Employee Placed on COVID Leave not Constructive Dismissal, Court Reverses Earlier Ruling

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Previously, we provided an e-blast on the decision Coutinho v. Ocular Health Centre Ltd. 2021, ONSC 3076. In that case, the Superior Court determined that an employer placing an employee on the Infectious Disease Emergency Leave (“IDEL”), found in O. Reg. 228/20 made under the Ontario Employment Standards Act, 2000 (the “ESA”) amounted to a constructive dismissal under the common law.

By way of background, an employee is deemed to be on IDEL leave if:

  1. An employee is not represented by a trade union;
  2. The employer temporarily reduces or eliminates the employee’s hours of work and/or wages for reasons related to COVID-19; and
  3. The temporary reduction or elimination occurs during the COVID period, which is scheduled to end on September 25, 2021.

The Regulation specifically states that a reduction or elimination in a non-unionized employee’s hours and wages for reasons related to COVID-19, (1) does not constitute a layoff within the meaning of the ESA, and (2) does not constitute constructive dismissal. Despite these statutory provisions, the Court reasoned that the ESA did not displace the employee’s right to pursue a common law claim for constructive dismissal. The Court relied on section 8(1) of the ESA which states that nothing in the Act effects an employee’s right to pursue a civil remedy.

In Taylor v. Hanley Hospitality Inc. 2021 ONSC 3135, the Ontario Superior Court has determined that an employee placed upon IDEL is not constructively dismissed under the common law.  In doing so, the Court ruled that the reasoning applied by the Court in Coutinho v. Ocular Health Centre was wrong and that it ignored the exceptional circumstances created by the pandemic and the inherent unfairness for employers to face wrongful dismissal claims in the face of government declared states of emergency and forced closures.

In this case, Ms. Taylor was an employee of a Tim Hortons (Hanley Hospitality Inc.). Due to the COVID-19 emergency, Tim Hortons was required to close all of their storefronts and was limited to takeout and delivery. On March 27, 2020, Ms. Taylor was temporarily laid off from her employment and on August 18, 2020, she was advised that she was being recalled to her employment effective September 3, 2020.  She claimed that the layoff was a constructive dismissal and that her employment had been terminated. She claimed that the ESA and IDEL provisions did not displace her common law right to pursue a constructive dismissal claim. The Court rejected her argument and in doing so, rendered the opposite decision to Coutinho v. Ocular Health.

In reviewing the arguments, the Court agreed with the Employer that:

  • Section 8 of the ESA has never been interpreted to go as far as the Court did in Coutinho and the Court has never before held that section 8(1) prevents the ESA from displacing the common law;
  • IDEL provides the employer with a specific statutory right to place an employee on leave for reasons related to COVID and placing an employee on this leave amounting to constructive dismissal would render the legislation meaningless;
  • It is essential that the court remembers the context of IDEL and in particular, that it was enacted in response to government-imposed shutdowns necessitated by a pandemic forcing business to close or restrict its business with the specific intent to protect employers from such lawsuits; and
  • The Court in Coutinho failed to consider and appreciate these factors, and the analysis in that decision was wrong in law.

This is a welcomed decision for employers and in our view, the correct one. It is consistent with the legislative intent of the IDEL provisions that were enacted in response to a pandemic. As the Court noted in the Taylor decision, the Ontario government recognized the inherent unfairness in subjecting employers to wrongful dismissal claims in the face of government-imposed closures and restrictions.  While this decision is welcome news, employers should be aware that the law remains unsettled and could still face claims of constructive dismissal in response to layoffs required by the pandemic.  Both decisions are being appealed, and therefore, it will be up to the Ontario Court of Appeal to resolve the matter.  Employers should also be aware that the protections offered under the IDEL provisions are only in place until September 25, 2021

If you have any questions of how this decision might impact you directly, please contact us.