COVID-19 – Constructive Dismissal Update

As many employers are aware, not long after the start of the pandemic, the provincial government enacted legislation to preclude employees from advancing a claim of constructive dismissal based on a temporary lay-off prompted by COVID-19. More information on constructive dismissal can be found here.

Specifically, the government passed O. Reg. 228/20 entitled Infectious Disease Emergency Leave (the “IDEL Regulation”). Section 7 of this Regulation of the Employment Standards Act, 2000 (the “ESA”) states:

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.

The current iteration of this Regulation, which has been amended several times since it was passed, defines the “COVID-19 period” as the period from March 1, 2020 to July 3, 2021 (as of the time of this writing).

I have been consulted on several occasions by both employers and employees about the meaning of section 7 of the IDEL Regulation. Each wanted to know whether it precluded a claim for damages for common law notice and not just statutory notice under the ESA. In other words, they wanted to know if an employee could still commence a court action for constructive dismissal because of a temporary lay-off.

As is the case with most new legislation, there was no case law directly on point at the time to provide guidance on the interpretation and application of section 7. However, there is now a decision of the Ontario Superior Court of Justice that provides some clarification.

In Coutinho v. Ocular Health Centre Ltd., the employee was placed on a temporary lay-off effective May 29, 2020 after six years of service. Three days later, on June 1, 2020, she started a constructive dismissal action against her employer.

Relying upon section 7 of the IDEL Regulation, the employer took the position that the temporary lay-off did not constitute a constructive dismissal and brought a summary judgment motion to have the action dismissed. In response, the employee took the position that the IDEL Regulation is restricted to claims for statutory notice under the ESA and did not preclude her right to advance a civil claim for damages for common law notice.

The motions judge agreed with the employee.

In reaching this decision, the motions judge cited section 8 of the ESA which states, “Subject to section 97, no civil remedy of an employee against his or her employer is affected by this Act.” Section 97 of the ESA provides that a civil claim for wrongful or constructive dismissal may not be commenced if there is already a complaint under the ESA that pertains to the same termination of employment. In this case, the employee did not file a complaint under the ESA.

Based on this, the motions judge concluded, “the scope of s. 7 deeming a temporary lay-off for reasons related to COVID-19 to not constitute a constructive dismissal is constrained by s. 8(1) of the ESA. It is not possible to reconcile the interpretation of the IDEL Regulation urged by Ocular with the section of the statute which unequivocally provides that an employee’s civil remedy against her/his employee shall not be affected by any provision of the Act.” (Emphasis added)

Interestingly, the employee managed to find new employment with better remuneration roughly 7 weeks after the lay-off, so the only remaining issue to be determined was whether she was still entitled to 6 weeks of termination pay under the ESA in light of the employer’s assertion that there was cause for dismissal.

It is unclear whether the employer will appeal this decision. However, the reasoning of the motions judge appears sound.

The takeaway from this case for employers is that to avoid a constructive dismissal claim arising from a temporary lay-off, a prudent course of action would be to try to secure a waiver from the employee not to claim constructive dismissal pending the recall to work or the end of the temporary lay-off period prescribed under the ESA, whichever comes first.

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.