Constructive Dismissal & COVID-19 Regulations: Uncertainty Remains

According to Ontario’s IDEL regulations, which were introduced in May 2020 and applied retroactively to the period beginning on March 1, 2020, if an employee was affected by a temporary reduction or elimination in work hours or wages for reasons related to COVID-19, it does not constitute a constructive dismissal under the Employment Standards Act, 2000 (ESA).

While statutory constructive dismissal claims in this context are clearly barred under the IDEL regulations, much uncertainty exists in connection with common law constructive dismissal in this context.

Coutinho v. Ocular Health Centre

In this case, the employer took the position that IDEL regulation precluded constructive dismissal claims for temporary layoffs arising due to covid-19 shutdowns. 

The judgement in Coutinho v Ocular Health was released in late April, 2021.  In his reasons, Justice Broad for the court held that that plaintiffs retained the right to treat a temporary layoff as a constructive dismissal at common law, despite the IDEL regulations. In other words, the scope of the IDEL regulations extended only to statutory constructive dismissal claims, not common law claims.  

This decision was welcome news for employees seeking damages through the courts  as a result of forced  temporary layoffs for prolonged periods of time. 

Taylor v. Hanley Hospitality

Fast forward several weeks later to early June, 2021, in the case Taylor v Hanley Hospitality.  In that case it was found that the plaintiff who had been put on temporary layoff, had not been constructively dismissed by their employer. Flying in the face of the Coutinho judgement, Justice Ferguson held that IDEL regulations can and did change the common law. 

In dismissing the constructive dismissal claim, Justice Ferguson elaborated that the Coutinho case did not consider these factors and the law was wrongly applied.

It was found that the provincial government’s intention in enacting IDEL regulations was to displace  common law constructive dismissal claims stemming from temporary layoffs. 

Of significance to the court’s decision, the government  measures forced businesses to close or significantly reduce business.  The IDEL regulations were intended to protect distressed businesses against constructive dismissal claims during this emergency period. 

According to Justice Ferguson: “The Ontario Government recognized the inherent unfairness in subjecting employers to wrongful dismissal claims as a result of the government imposing a state of emergency. If they did not take action, these claims would only serve to make the economic crisis from the pandemic even worse. It is just common sense. The plaintiff’s action is dismissed.”

Employers can look to the Taylor case as a potential basis for defending constructive dismissal claims related to temporary layoffs as a result of covid-19. 

The Takeaway

These inconsistent decisions have muddied the waters when it comes to interpreting the employment law implications about what constitutes a common law constructive dismissal in the context of covid-19 period. 

Until the Court of Appeal weighs in on the issue, both employers and employees are forced to wait for further clarification on whether or not a constructive dismissal claim has merit in this context.