Canada: Court Of Appeal Declines To Decide Whether IDEL Constitutes Common Law Constructive Dismissal

Following the introduction of Infectious Disease Emergency Leave ("IDEL") in Regulation 228/20 (the "Regulation") passed May 29, 2020, pursuant to the Employment Standards Act, 2000 ("ESA"), the common law of constructive dismissal has been uncertain as a result of conflicting Ontario court decisions.

Background

The Regulation states that non-unionized employees who had their hours reduced or eliminated due to COVID-19 are deemed retroactively to be on IDEL. As reflected in section 50.1 of the ESA, a temporary reduction or elimination of an employee's work hours and/or wages due to COVID-19 does not constitute constructive dismissal during the "COVID-19 period", which began (retroactively) on March 3, 2020, and is currently set to expire on July 30, 2022.

The Regulation has resulted in some confusion, since it prevents employees on IDEL from advancing a claim for constructive dismissal under the ESA, contrary to the well-established principle that an employer does not have an inherent common law right to temporarily lay off an employee - even if the employer complied with the layoff provisions of the ESA (the employer would need to include a lay-off provision in the employment contract).

Normally, in order for the common law to be altered by statute, there would need to be express language in the statute to that effect. As stated expressly at section 8(1) of the ESA, "no civil remedy of an employee against his or her employer is affected by this Act". The Regulation does not contain any language which would modify this section of the ESA, leaving many to wonder how the courts would interpret and apply the Regulation. In earlier blog posts, which can be found here and here, we too at DSF contemplated this uncertainty.

Coutinho v Ocular Health Centre Ltd., 2021 ONSC 3076 (CanLII) ("Coutinho")

The question of whether the Regulation prevented an employee from advancing a claim for constructive dismissal at common law was first put before the court in Coutinho. The court ruled that while the Regulation prevented the employee from pursuing damages under the ESA, it did not prevent them from pursuing a claim for constructive dismissal at common law.

Thus the court determined that the Regulation did not impact an employee's common law right to assert that a reduction in hours of work and/or wages constitutes a constructive dismissal, which would entitle the employee to wrongful dismissal damages.

For a more thorough discussion of this decision, please see our previous blog post here.

Taylor v Hanley Hospitality Inc., 2021 ONSC 3135 ("Taylor")

The "certainty" provided by the court in Coutinho did not last long, however, following the conflicting decision of the Ontario Superior Court in Taylor. In contrast to the decision in Coutinho, the Court determined that an employee on IDEL under the Regulation had no right to claim constructive dismissal claim at common law.

Please see our previous blog post here for more details on this decision, and our blog post here to see our first analysis of the conflicting judgments.

Taylor v Hanley Hospitality Inc., 2022 ONCA 376

As anticipated, the Superior Court's decision was appealed due to the inconsistencies between the rulings in Coutinho and Taylor. The Court of Appeal decision was expected to clarify the law in this regard, however, the decision released on May 12, 2022, ultimately did not do so.

The Court of Appeal overturned the trial judge's decision on other, unrelated grounds

related to an erroneous granting of a Rule 21 motion under the Rules of Civil Procedure. Thus no determination was made on whether section 50.1 of the ESA overrides an employee's common law right to assert constructive dismissal. The case and this question of the law were sent back to the Superior Court to be re-adjudicated.

Current State of the Law: Employers Beware

For the time being, Coutinho and Fogelman v IFG, 2021 ONSC 4042 are the governing authorities. In both decisions, the Superior Court has found that section 50.1 and the Regulation do not displace an employee's common law right to assert constructive dismissal.

Although the law is by no means certain, employers should be aware that according to these decisions, many temporary layoffs due to COVID-19 could be considered unlawful and may entitle employees to wrongful dismissal damages.

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.