Judge declares infectious disease leave is not constructive dismissal

Faced with COVID-19’s unprecedented impact on their businesses, a number of employers were forced to temporarily layoff employees. Originally, these layoffs were expected to be short, but as the COVID-19 pandemic stretched on these temporary layoffs extended longer than many employers and employees expected.

On May 29, 2020, to address the employees on temporary layoff who were going to be deemed terminated under the Employment Standards Act, 2000 (the ESA), the Ontario government enacted the Infectious Disease Emergency Leave Regulation (the Regulation). The Regulationdeemed all employees who had their hours of work reduced or eliminated because of COVID-19 during the “COVID-19 period” to be on an Infectious Disease Emergency Leave (IDEL) retroactive to March 1, 2020.

The Regulation also stated that such a temporary reduction or elimination of an employee’s hours or work did not constitute constructive dismissal if it occurred during the COVID-19 period. The question for many employment lawyers was, and still is, whether the Regulation eliminated claims for constructive dismissal under the common law or just under the ESA.

In the recent Ontario Superior Court of Justice decision of Taylor v Hanley Hospitality Inc., Justice Ferguson ruled that employees on the IDEL have not been constructively dismissed for any purpose, including the common law. In her decision, Justice Ferguson emphasized that thousands of employees had been laid off because of COVID-19 and that many employers were forced to layoff employees based on the mandated closures by the Ontario government and not because of their own business decisions.

Ultimately, Justice Ferguson decided that the common law on layoffs was inapplicable and irrelevant in light of the Regulation. The Justice further found that if employees on the IDEL were terminated for the purposes of the common law it would render the Regulation meaningless, offend the rules of statutory interpretation and exacerbate the economic crisis that the Regulation was supposed to address. The employee, therefore, was not entitled to any notice, or pay in lieu thereof, with respect to the IDEL or the temporary layoff.

In her reasons, Justice Ferguson declined to follow the Ontario Superior Court of Justices’ decision in Coutinho v Ocular Health Centre Ltd. in which Justice Broad had found that  the Regulation did not prevent an employee from successfully suing for constructive dismissal under the common law. As a result, Ontario employers are now left with  conflicting decisions from the Ontario Superior Court of Justice on the issue of whether putting an employee on the IDEL will constitute a constructive dismissal under the common law and therefore trigger wrongful dismissal damages. It seems that we will have to wait for the Ontario Court of Appeal to weigh in to provide some much needed clarity.

Extension of “COVID-19” Period

In connection with the changing landscape related to the deemed IDEL, on June 4, 2021 the Ontario government extended the deemed IDEL “COVID-19 period” from July 3, 2021 to September 25, 2021. As a result, the “clock” on automatic terminations related to temporary layoffs remains frozen and employees whose hours or wages are temporarily reduced because of COVID-19 are not on a temporary layoff but rather on a deemed unpaid ESA leave of absence. Employees on the deemed leave are entitled to the leave of absence protections under the ESA, including the right to reinstatement and benefits continuation. A detailed discussion of the Regulation can be found in our May 31, 2020 bulletin, available here.

This means that employers in Ontario can continue to take steps to respond to measures introduced through Ontario’s three-step Roadmap to Reopen plan without the risk of facing a constructive dismissal claim because of such actions – at least for the purposes of the ESA. After September 25, 2021, unless the deemed IDEL is further extended, the ESA’s regular rules with respect to temporary layoffs will once again apply with the temporary layoff “clock” resetting.

Separate from the deemed IDEL, employees may also be eligible for the paid or unpaid IDEL if they meet certain prescribed conditions and are not performing the duties of their position for reasons related to COVID-19.