Court Finds that ESA’s IDEL Does Restrict Employee’s Ability to Pursue a Civil Claim for Constructive Dismissal

Download Télécharger

As Focus readers may recall, as detailed in our earlier Focus Alert, the Ontario Superior Court of Justice previously examined in the case of Coutinho v. Ocular Health Centre Ltd. (April 27, 2021) whether the reference to “constructive dismissal” in Regulation 228/20 (Infectious Disease Emergency Leave) (“IDEL Regulation”) made under the Ontario Employment Standards Act, 2000 (the “ESA”) restricted an employee’s ability to pursue a complaint (or claim) against an employer for constructive dismissal under both the ESA and the common law, or whether it was confined to the ESA alone. In that case, the Court held that the IDEL Regulation did not restrict the employee’s ability to pursue a civil claim against her employer for constructive dismissal at common law. However, in the recently issued decision of Taylor v. Hanley Hospitality Inc. (June 7, 2021), the Ontario Superior Court of Justice came to a completely opposite conclusion.

 

Background

In March 2020, the Ontario government introduced the infectious disease emergency leave (“IDEL”) under the ESA to provide employees with the right to take unpaid, job-protected leave if they are not performing the duties of their position because of specified reasons related to a designated infectious disease (i.e., COVID-19). Then, in May 2020, the Ontario government enacted the IDEL Regulation, which provides employers impacted by the COVID-19 pandemic with temporary relief from the ESA’s rules on temporary layoff, termination, severance and constructive dismissal by deeming an employee to be on unpaid, job-protected IDEL in certain situations for non-unionized employees. In particular, subsection 7(1) of the IDEL Regulation provides as follows:

7. (1) The following does not constitute constructive dismissal if it occurred during the COVID-19 period:

  1. A temporary reduction or elimination of an employee’s hours of work by the employer for reasons related to the designated infectious disease.
  2. A temporary reduction in an employee’s wages by the employer for reasons related to the designated infectious disease.

In Coutinho, the Court found that the IDEL Regulation did not restrict the employee’s ability to pursue a civil claim for constructive dismissal against her employer and the Court found in that case, that the employee had been constructively dismissed by her employer. A different judge (Justice Ferguson) of the Ontario Superior Court of Justice has now issued the decision of Taylor v. Hanley Hospitality Inc. (June 7, 2021), which reaches the opposite conclusion for the reasons summarized below.

 

Taylor v. Hanley Hospitality Inc. (June 7, 2021)

Because of the Ontario government declaring a state of emergency on March 17, 2020, the employer (Hanley Hospitality Inc.) was required to close all its Tim Hortons storefronts and one of its stores entirely. The employer made reductions to its workplace because of the state of emergency and it had to temporarily layoff over 50 employees, including the plaintiff employee in this case. The employee was temporarily laid off from her employment on March 27, 2020. As a result of the IDEL Regulation, she was deemed to be on IDEL under the ESA. The employee was then recalled and she returned to work on September 3, 2020. The employee argued that her temporary layoff was a constructive dismissal at common law and that her employment had been terminated. However, the Court did not agree. The Court found that the employee’s layoff was no longer a layoff, rather it was an IDEL, which meant that any argument regarding the common law on temporary layoffs had become inapplicable and irrelevant.

In this decision, the Court specifically referred to having considered submissions provided by the parties as a result of the recent release of the Coutinho decision. The Court indicated agreement with the employer’s submissions and found that the employee could not be on leave of absence (IDEL) for ESA purposes and yet be terminated by constructive dismissal for common law purposes, as this would lead to an absurd result. The Court also agreed with the employer’s submission that the Coutinho decision was wrongly decided and that the law would be better served by a decision that applied common sense and the rules of interpretation to reach the conclusion sought by the employer: that the plaintiff employee was not constructively dismissed and that she was on IDEL, by virtue of the ESA’s IDEL and the IDEL Regulation. The Court further agreed that subsection 8(1) of the ESA, which states (in relevant part), that “…no civil remedy of an employee against his or her employer is affected by this Act” does not prevent the ESA from displacing the common law and that one should not forget that the common law evolves as the changing times make it necessary to do so.

The Court also agreed that it was essential to remember the context of the IDEL under the ESA and the IDEL Regulation as follows:

  • The legislature created the “problem” when it triggered the state of emergency and required employers to cease or curtail their operations;
  • The legislature forced employers to layoff employees or reduce their hours;
  • In doing so, the legislature exposed employers to claims of common law constructive dismissal;
  • To avoid those consequences, the legislature amended the ESA to create the IDEL and created the Regulation;
  • The legislature solved the very problem that it had created and took away that exposure that arose from its own action;
  • It should be obvious to the world what the legislature’s intention was by doing so.

The Court concluded that exceptional situations call for exceptional measures. The Court added that the Ontario government recognized the inherent unfairness in subjecting employers to wrongful dismissal claims as a result of the government imposing a state of emergency. If the government did not take action, these claims would only serve to make the economic crisis from the pandemic even worse. The Court confirmed that it is just common sense and dismissed the plaintiff employee’s action.

 

In Our View

The Taylor decision will certainly be welcomed by employers in Ontario, particularly those who have (like the employer in the Taylor decision) been severely impacted by the mandatory shutdowns and restrictions in Ontario throughout the COVID-19 pandemic. However, we now have two Superior Court of Justice decisions that reach opposite conclusions, and it remains to be seen whether the Ontario Court of Appeal (or even the Supreme Court of Canada) will weigh in on the issue in the future to provide clarity. In the meantime, given the importance of this issue to Ontario employers, we will continue to regularly update our readers with significant developments in this area.

For more information, please contact Sheri Farahani at 613-769-4781 or Kyle Shimon at 613-563-7660 ext.269.