COVID-19: Legislative Changes to Constructive Dismissal

As of May 29, 2020, the Ontario government has altered the law on constructive dismissal.

In Farber v. Royal Trust Co., the Supreme Court of Canada describes a constructive dismissal as “a fundamental or substantial change to an employee’s contract of employment.” In its subsequent decision in Potter v. New Brunswick Legal Aid Services, the Supreme Court further explains that a constructive dismissal occurs “when an employer’s conduct evinces an intention no longer to be bound by the employment contract”.

By contrast, Ontario’s Employment Standards Act, 2000 and its regulations do not provide a similar description or explanation, let alone a precise definition, of constructive dismissal.  In a now-archived webpage, the Ontario government states here that a constructive dismissal “may occur when an employer makes a significant change to a fundamental term or condition of an employee’s employment without the employee’s actual or implied consent.”  Not surprisingly, the webpage further indicates that constructive dismissal “is a complex and difficult subject” and suggests that a person seeking more information about this area of law contact the Employment Standards Information Centre.

Generally, a reduction in remuneration or a lay-off (even a temporary one) would constitute a constructive dismissal – until now.

Prior to May 29, 2020, if an employee’s wages or hours were temporarily reduced or eliminated by the employer as a result of COVID-19, the employee could file a complaint with the Ministry of Labour’s Employment Standards branch, or commence a constructive dismissal action in the Superior Court of Justice.  However, on that date, the Ontario government enacted Regulation 228/20: Infectious Disease Emergency Leave which can be found here.

Section 7 of this regulation states:

7. (1) The following does not constitute constructive dismissal if it occurred during the COVID-19 period

1. A temporary reduction or elimination of an employee’s hours of work by the employer for reasons related to the designated infectious disease.

2. A temporary reduction in an employee’s wages by the employer for reasons related to the designated infectious disease.

(2) Subsection (1) does not apply to an employee whose employment was terminated under clause 56 (1) (b) of the Act or severed under clause 63 (1) (b) of the Act before May 29, 2020.

Section 8 of the regulation goes on to preclude a complaint to the Ministry of Labour because of a temporary reduction of wages or hours due to COVID-19.

Effectively, this means that a temporary reduction of wages or hours of work as a result of COVID-19 by the employer on or after May 29, 2020 would not be a constructive dismissal.  What is interesting about this change is that the legislation does not qualify or limit the meaning of “constructive dismissal” for the purposes of the Employment Standards Act, 2000 and its regulations only.

In other words, it appears that this regulation may also preclude a constructive dismissal action in the Superior Court of Justice based on a temporary reduction of wages or hours.  There are arguments both for and against this position, and there is no legal authority to provide guidance on this yet.

Constructive dismissal litigation can be risky.  These legislative changes make it more so. Any attempt to pursue such a claim during the COVID-19 period – which is defined to last until 6 weeks after the end of the state of emergency – should be made with caution.

This article is intended only to provide general information and does not constitute legal advice. Should you require advice specific to your situation, please feel free to contact me to discuss the matter further.