Coutinho v. Ocular Health Centre Ltd.2 In Coutinho, on a motion for summary judgment, the Court held that the Regulation did not necessarily preclude a common law claim for constructive dismissal. However, Justice Ferguson in this case held that the analysis in Coutinho was “wrong in law” because it did not consider the context of IDEL and the Regulation. Further, Coutinho failed to consider that its interpretation of the Regulation rendered the legislation meaningless, and hence, offended the rules of statutory interpretation.

Summary of facts

Candace Taylor was temporarily laid off from her employment on March 27, 2020. On August 18, 2020, Ms. Taylor was recalled to her employment, and returned to her employment. Ms. Taylor nevertheless brought a claim against her employer for constructive dismissal during the period of her alleged temporary layoff. In her claim, Ms. Taylor acknowledged that the temporary layoff was related to the COVID-19 pandemic. The employer, Hanley Hospitality, brought a Rule 21 motion to strike Ms. Taylor’s complaint on the basis that, by virtue of the Regulation, Ms. Taylor’s lay off was in fact an IDEL, and hence, could not be a constructive dismissal under statute or common law.

The Court’s decision

In the decision, Justice Ferguson took judicial notice of the fact that hundreds of thousands of Canadians had their employment interrupted by the COVID-19 pandemic, that the Ontario government passed an emergency order requiring many businesses (including the defendant) to close their stores and limit their services, and that the province undertook legislative measures to address the employment impacts of the pandemic.

Justice Ferguson considered Ontario Regulation 228/20 noting that under the Regulation, a temporary reduction or elimination of an employee’s hours of work by the employer for reasons related to COVID-19 did not constitute constructive dismissal.

Justice Ferguson then turned to Coutinho v. Ocular Health Centre Ltd. in which Justice Broad held that Regulation 228/20 did not bar an employee from making a common law claim for constructive dismissal in relation to being laid off without pay due to reasons related to COVID-19. Justice Broad’s decision in Coutinho focused on section 8(1) of the Regulation which provides that (subject to limited circumstances that were not present) no civil remedy of an employee against their employer is affected by the ESA. Additionally, Justice Broad referred to the Ontario Ministry of Labour Guide which stated that the Regulation only affected what constituted constructive dismissal under the ESA and did not address what constituted a constructive dismissal at common law. Hence, Justice Board found that common law claims of constructive dismissal were not compromised by the Regulation.

Justice Ferguson held that Coutinho had been wrongly decided. According to Justice Ferguson, it offends the rules of statutory interpretation to give an interpretation which renders legislation meaningless, which was what occurred in Coutinho. Justice Ferguson also held that section 8(1) of the ESA did not stand for the proposition that Justice Broad espoused, but rather that section 8(1) had been interpreted by the courts as simply setting out that the ESA does not set out an exclusive forum for addressing matters set out in the ESA, and that section 8(1) had never been interpreted as preventing the ESA from displacing the common law. Rather, the Ontario Court of Appeal has previously stated that statutes enacted by the legislature displace the common law and that it was a faulty premise that the common law continues to operate independently of the ESA. Finally, Justice Ferguson held that the Regulation can and did change the common law, which meant that reductions or elimination of working hours related to COVID-19 are not layoffs or constructive dismissals but deemed statutory leaves of absences.

In granting the employer’s motion, and dismissing the action, Justice Ferguson concluded by stating that 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, and therefore passed the Regulation. Justice Ferguson noted that if the government had not taken this action, it would only have served to make the economic crisis of the pandemic even worse.

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1 2021 ONSC 3135

2 2021 ONSC 3076

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This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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