Since the onset of the pandemic, employers across Ontario have been forced to institute temporary layoffs for extended periods. In many cases, employees have been temporarily laid off for several months with no clear or immediate end date in sight. Everyone appears to be in a hold pattern waiting for the pandemic to end. That being said, is there legal recourse for employees who are temporarily laid off?
The Province enacted regulations, which broadly speaking, removed the ability of employees to obtain statutory termination pay and severance pay on account of an extended temporary layoff caused by COVID-19. Employment lawyers have debated about whether employees can nevertheless successfully obtain constructive dismissal damages under the common law. In a recent decision of the Ontario Superior Court in Coutinho v. Ocular Health Centre,  ONSC 3076 the Court has provided some guidance on the issue, clarifying that temporary layoffs due to COVID-19 can indeed still constitute a constructive dismissal at common law.
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 (4) 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.
In its defence the Clinic alleged, among other things, that it had cause for dismissal therefore excusing it from having to pay her damages. 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, 2000. Specifically, the Clinic argued that the temporary layoff was deemed to be on an infectious disease emergency leave and therefore could not be a constructive dismissal under the ESA or the common law. The Clinic further argued that the unprecedented emergency brought on by the pandemic ought not to constitute a constructive dismissal under the common law.
Ultimately, the Court sided with the Plaintiff and reaffirmed the common law principle that an employer has no right to institute a temporarily 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 at 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.
This is the first reported court decision in Ontario dealing with temporary layoffs resulting from the COVID-19 pandemic. The decision makes it clear that 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 sidenote, 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. It remains to be seen whether this aspect of the decision will be appealed.