A competing perspective: COVID-19-related layoffs are not constructive dismissals

Ontario employers struggling to manage their workforces during the COVID-19 pandemic received welcome news from a favourable Superior Court of Justice decision. In Taylor v Hanley Hospitality Inc., the court held that a temporary layoff caused by reasons related to COVID-19 did not constitute a constructive dismissal at common law. The decision marks a departure from the court’s recent approach on the subject.

The decision

The plaintiff in Taylor was an employee of a restaurant franchise that had been severely impacted by the Government of Ontario’s COVID-19 measures that required the employer to close its storefront and limit its business to takeout and delivery. As a result, the employer temporarily laid off a number of employees, including the plaintiff. The plaintiff brought a claim alleging that the temporary layoff amounted to a constructive dismissal entitling her to damages as if her employment had been terminated.

The employer brought a motion for summary judgment arguing that the plaintiff had not been constructively dismissed, but instead was deemed to be on an infectious disease emergency leave under O.Reg. 288/20: Infectious Disease Emergency Leave (Regulation), enacted pursuant to the Employment Standards Act, 2000 (ESA). The Regulation provides, among other things, that an employee whose hours are temporarily reduced or eliminated for reasons relating to COVID-19 is deemed to be on infectious disease emergency leave and not considered laid off for the purposes of the ESA sections regarding termination (s. 56) or severance (s. 63). The Regulation further provides that a temporary reduction or elimination of hours for reasons related to COVID-19 does not constitute constructive dismissal.

The plaintiff argued that the Regulation did not displace the common law doctrine that a layoff is a constructive dismissal. In support of her claim, the plaintiff relied in part of the Superior Court’s decision in Coutinho v Ocular Health Centre Ltd., which had held that a layoff related to COVID-19 did constitute a constructive dismissal at common law and such a constructive dismissal was not displaced by the Regulation (we refer you to our previous legal update on this decision).  

The court agreed with the employer and held that the plaintiff had not been constructively dismissed in the circumstances of the case. In so holding, the court expressly disagreed with the court’s previous decision in Coutinho and concluded that by enacting the Regulation, the legislature had clearly intended to displace the common law doctrine of constructive dismissal in the unique context of layoffs caused by the COVID-19 pandemic. 

In the words of the court, “The Regulation can and did change the common law. Effectively, ‘in these circumstances (COVID), you are not laid off, not constructively dismissed, and you are on a statutory leave of absence.’”¹ 

Implications

The court’s decision in Taylor is a clear recognition that by enacting the Regulation, the Government of Ontario intended to give relief to employers against the unfair application of the common law doctrine of constructive dismissal in the unprecedented context of a global pandemic and associated crisis. As the court stated:

“[…] exceptional situations call for exceptional measures. 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.”² 

The decision in Taylor is certainly welcome news to employers who have struggled during the pandemic. It does not, however, necessarily eliminate the risks associated with reducing or eliminating hours due to COVID-19-related reasons. While a notice of motion for leave to appeal has recently been filed in the Coutinho file, as of the date of this writing, it has not yet been overturned and continues to stand for the proposition that the traditional principles of common law apply in the context of COVID-19-related layoffs in spite of the Ontario government’s enactment of the Regulation.

The competing decisions in Taylor and Coutinho have, for the time being, created uncertainty as to an employer’s ability to lay off an employee in the context of COVID-19 without it amounting to a constructive dismissal at common law. Despite this uncertainty, the court’s decision in Taylor gives hope that common sense in this context may prevail.