Canada: IDEL Extension And A Welcome Case For Employers On Constructive Dismissal And Pandemic Layoffs

The Government of Ontario has once again extended the period that the infectious disease emergency leave ("IDEL") will apply. IDEL will now extend to September 25, 2021. Prior to this change, IDEL was scheduled to expire on July 3, 2021.

IDEL was enacted under Ontario Regulation 228/20: Infectious Disease Emergency Leave (the "IDEL Regulation"), which amended the Employment Standards Act, 2000 (the "ESA"). Under the IDEL Regulation, non-unionized employees whose wages or hours are reduced or eliminated due to COVID-19 are not considered statutorily laid off or constructively dismissed under the ESA. Instead, such employees are deemed to be on job-protected leave.

The ongoing extensions of the layoff provisions have been welcomed by employers who have not seen their businesses return to pre-pandemic levels, but frustrating for employees who continue to wait to be recalled to work.

If the statutorily defined "COVID-19 period" is not extended yet again, as of September 26, 2021, the maximum timelines for temporary layoffs under the ESA will restart, and terminations will automatically be triggered for layoffs that exceed 13 weeks in a 20-week period or 35 weeks in a 52-week period (if certain conditions are met).

Constructive Dismissal - Divergent Case Law

In our previous article, we addressed an important and uncertain issue for employers in Ontario: whether reliance on IDEL protects employers from claims of constructive dismissal at common law. Although the IDEL Regulation modified the ESA, the question remained whether the regulation impacted constructive dismissal claims under the common law specifically.

In the employment context, the ESA and the common law often work in parallel. The ESA provides statutory minimums, but the common law may simultaneously provide other obligations and rights to parties, which often exceed statutory minimums. For example, although the ESA provides for minimum termination notice periods, the common law provides employees the right to reasonable notice. This reasonable notice normally significantly exceeds the statutory minimum periods, unless an enforceable employment agreement unambiguously eliminates this right.

Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 ("Ocular Health") was the first instance where a court directly addressed the issue of whether IDEL precluded an employee from alleging that they were constructively dismissed at common law. To the frustration of employers, the Superior Court held that IDEL did not impact the common law. Therefore, absent a contractual term that permits temporary layoffs, employees could make a valid claim for constructive dismissal, which has the same impact as if they had been dismissed without cause.

In Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135 ("Hanley Hospitality"), a recent Superior Court decision dated June 7, 2021, Justice Ferguson declined to follow Ocular Health.

Hanley Hospitality involved a Tim Hortons employee who had been temporarily laid off from her job in March 2020 due to a COVID-19-related business interruption. Justice Ferguson held that where temporary layoffs were implemented for reasons related to COVID-19, the IDEL Regulation displaced the common law doctrine that a temporary layoff triggers a valid claim for constructive dismissal.

Central to Her Honour's reasons was that the government recognized the "inherent unfairness in subjecting employers to wrongful dismissal claims as a result of the government imposing a state of emergency" and that "in these times of COVID-19 . any argument regarding the common law on layoffs has become inapplicable and irrelevant." Interestingly, this finding was made despite the fact that the Ministry of Labour acknowledged that IDEL did not "address what constitutes a constructive dismissal at common law," a point referenced in Ocular Health, but not in Hanley Hospitality.

While this decision is certainly welcome for employers in Ontario and elsewhere who have been looking to the courts for practical and balanced guidance during the pandemic, Hanley Hospitality and Ocular Health represent divergent precedents. Until other courts interpret and apply these decisions - or more likely the Ontario Court of Appeal provides clarity and direction - counsel will no doubt align their arguments to the precedent that serves their clients' interests.

For employers, Hanley Hospitality provides a credible argument that common law claims for constructive dismissal have been extinguished by IDEL, if for no other reason than the need for the common law to evolve in these exceptional, unprecedented circumstances. Based on the circumstances, employers can argue that the contractual terms between the parties, past practice and an employee's untimely objection to a layoff also rebuff constructive dismissal claims.

We encourage our clients to continue to exercise caution in making their decisions with respect to temporary layoffs. Another update is sure to come soon.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.