Status of COVID-19 layoffs remains in question after Ontario Court of Appeal decision

Ontario employers have long awaited an answer to the question of whether an employee temporarily laid off for reasons related to COVID-19 can claim constructive dismissal at common law despite legislative provisions deeming such layoffs not to constitute constructive dismissal under employment standards legislation. Many had hoped the issue would finally be resolved by the Ontario Court of Appeal in Taylor v Hanley Hospitality Inc.¹ Unfortunately, Ontario employers must continue to wait as the court declined to provide guidance on this important question. 

The uncertainty created by the COVID-19 pandemic caused many employers to take drastic measures to address unprecedented public health measures, including placing their employees on temporarily layoff.  

At common law, a temporary layoff is presumptively considered a constructive dismissal treating employees who have been placed on temporary layoff much the same as employees who have been terminated without cause. The common law presumption of constructive dismissal has historically been applied despite provisions in the Employment Standards Act, 2000 (the ESA) defining layoffs of a certain length to be a “temporary layoff” and not a termination.² 

Shortly after the onset of the pandemic, the Government of Ontario introduced certain legislative amendments that appeared to be welcome news to those employers who had been forced to place employees on temporary layoff due to closures and other effects of the public health emergency. Namely, s. 50.1 was added to the ESA and regulation O. Reg. 228/20 (the Regulation) was enacted, both of which addressed the introduction of a new category of leave under the ESA: infectious disease emergency leave. 

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 or severance. The Regulation further provides that a temporary reduction or elimination of hours for reasons related to COVID-19 does not constitute constructive dismissal.  

The introduction of these legislative amendments was welcome news to employers across the province, as it afforded them greater flexibility to manage their workforces during the COVID-19 pandemic. While it was clear that an employee placed on temporary layoff for reasons related to COVID-19 would not be constructively dismissed at common law, the impact of the amendments on the common law presumption of constructive dismissal was less certain. 

Competing line of cases 

The Ontario Superior Court of Justice has issued contradictory decisions as to whether the Regulation and s. 50.1 of the ESA displace employees’ common law claims for constructive dismissal.  

In Coutinho v Ocular Health Centre Ltd.,³  the court found that the employer’s unilateral decision to lay off Ms. Coutinho constituted a constructive dismissal and the Regulation did not bar her from bringing a civil action pursuant to the common law. 

In contrast, a subsequent Ontario Superior Court of Justice decision disagreed with the ruling in Coutinho. Specifically, the court in Taylor v Hanley Hospitality Inc.⁴ held 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.  

We have published legal updates on both decisions. A brief overview of each can be found here and here, respectively. 

Ontario Court of Appeal decision

The plaintiff appealed the Superior Court of Justice’s decision in Taylor. Many hoped that the Court of Appeal’s decision in Taylor would provide much-needed clarity on the issue and guidance to employers and employees impacted by the COVID-19 pandemic. 

Unfortunately, the Court of Appeal disposed of the matter without making any ruling on the impact that s. 50.1 had on the common law doctrine of constructive dismissal. Instead, it dismissed the appeal on the basis that the motion judge had erred by dismissing the action on a summary basis (under Rule 21 of the Rules of Civil Procedure) in circumstances where the material facts, including facts necessary to assess legislative intent, were either in dispute or not properly before the court.

In dismissing the appeal, the Court of Appeal specifically declined to rule on whether the legislative amendments displaced constructive dismissal claims at common law. 

Implications

Unfortunately, the important question remains: Can an Ontario employee, temporarily laid off for reasons related to COVID-19, claim constructive dismissal at common law even though s. 50.1 of the ESA and the Regulation disentitle them from doing so under employment standards legislation? 

Until the Court of Appeal rules on this point, this question remains a live issue. 

We will continue to monitor this issue and report on developments.