Ontario employers worried about potential termination and severance pay obligations due to the length of layoffs caught a welcome break on Friday, May 29, 2020. The Ontario government suspended significant portions of the laws regarding temporary layoffs and terminations under the Ontario Employment Standards Act, 2000 ("ESA") during the "COVID-19 period."
The Infectious Disease Emergency Leave Regulation (the "Regulation") defines the "COVID-19 period" as starting March 1, 2020 and ending six (6) weeks after the current declared emergency ends. During the COVID-19 period, there are important changes to the ESA:
- Temporary Layoffs become Deemed Infectious Disease Emergency Leave: Most employees temporarily laid off by their employers due to the impact of the COVID-19 pandemic during the "COVID-19 period" are deemed to be on an authorized "Infectious Disease Emergency Leave" ("IDEL") under section 50.1 (1.1) of the ESA. By treating an eligible temporary layoff as an IDEL, the Regulation permits employers to postpone their normal obligations to provide notice of termination (or pay in lieu thereof) and severance pay under the ESA.
- No Constructive Dismissal Claims due to Reduced Hours or Layoff: Most employees whose hours were reduced or eliminated due to the COVID-19 pandemic during the "COVID-19 period" are not entitled to claim "constructive dismissal" under the ESA. Constructive dismissal is the term used to describe a situation where an employer unilaterally imposes significant negative changes to the terms and conditions of employment, such as a significant reduction in hours or, in some cases, layoffs. Many employees were being advised to challenge layoffs or reductions in hours, under the laws of constructive dismissal.
- No Constructive Dismissal due to Reduced Wages: Most employees whose wages were reduced due to the COVID-19 pandemic during the "COVID-19 period" are not entitled to claim constructive dismissal under the ESA.
- Automatic deemed non-filing of certain claims: Certain claims filed with the Ministry of Labour asserting that a temporary reduction in hours or wages constitutes a "termination" or "severance " of employment under the ESA, are "deemed not to have been filed", if the temporary reduction or elimination of hours or wages occurred during "the COVID-19 period".
- Benefit contributions: Employers not making benefit contributions during an employee's temporary layoff as of May 29, 2020 are not obligated to make benefit contributions with respect to pension, life, accidental death, extended health, or extended dental during an employee's deemed IDEL.
Why is this Regulation Important?
Under section 56 of the ESA, a "temporary layoff" does not constitute a termination of employment. Employers can temporarily lay off an employee without triggering the obligation to provide notice (or pay in lieu thereof) and/or severance under the ESA. The ESA normally has time limits before a "temporary layoff" is deemed to be a termination, triggering statutory notice and severance obligations. Many employers believed they might be facing substantial liability under the ESA to pay notice and severance to employees as early as mid-June. Since many employers have been legally unable to do any kind of business, the termination and/or severance obligations would clearly have been incredibly burdensome and possibly push some into insolvency.
The Regulation effectively suspends the employer's normal obligations to provide notice (or pay in lieu thereof) and/or severance under the ESA if a temporary layoff exceeds the permissible time limits during the "COVID-19 period". The temporary layoff would have to have started March 1, 2020 or thereafter.
Does the Regulation Impact Common Law Obligations of Employers?
Many employers remain concerned about their exposure to a potential common law claim because of reductions in wages, hours or layoffs. Unfortunately, the Regulation does not amend the common law of constructive dismissal. We believe, however, that the Courts will recognize that the COVID-19 pandemic represents an unprecedented economic challenge that required an unprecedented response.
Who does the Regulation not apply to?
The Regulation does not apply if an employee was deemed to have been terminated under the ESA by virtue of the length of a layoff on or before May 29, 2020. The impacts of the COVID-19 pandemic hit Canada in early to mid-March. If an employee is deemed to be terminated because of the length of a layoff on or before May 29, 2020, the start of the layoff period preceded the COVID 19 pandemic in Canada. The normal ESA rules regarding temporary layoffs becoming permanent layoffs would apply.
Similarly, if an employee received notice of termination and resigned before May 29, 2020, the Regulation would not apply. The Regulation does not apply where an employee has actually been terminated by their employer, unless both the employee and employer agree to withdraw the notice of termination. From a policy perspective, the Regulation is designed to allow employers flexibility in the administration of layoffs during the COVID-19 period. It is not designed to remove the obligation to provide notice (and severance, where applicable) upon termination.
The Regulation and the entire Act are not applicable to federally-regulated employers, who are governed by the Canada Labour Code.
Finally, the Regulation does not apply to unionized workplaces, where it is anticipated that parties will negotiate an appropriate resolution for the workplace in question.
Conclusion
Ontario employers should be relieved that the Government of Ontario has introduced some much-needed flexibility to the permissible length of temporary layoffs. The Regulation delays any possible notice or severance obligations under the ESA until six (6) weeks after the declared emergency ends.
Clearly, the government anticipates that the vast majority of employees will be recalled shortly after the declared emergency ends. Of course, no one actually knows how quickly the economy will actually recover and whether the Regulation will be sufficient to protect employers against a crippling bill for notice and severance at the end of the emergency.
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