Whether COVID-19 Lay-off is a Constructive dismissal. Recent case law.
The battle between two legal systems in Ontario exploded with a new force. It is a well-known fact that there are two different sources of employment law: common law and statutes. Sometimes they have identical rules that allow for uniformity in understanding of legal rights, but sometimes they are conflicting and that is what makes trouble for lawyers, judges, and the public in general.
While lay-off under Employment Standards Act, in general, is allowed, under the common law the same lay-off is treated as a breach of the employment contract and a constructive dismissal. The difference is that a person on lay-off, generally speaking, has no entitlements to termination or severance pay under the Employment Standards Act, but at the same has such rights under the common law.
COVID-19 has brought its complication and Ontario government enabled Regulations 228/20, Infectious Disease Emergency Leave, more widely known as IDEL. According to those regulations, every employer has a right to lay off his employees due to COVID-19 restrictions even though the employment contract has no provision that allows lay-offs. Such layoffs are not to be treated as constructive dismissal.
Recent court cases show that this is not as simple as it might look like and because of that we now have two cases with a similar set of facts but with a completely different outcome.
In Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 Ontario Superior Court of Justice concluded that IDEL Regulation did not change the common law. The overall effect is that while IDEL layoffs are not constructive dismissal under the Employment Standards Act, however under the common law they are. As a result, an employer was ordered to pay termination pay to his employee who was placed on IDEL (laid off).
The arguments, in this case, seem logical and clear. First of all, it is a well-established principle that if a government is willing to change a common law by enabling a statute, this shall be clearly and unequivocally stated in the statute. The Regulations have nothing to this effect and the Court stated that Plaintiff’s rights to pursue a civil claim for constructive dismissal under the common law were not affected.
Surprisingly, the Ministry of Labour has the same position that was published in “Your Guide to the Employment Standards Act: temporary changes to ESA rules”. In this guide, the Ministry provides an explanation on how the Regulations shall apply and explained that these Regulations do not address what constitutes a constructive dismissal at common law.
In another recent case, Taylor v Hanley Hospitality Inc., 2021 ONSC 3135, Justice Jane Ferguson took a different position and concluded that IDEL precludes an employee from making claims for constructive dismissal under the common law. The reason for such conclusion is the idea of IDEL Regulations was to release employers from liability due to COVID-19 measures. In other words, the court said that since the intention of the government was to enable employers to lay off people or to reduce hours without consequences, IDEL Regulations impacted employee’s common law rights as well.
At the moment, both cases are in the Appeal Court and the legal community with the public are waiting for some certainty in this area. In the meantime, layoffs remain the area where a proper legal advice is required, as a wrong step might cost you a significant amount of money.