Over the past two years, many Canadians have been laid off due to the business interruptions caused by the COVID-19 pandemic. Most workers hoped that they would be rehired as public health restrictions were relaxed. Under the Employment Standards Act, an employer has a contractual right to lay off an employee for a certain amount of time. However, if the layoff has no limit, it will be deemed a termination.

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. Absent contractual language allowing for a layoff, an employee may be considered to have been constructively dismissed when their hours have been substantially reduced. However, courts are now faced with determining how this concept will be applied in light of required layoffs and business closures caused by COVID-19.

Recent Constructive Dismissal Case Law

In the recent case of Fogelman v. IFG – International Financial Group Ltd., an employee argued he was constructively dismissed after being temporarily laid off. The employer, IFG, cited section 56(2) of the Employment Standards Act, which empowers an employer to temporarily lay off an employee in certain circumstances without the layoff being deemed a termination.

The court in Fogelman found that because the employment contract did not include any layoff provisions, the employee’s layoff was a constructive dismissal. Therefore, he was entitled to reasonable notice and damages for lost wages. IFG argued the damages should be deducted from the employee’s Canada Emergency Response Benefit (“CERB”) payments provided under the federal COVID-19 Emergency Response Act. The court, however, declined to make such an order and decided CERB payments should not be treated as income for the purposes of an employee’s efforts to mitigate the effects of their constructive dismissal.

Other cases, however, have confused the issue further. In Taylor v. Hanley Hospital Inc., an employee who was laid off during the pandemic could not claim constructive dismissal under the common law. The judge in Taylor stated:

“I agree with Tim Hortons that exceptional situations call for exceptional measures. 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 they did not take action, these claims would only serve to make the economic crisis from the pandemic even worse. It is just common sense. The plaintiff’s action is dismissed.”

Infectious Disease Emergency Leaves under the Employment Standards Act

Given the contradicting outcomes of the Taylor and Fogelman cases, there is still confusion about how pandemic-related layoffs will be viewed in light of pre-COVID-19 common law and the current emergency response legislation in place.

The Ontario government has enacted Infectious Disease Emergency Leave (“IDEL”) provisions by regulation under the Employment Standards Act in response to the pandemic. These provisions provide that hours of work that are temporarily reduced or eliminated for reasons related to a designated infectious disease are not to be considered constructive dismissal if they occurred during the COVID-19 period.

The judge in Taylor found the IDEL regulation applied to the employee’s layoff, and therefore she could not claim constructive dismissal. By contrast, in the Fogelman case, the judge considered the IDEL regulation but found it did not displace common law remedies for constructive dismissal as per section 8(1) of the Employment Standards Act. Section 8(1) provides that no civil remedy of an employee against their employer is affected by the Employment Standards Act.

Employee Considerations After a Temporary Layoff

After being laid off, you may be entitled to receive regular Employment Insurance benefits from the federal government. Eligibility is based on how you lost your job, the duration of your employment, and the maximum amount of insurable weekly earnings. Both the Canada Emergency Response Benefit and Canada Recovery Benefit are now closed.

If you believe your temporary layoff during COVID-19 was, in fact, a constructive dismissal, you should contact a qualified employment lawyer immediately to preserve your legal options. A lawyer can review your employment contract and any provisions governing layoffs. They can also advise you about wages, benefits, or other entitlements you may be owed and provide you with any available options for pursuing compensation.

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.