Since March 2020, many employers have been forced to make the difficult decision to reduce or eliminate employee hours of work, or reduce wages, as a result of the COVID-19 pandemic. In other words, there have been many layoffs for reasons related to COVID-19.
Last year, the provincial government introduced O. Reg 228/20 (the “Regulation”) which deemed such COVID-19 layoffs to be “infectious disease emergency leaves” (“IDEL”) and thus not subject to the regular layoff provisions of the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”), at least until the end of the COVID-19 period (which is currently set to expire on July 3, 2021). The Regulation explicitly provides that such deemed leaves are not to be treated as a layoff, termination, severance or constructive dismissal for the purposes of the ESA.
The deemed IDEL was intended to avoid deemed terminations caused by layoffs extending past the statutory limitations. Such deemed terminations would lead to mandatory termination and severance payments, and in many cases claims for reasonable notice at common law. Such an expense would be unaffordable for many employers trying to stay afloat amid an unprecedented pandemic. It would also lead to job loss for many employees.
The deemed IDEL was intended to provide relief to employers and job protection for employees. Many assumed that deemed IDELs would be treated as leaves of absence and would not be considered a constructive dismissal under the common law. Surely, allowing employees to claim constructive dismissal and seek damages for such a leave would defeat the very purpose of the leave.
However, on April 27, 2021, a decision from the Ontario Superior Court held otherwise. In Coutinho v. Ocular Health Centre (2021 ONSC 3076), the key issue was whether a deemed IDEL could be considered a constructive dismissal. In short, the court said…yes. The court held that the IDEL regulation does not affect an employee’s right to pursue a common law claim for constructive dismissal.
The reasoning was twofold. First, the judge noted that section 8 of the ESA explicitly provides that no civil remedy of an employee against his or her employer is affected by the ESA. Therefore, even though the Regulation provides that a deemed IDEL shall not constitute a constructive dismissal for the purposes of the ESA, it can still be a constructive dismissal under the common law.
Second, the judge turned to the common law. It is well-established that a layoff, even if consistent with the ESA, can be a constructive dismissal under the common law unless there is an agreement between the employer and the employee to the contrary.
For these reasons, the court held that the plaintiff employee could treat the employer’s unilateral imposition of a deemed IDEL as a constructive dismissal.
This decision is sure to be controversial amongst employment lawyers. It will impact countless employers and employees. The implication of this decision is that any employee in Ontario who has been placed on a deemed infectious disease emergency leave may now have a constructive dismissal claim against their employer.
Unfortunately, the court in this case did not address many important considerations:
Does opening the door for deemed IDELs to be considered constructive dismissal defeat the entire purpose of the deemed IDEL, being to protect employers during an unprecedented and financially devastating period?
Is this decision fair in light of the mandatory business closures that forced many employers to shut their doors and lay off employees?
Why was the deemed IDEL treated as a layoff and not a leave of absence?
Why did the judge leave open the possibility of statutory termination pay when the statute provides that a deemed IDEL is not a termination?
The common law provides that a layoff is not a constructive dismissal if the parties agree to the layoff. This is commonly found in employment agreements. How could employers and employees agree to a deemed IDEL in advance when such a leave was unforeseeable prior to its enactment?
The unprecedented nature of the COVID-19 pandemic and the unique circumstances of the deemed IDEL were largely ignored in this decision. The court seemed to follow the status quo in circumstances where there is no status quo.
It remains to be seen whether this decision will hold up to subsequent scrutiny.
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