Under the common law, a court can find an employee was constructively dismissed when there has been a substantial change in the terms of their employment agreement. When there is no contractual language allowing for a layoff in the employment agreement, an employee may be considered to have been constructively dismissed when their hours have been substantially reduced. 

We recently wrote about two cases that reached different decisions on the issue of whether an employee can claim constructive dismissal after being laid off in response to the COVID-19 pandemic. The Court of Appeal for Ontario has now issued its decision in the appeal against one of these decisions. We take a look at this below.

Infectious Disease Emergency Leave under the Employment Standards Act

The Legislative Assembly of Ontario amended the Employment Standards Act in March 2020 to create Infectious Disease Emergency Leave. The ESA lays down the circumstances in which an employee is entitled to a leave of absence, with or without pay, if the employee will not be performing the duties of their position because of a declared emergency. 

The Infectious Disease Emergency Leave regulation designates COVID-19 as an infectious disease for the purpose of entitlement to Infectious Disease Emergency Leave, during the COVID-19 period. This is the period beginning on March 1, 2020, and ending on July 30, 2022.

In relation to constructive dismissal, the regulation states that a temporary reduction or elimination of an employee’s hours of work, or an employee’s wages, by the employer for reasons related to the designated infectious disease, does not constitute constructive dismissal if it occurred during the COVID-19 period.

Tim Hortons employee claims constructive dismissal after temporary layoff

In March 2020, an assistant manager of a Tim Hortons store in Whitby was placed on a temporary layoff without pay. Before being recalled to her employment in September 2020, the employee commenced an action against her employer, claiming damages for constructive dismissal.

The employee argued that, following her temporary lay-off, the employer continued its operations with a reduced staff. She submitted that her temporary lay-off was, therefore “a business decision made by the [employer] in response to unfavourable economic conditions” and not related to COVID-19.

On the other hand, the employer told the court that as a result of the Ontario government’s declaration of a state of emergency and subsequently imposed emergency measures due to the pandemic, it was “left with no choice but to temporarily lay off over 50 employees.” It said that the employee was placed on Infectious Disease Emergency Leave and was never terminated from her employment.

Superior Court dismisses the employee’s constructive dismissal claim

An Ontario Superior Court justice dismissed the employee’s constructive dismissal claim in a hearing for a motion brought by the employer in Taylor v Hanity Hospitality Inc. The employer brought the motion to have the issue determined before trial. Although not commonplace, this was allowed because the issue involved the proper interpretation of a law which requires little evidence compared to issues that come with the need to assess witness or evidentiary credibility.

Her Honour examined the Employment Standards Act and the Infectious Disease Emergency Leave regulation and concluded that together they change the common law. Looking at the context of the regulation, she noted that the legislature created a problem when it triggered the state of emergency and required employers to cease or curtail their operations. It was “obvious” that the legislature intended to solve this problem by taking away exposure of employers to claims of constructive dismissal.

Her Honour also considered section 8(1) of the Employment Standards Act. This section holds that no civil remedy of an employee against his or her employer is affected by the Act. The Superior Court justice interpreted the provision as merely confirming that the Employment Standards Act is not the exclusive forum to seek redress for issues involving the Act rather than preventing the Act from displacing the common law. On this basis, she accepted that the employee was laid off for reasons related to COVID-19, and dismissed the claim.

A previous case took a different approach

The justice’s decision on the motion in the case above is at odds with the decision of the Superior Court in Fogelman v IFG. In that case, the justice held that the Infectious Disease Emergency Leave regulation did not apply to the employee’s claim for constructive dismissal made under the common law by reason of section 8(1) of the Employment Standards Act. The justice understood this provision to mean that the Act does not supersede the civil remedies otherwise available.

Court of Appeal overturns decision but does not decide whether a COVID-19 layoff can constitute constructive dismissal

Returning to Taylor v Hanley Hospitality Inc, the Ontario Court of Appeal overturned Justice Ferguson’s decision and remitted the action back to the Superior Court. 

The Court of Appeal held that the issue of whether the regulation displaced common law constructive dismissal was not appropriate to determine before trial. Each of the parties had made conflicting factual allegations. For example, the employee claimed that she was temporarily laid off because of unfavourable economic reasons and that she was treated differently than other employees that continued to work. By contrast, the employer submitted that the employee was laid off for reasons related to COVID-19. Thus, factual findings would need to be made at trial so that they could be closely assessed.

The parties asked the Court of Appeal to determine whether Infectious Disease Emergency Leave regulation precluded a constructive dismissal claim, but it refused to do so as it was not necessary at that stage of the matter. As a result, we are still awaiting guidance at the Court of Appeal level.

Contact Grosman Gale Fletcher Hopkins LLP in Toronto for Advice on Layoffs and Constructive Dismissal

At Grosman Gale Fletcher Hopkins LLP, our highly-experienced employment lawyers have helped both employers and employees navigate terminations, including constructive dismissals, for more than three decades. We regularly advise workplace parties on a wide range of employment issues, including wrongful dismissal disputes, termination letters and other employment or labour law matters. To find out how we can help you with your employment matter, contact us online or by phone at 416-364-9599 to schedule a consultation.