Common Law on Layoffs Found to be “Inapplicable and Irrelevant” by Ontario Court

Traditionally at common law, employers have been found to lack the inherent right to place employees on temporary layoffs, with courts confirming that the right to layoff is one employers must bargain for, as an express or implied term of the employment contract.  When faced with a global pandemic, however, employers across the country were left with no choice, thereby risking constructive dismissal claims by all affected staff.

On June 7, 2021, the Ontario Superior Court of Justice established that where temporary layoffs were implemented for reasons related to COVID-19, the common law doctrine that a layoff equates to a constructive dismissal has been displaced by the Infectious Disease Emergency Leave, Ontario Regulation 228/20 and the Employment Standards Act, 2000, SO 2000, c. 41. Recognizing that it was “inherently unfair” to subject employers to wrongful dismissal claims on the basis of the Government imposed state of emergency for the COVID-19 pandemic, the Court found that “the common law on layoffs has become inapplicable and irrelevant” in those circumstances.

Amendments to the Employment Standards Act, 2000 (“ESA”) which were made in May 2020 provide that all temporary layoffs relating to COVID-19 are deemed to be Infectious Disease Emergency Leaves (“IDEL”) retroactive to March 1, 2020 and continuing until the end of the COVID-19 period (currently ending on September 25, 2021).

In Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135 (“Taylor”), the latest decision from the Ontario Superior Court on COVID-19 related layoffs, the court held that the ESA, and specifically the amendments relating to IDEL, acted to override the common law doctrine that a temporary layoff is a constructive dismissal. In other words, an employer’s temporary reduction or elimination of an employee’s work hours for reasons related to the COVID-19 during the COVID-19 period does not constitute a constructive dismissal.

In Taylor, the employer, Hanley Hospitality Inc. operating as Tim Hortons, brought a motion to strike a claim brought by one of its employees, Candace Taylor, who had taken the position that she was constructively dismissed when she was placed on a temporary layoff. Ms. Taylor had been laid off from Tim Hortons from March 27, 2020 as a result of the Ontario Government’s declaration of a state of emergency due to COVID-19 and the serious disruption in business that occurred thereafter.

Upon analyzing the statutory scheme established by section 50.1 (1.1) of the ESA and its corresponding regulations, the Court concluded that it would offend the rules of statutory interpretation to affirm an interpretation of the ESA that renders the legislation meaningless. The Court specifically looked at s. 8(1) of the ESA and held that while the Act does not set out an exclusive forum for addressing disputes, it can and should override the common law.

Under the ESA, COVID-19 has been prescribed as a “designated infectious disease” and all temporary layoffs relating to the disease are deemed to be Infectious Disease Emergency Leaves. The decision affirms that the normal rights for statutory leaves are applicable to all temporary layoffs relating to COVID-19.

The Court’s finding in Taylor is directly contradictory to the recent finding in Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076,where the court held that s. 8(1) prevents the ESA from displacing the common law. Indeed, the Court in Taylor made specific references to Coutinho, finding that the Court in Coutinho had applied an interpretation of s. 8(1) which had never been done before and which was contrary to the Ontario Court of Appeal’s decision on this very issue, and which was “wrong in law”.

The Court in Taylor adopted a purposeful and practical approach to statutory interpretation, noting that the government specifically amended the ESA to protect employers from “the inherent unfairness” which would result from exposing employers to a plethora of wrongful dismissal claims due to placing employees on temporary layoffs, which was necessitated, in large part, by government action. In other words, the ESA amendments were meant to address the “problem” that was created when the government triggered a state of emergency and required employers to cease or curtail their operations. The Court considered it “obvious” that the Legislature’s intention in amending the ESA was to protect employers from going out of business with wrongful dismissal claims. For the Court to find otherwise and allow constructive dismissal actions to proceed would be absurd.

This decision is a long-awaited positive development for employers across Ontario. Pandemic-related temporary layoffs have been on the rise across Ontario due to the continuing impacts of the COVID-19 pandemic, with a lot of uncertainty as to what protections would ultimately be available to employers.

The Taylor decision can be distinguished from Ristanovic v. Corma Inc., 2021 ONSC 3351, another recent ESA statutory interpretation case, which found against the employer, but on notably distinguishable facts. Namely, the employees in Ristanovic had been laid off prior to the pandemic taking hold in Ontario, and were not subject to the statutory amendments at issue in Taylor. In some respects, though, the Taylor decision builds on Ristanovic, as the Court in Ristanovic left open the possibility that employers might have the implied right to utilize temporary layoffs in the face of an unprecedented global pandemic.

Taylor provides support and clarity and a breath of fresh air for employers that temporary layoffs relating to COVID-19 which are captured by the ESA amendments will likely be considered as an Infectious Disease Emergency Leave and not constructive dismissals.

If you have any questions about this topic, other COVID-19 related questions, or would like assistance with developing and/or reviewing pandemic plans, please do not hesitate to contact a Mathews Dinsdale lawyer, or refer to the Firm’s COVID-19 website resources.

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