ESA’s IDEL Regulation Found by Court to Not Restrict Employee’s Ability to Pursue a Civil Claim for Constructive Dismissal

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In the first reported civil case examining the intersection between the Employment Standards Act, 2000 (ESA) COVID-19 leave provisions and constructive dismissal at common law, a judge of the Ontario Superior Court of Justice ruled that the right to pursue a civil claim for constructive dismissal at common law is still possible, even if the employee was technically placed on an ESA COVID-19 related leave following the onset of the pandemic.

As readers of Focus will recall, in May of 2020, the Ontario government enacted O. Reg. 228/20 Infectious Disease Emergency Leave (the “IDEL Regulation”) under the ESA, which provides for various leaves of absence arising because of COVID-19. Section 7 of the IDEL Regulation states:

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.

The scope of the above language was at issue in the recent case of Coutinho v. Ocular Health Centre Ltd. (April, 2021). In particular, the Court was called upon to decide whether the IDEL Regulation’s reference to “constructive dismissal” captured constructive dismissal under both the ESA and at common law, or whether it was confined to the ESA alone.

By way of background, on May 1, 2020, Ms. Coutinho was not permitted to attend work by her employer (as the locks had been changed) and she was initially told she would still be paid. She was given written notice by her employer on May 29, 2020 that she was being laid off without pay from her position as Office Manager after six years of service with Ocular Health Centre Ltd. She commenced a civil claim in early June, 2020, in which she alleged that she had been constructively dismissed and sought damages and statutory entitlements totalling $200,000.

In its defence, the employer claimed that, following a consolidation of two of the employer’s locations, it was temporarily unable to continue Ms. Coutinho’s employment because of the impact of COVID-19. The employer relied on section 7 of the IDEL Regulation and argued that the temporary elimination of Ms. Coutinho’s work duties and work hours did not constitute constructive dismissal. The employer also claimed that, in the alternative, it had cause to terminate the employment on the basis of alleged misconduct relating to Ms. Coutinho’s reporting of staff hours. It was, however, primarily on the basis of the IDEL Regulation that the employer moved for summary judgement seeking dismissal of Ms. Coutinho’s claim that she was constructively dismissed.

While there was some debate between the parties relating to whether Ms. Coutinho was in fact laid off because of COVID-19, the Court found that it was not necessary to decide this point. Instead, the Court held that the IDEL Regulation did not impact the employee’s right to pursue a civil claim against her employer for constructive dismissal at common law.

This conclusion was based on two factors. The first factor was the language in the ESA itself, as the IDEL Regulation’s enabling statute. Section 8(1) of the ESA states (in relevant part), that “…no civil remedy of an employee against his or her employer is affected by this Act.” The Court noted that the interpretation of a regulation must be informed by the constraints set out in the regulation’s enabling statute, and thus found that the scope of section 7 of the IDEL Regulation must be viewed in light of section 8 of the ESA.

The second factor was the interpretation of the IDEL Regulation put forth by the Ontario Ministry of Labour, Training and Skills Development (Ministry), which is responsible for administering the ESA. The Ministry’s publication entitled “Your Guide to the Employment Standards Act: temporary changes to ESA rules” discusses the IDEL Regulation in the context of constructive dismissal, and states that, while the IDEL Regulation establishes that there is no constructive dismissal under the ESA when an employee is temporarily laid off for reasons related to COVID-19, the IDEL Regulation does not affect what constitutes a constructive dismissal at common law.

The Court next considered a second argument raised by the employer: that Ms. Coutinho had not been constructively dismissed because she failed to make inquiries as to when she would be called back to work. The Court rejected this argument, noting that the employer did not provide any authority for the proposition that, following a unilateral imposition of a lay off, the employee is required to make such inquiries prior to bringing an action for constructive dismissal. The Court concluded that the written notice provided by Ocular on May 29, 2020 to Ms. Coutinho that she was being laid off without pay constituted a constructive dismissal and Ms. Coutinho was not barred by the IDEL Regulation from bringing a civil action against her employer at common law.

While the Court ruled in favour of Ms. Coutinho and held that she had indeed been constructively dismissed, notwithstanding the IDEL Regulation, it awarded statutory (ESA) entitlements to termination pay in the amount of $6,103.85. Ms. Coutinho had obtained employment shortly after the lay-off and, as a result had almost fully mitigated her common law damages. The Court remitted for trial the one outstanding issue that could not be determined by way of summary judgement, related to whether the employer otherwise had just cause to terminate Ms. Coutinho’s employment such that it was relieved of its obligation to pay any termination amounts.

 

In Our View

This decision is very significant given the duration of the COVID-19 pandemic and the serious impact it has had on a vast number of workplaces. That said, we believe that the facts of this case may end up being distinguishable from other circumstances. There are elements of the decision in Coutinho v. Ocular Health Centre Ltd. which would suggest that the employer’s reasons for placing Ms. Coutinho on leave in May 2020 may not have been related to the pandemic or a government regulation associated with the pandemic and, unfortunately, this was not something that the judge in this case analyzed in any detail. With this in mind, we believe that there continues to be much more to be said about the impact of this unprecedented and extraordinary pandemic situation on the common law of constructive dismissal. We will update our readers with significant developments in this area.

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