Temporary Layoff During COVID-19 Results in Constructive Dismissal
The recently released decision of Coutinho v. Ocular Health Centre Ltd. 2021 ONSC 3076, may cause headaches for many employers within Ontario who have been required to layoff their employees due to COVID-19 restrictions.
As a starting point, a constructive dismissal for common law purposes occurs in the circumstance where an employer unilaterally imposes a layoff, in the absence of an express contractual clause allowing them to do so.
After COVD-19 commenced, the Ontario government introduced O. Reg. 228/20, Infectious Disease Emergency Leave regulation under the Employment Standards Act, 2000, S.O. 2000. c.41 (the “ESA”), otherwise known as IDEL. Under section 4 of IDEL, an employee is deemed to be on the leave if the employee’s hours of work were temporarily reduced or eliminated by the employer related to COVID-19. For the purposes of the Act, an employee is deemed to be on IDEL, and under section 7 of the Regulation, a temporary reduction in wages or elimination of the employee’s hours of work due to COVID-19 would not constitute constructive dismissal. Employers rightly believed that these statutory measures would provide some protection against allegations of constructive dismissal under the ESA.
Queue the Coutinho decision.
The decision involved an ophthalmic clinic (“Ocular”), and an office manager. At the time COVID-19 occurred, there was a dispute in the clinic over various corporate and business issues. On April 28, 2020, a lawyer for Ocular’s clinic wrote to clinicians alleging that they had failed to comply with COVID-19 guidelines in relation to their practices. Things got heated, and the clinic changed the locks on April 30, 2020. The employee arrived and was told that she would not be allowed entry. She was advised via a letter, that the clinic was closed and that they would be placing her on temporary layoff.
She sued for constructive dismissal on June 1, 2020 and sought all of her statutory and common law entitlements, including termination pay.
Ocular argued that IDEL applied, and as such, that she was not entitled to argue that she was constructively dismissed. Ocular argued that the Regulation made it clear that the employee was deemed to be on emergency leave, and that the temporary elimination of her employment or work hours did not constitute constructive dismissal.
The employee argued that nothing in the ESA removed her rights to sue for constructive dismissal at common law. After reviewing the arguments, the Court made the determination that the Regulation does not remove the individual’s common law right to sue for constructive dismissal.
Specifically, the Court indicated that the starting point for examining the issue was section 8(1) of the ESA. Section 8 of the ESA states that “no civil remedy of an employee against his or her employer is affected by this Act”. The Court at paragraph 43, further indicated that “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 employee shall not be affected by any provision of the Act.”
Basically, the Court determined that section 7 of IDEL is limited by section 8 of the ESA, and it is not possible to reconcile the two clauses to limit a constructive dismissal argument for common law purposes. To further its view in this regard, it reviewed the guide from the Ministry of Labour, entitled “Your Guide to the Employment Standards Act: temporary changes to ESA rules”. The Court noted that under the constructive dismissal portion of the guide it said as follows:
These rules affect only what constitutes a constructive dismissal under the ESA. These rules do not address what constitutes a constructive dismissal at common law.
The Court noted that while the Guide was not binding on the Court, it was of assistance in order to offer insight into the intention behind the IDEL regulation, including that it does not affect an employee’s common law right to advance a civil claim of constructive dismissal. The Court also determined that the employee should be entitled to her statutory entitlements, indicating she was constructively dismissed, subject to a determination of the cause argument brought by Ocular.
It strains logic to suggest that the employee is entitled to any statutory termination pay on the basis of constructive dismissal when the legislation specifically precluded such a result. The Court is not entitled to disregard such a clear statutory requirement and in our view, the decision is wrong.
The decision has the potential to impact employers who have temporarily laid off employees relying on these statutory amendments as a measure of protection against allegations of constructive dismissal in the midst of a pandemic. Given this decision, in the circumstance where employers have laid off employees absent these express contractual provisions entitling them to do so, an employer is at risk of a constructive dismissal lawsuit. If you have any questions as to whether the decision would apply to your situation, please contact us.
Authored by: Travis Ujjainwalla
The material presented in this blog is to present general information on the subject matter and should not be regarded or relied upon as legal advice or opinion.