Court of Appeal Refuses to Decide Whether IDEL Constitutes Constructive Dismissal at Common Law – Wrongful/Wrongful Dismissal

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Following the introduction of Infectious Disease Emergency Leave (“IDEL”) in Regulation 228/20 (the “By-Law”) adopted on May 29, 2020, in accordance with the Employment Standards Act 2000
(“ESA”), the common law of constructive dismissal is uncertain due to conflicting Ontario court decisions.

Background

The settlement states that non-union employees whose hours have been reduced or eliminated due to COVID-19 are deemed retroactively on IDEL. As stated in Article 50.1 of the
ESAa temporary reduction or elimination of an employee’s hours of work and/or wages due to COVID-19 does not constitute constructive dismissal during the “COVID-19 period”, which began (retroactively) on March 3, 2020 and which is currently set to expire on July 30, 2022.

The settlement has caused some confusion, as it prevents IDEL employees from bringing a claim for constructive dismissal under the ESA, contrary to the well-established principle that an employer does not have an inherent common law right to temporarily lay off an employee – even if it has complied with the provisions of the Layoff Act ESA (the employer should include a dismissal clause in the employment contract).

Normally, for the common law to be changed by statute, the statute would have to contain express language to that effect. As expressly stated in Article 8(1) of the ESA, “no civil recourse of an employee against his employer is affected by this law”. The regulations do not contain any wording that would alter this section of the ESA, leaving many wondering how the courts would interpret and apply the settlement. In previous blog posts, which can be found here and here, we too at DSF have considered this uncertainty.

Coutinho v. Ocular Health Center Ltd., 2021 ONSC 3076 (CanLII) (“Coutinho”)

The question of whether the Settlement precluded an employee from bringing a claim for constructive dismissal at common law was first brought before the Court of Coutinho. The court held that although the settlement prevented the employee from claiming damages under the
ESAthis did not prevent them from pursuing a constructive dismissal action at common law.

Thus, the court determined that the settlement did not affect an employee’s common law right to assert that a reduction in hours of work and/or wages constitutes constructive dismissal, which would give rise to damages. interest for wrongful dismissal.

For a more in-depth discussion of this decision, please see our previous blog post here.

Taylor v Hanley Hospitality Inc., 2021 ONSC 3135 (“taylor“)

The “certainty” provided by the court in
Coutinho however, did not last long following the Ontario Superior Court’s contradictory decision in taylor. Contrary to the decision of Coutinhothe Court determined that an employee on IDEL under the settlement was not entitled to claim a claim for constructive dismissal at common law.

Please see our previous blog post here for more details on this decision, and our blog post here to see our first analysis of the conflicting judgments.

Taylor v Hanley Hospitality Inc., 2022 ONCA 376

As expected, the Superior Court’s decision was appealed due to inconsistencies between the judgments in Coutinhoand taylor. The decision of the Court of Appeal was to clarify the law in this regard, however, the decision issued on May 12, 2022 ultimately did not do so.

The Court of Appeal reversed the trial judge’s decision on other unrelated grounds

related to the erroneous grant of a request under Rule 21 under the
Rules of civil procedure. Thus, no decision has been made as to whether section 50.1 of the ESA prevails over an employee’s common law right to claim constructive dismissal. The case and this question of law were sent back to the Superior Court for a new trial.

Current state of the law: employers beware

For now, Coutinho and Fogelman v IFG, 2021 ONSC 4042 are the governing authorities. In both decisions, the Superior Court found that section 50.1 and the Regulations do not oust an employee’s common law right to claim constructive dismissal.

While the law is by no means certain, employers should be aware that based on these rulings, many temporary layoffs due to COVID-19 could be considered illegal and eligible for wrongful dismissal damages.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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