The Pandemic-Related Temporary Layoff: Ontario Employees and their Legal Options

Constructive Dismissals and COVID-19  

From the outset of the pandemic, employers across Ontario have been forced to institute temporary layoffs, or a temporary reduction in employee’s hours of work, for extended periods of time. 

In many cases, employees have been temporarily laid off, or had their work week temporarily reduced for many months, all with no clear or immediate end date in sight. Despite the government of Canada’s assistance through the CERB, the uncertainty related to COVID-19 seems to have put both employers and affected employees in a holding pattern. 

But while everyone waits for the pandemic to subside, this period continues to drag on, meaning more and more workers in Ontario are beginning to ask how this affects their employment relationship.

Do they have legal recourse? The following discussion about a recent Ontario court decision will help shed some light on the issue.

Recent Court Decision on Constructive Dismissal Related to Covid-19

 judge’s gavel

The Ontario government enacted regulations, which removed the ability of employees to obtain statutory termination pay and severance pay entitlements from their employers on account of an extended temporary layoff for reasons related to COVID-19.

Employment lawyers have debated about whether employees can nevertheless successfully obtain constructive dismissal damages under the common law.

In a decision of the Ontario Superior Court in Coutinho v. Ocular Health Centre, [2021] ONSC 3076 the Court provided some guidance on the issue, clarifying that temporary layoffs due to COVID-19 can indeed still constitute a constructive dismissal under common law.

The Plaintiff’s Case

In Coutinho, the Plaintiff was employed as an office manager at an ophthalmic clinic. There was a business dispute among the ophthalmologists at the clinic, resulting in a temporary closure of the clinic. During the closure, the Plaintiff was not reporting to work but was still being paid by the clinic.

Four weeks later, on Friday, May 29, 2020, the Plaintiff was notified that she was being temporarily laid off because of the COVID-19 pandemic. The following Monday, she commenced a court action against the clinic alleging that she had been constructively dismissed.

She secured new employment less than two (2) months later with a few of the ophthalmologists who left the Clinic to set up their own practise.

Defendant

In its defence, the Clinic alleged that it had cause for dismissal, excusing it from having to pay her damages for the termination of employment. The issue of cause was reserved for trial, but the Clinic sought to have the constructive dismissal action dismissed on a summary judgment motion, relying upon the deemed Infectious Disease Emergency Leave (IDEL) regulations under the Ontario Employment Standards Act (ESA), 2000. 

Specifically, the Clinic argued that the temporary layoff was deemed to be on an infectious disease emergency leave and therefore could not be considered a constructive dismissal under the ESA or the common law. The Clinic further argued that changes brought on by the unprecedented pandemic response measures ought not to constitute a constructive dismissal under the common law.

Court Decision

Ultimately, the Court sided with the Plaintiff and reaffirmed the common law principle that an employer has no right to institute a temporary layoff absent an employment agreement to the contrary.

The Court further held that the IDEL regulations under the ESA do not bar an employee from seeking constructive dismissal damages pursuant to the common law. The Plaintiff did not have a contract of employment that entitled the Clinic to initiate a temporary layoff. Therefore, upon receiving the temporary layoff notice from her employer, she was entitled to treat the employment contract at its end. In the court’s view, the temporary layoff due to COVID-19 constituted a constructive dismissal under common law.

Interestingly, the cause allegations and the fact that she had been on an unspecified paid leave for four (4) weeks prior to the temporary layoff were not factors in the Court’s decision. Further, she did not need to establish that she had suffered significant loss of hours or pay.

The Court was satisfied that the temporary layoff notice on its own triggered the constructive dismissal. Ultimately, she mitigated the loss of employment by securing new work, and sought damages based only on her statutory termination pay entitlement.

Key Takeaway

This was the first reported court decision in Ontario dealing with temporary layoffs resulting from the COVID-19 pandemic.

The IDEL regulations under the ESA do not foreclose on a constructive dismissal claim at common law. Absent an employment contract that permits temporary layoffs, employees who are temporarily laid off due to the pandemic may successfully obtain constructive dismissal damages through the courts. This appears true even if the employee has not been out of work for very long.

While this decision serves as good news for employees, it should not be interpreted to mean that every temporary layoff in the context of the COVID-19 pandemic will amount to a constructive dismissal.

Each case will be decided individually based on its own specific set of circumstances. The decision is not binding in Ontario and it remains to be seen whether the Court in similar cases will follow suit.

As a side note, in quantifying damages, the Court held that absent cause for termination, the Plaintiff was entitled to statutory termination pay. This aspect of the decision appears inconsistent with express provisions of the ESA which preclude statutory termination pay under the IDEL provisions. The judge further conflates just cause at common law and wilful misconduct under the ESA.

Contact JPAK Employment Lawyers for Legal Advice About Your Temporary Layoff Period

Generally, a temporary layoff is a pause in the employment relationship, rather than a termination, as long as the employer recalls the employee within the specified period of time mandated by applicable employment standards legislation.

However, as this case discussion shows, there are situations where a temporary layoff can constitute constructive dismissal even if permissible under the ESA. Unless temporary layoffs are permitted under the agreement that governs an employee’s employment conditions, a temporary layoff can be considered a constructive dismissal.

If you have been affected by a temporary layoff and are curious about your legal options, contact the experienced team of lawyers at JPAK for legal advice about your situation.

By |2021-11-08T11:17:11-04:00May 4th, 2021|Article-All, Covid-19|0 Comments

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