4 COVID-19-related temporary a constructive : Ontario court Ontario ESA separates legislative rights and civil remedies, leaving the door open to common law liability for pandemic emergency leave

BACKGROUND Many employers have had to take measures to reduce costs during lockdowns as the COVID-19 pandemic marches on. Many provincial governments have passed legislation allowing employers to temporarily lay off employees or cut their pay. However, this doesn’t mean employers are free from liability for constructive dismissal, as a recent Ontario court decision has demonstrated.

BY PRIYA SARIN dispute related, in part, to an allegation that to both employers and employees that a the doctors were not adhering to proper resulting reduction in an employee’s A RECENT decision of the Ontario COVID-19 protocols. On May 1, 2020, or hours, or a layoff, should not auto- Superior Court could open the floodgates Ocular closed its Cambridge office. Initially, matically trigger a termination. to constructive dismissal claims against the company continued to pay Coutinho, The motions judge rejected this argu- employers from employees temporarily laid but on May 29, it informed her that she ment, concluding that while the IDEL regula- off as a result of the COVID-19 pandemic. would be placed on temporary layoff and tion precluded an ESA claim of constructive In the early days of the pandemic, many recalled as soon as possible. dismissal, it did not affect Coutinho’s right to employers were forced to temporarily lay Two days later, on June 1, Coutinho pursue a common law claim for constructive off employees. In response, on May 29, commenced a lawsuit against Ocular, dismissal. Relying on s. 8 of the ESA — which 2020, the Government of Ontario intro- alleging that the temporary layoff consti- states, “Subject to section 97, no civil remedy duced a regulation under the province’s tuted a constructive dismissal under the of an employee against his or her employer is Standards Act, 2000 (ESA) that common law and claiming $200,000 in affected by this Act” — the judge held: deemed an employee laid off for a COVID- “In my view, the scope of s. 7 deeming 19-related reason to be on infectious disease Despite the emergency leave a temporary layoff for reasons related to emergency leave (the IDEL regulation). COVID-19 to not constitute a constructive The IDEL regulation specifically states regulation, there was still a dismissal is constrained by s. 8(1) of the that a reduction of hours or wages for a ESA. It is not possible to reconcile the inter- COVID-19-related reason from March question of whether a layoff or pretation of the IDEL regulation urged by 1, 2020 to July 3, 2021 (unless further reduction in hours related to Ocular with the section of the statute which extended by the government) is not a unequivocally provides that an employee’s constructive dismissal: COVID-19 could be common civil remedy against her/his [employer] shall not be affected by any provision of the act.” “7. (1) The following does not constitute law constructive dismissal. The judge also referred to a publication constructive dismissal if it occurred during prepared by the Ontario Ministry of Labour, the COVID-19 period: damages. The following month, Coutinho and Skills Development, which 1. A temporary reduction or elimina- started new employment with the former stated that“these rules affect only what consti- tion of an employee’s hours of work doctors of the Cambridge clinic. tutes a constructive dismissal under the ESA. by the employer for reasons related to The claim proceeded by way of These rules do not address what constitutes a the designated infectious disease. summary judgment motion, and the court constructive dismissal at common law.” 2. A temporary reduction in an considered two issues: Did the IDEL regu- employee’s wages by the employer lation preclude a claim for constructive Was Coutinho’s layoff a for reasons related to the designated dismissal at common law, and if not, did constructive dismissal? infectious disease.” the temporary layoff amount to a common Ocular argued that the layoff did not amount law constructive dismissal? to a constructive dismissal because Coutinho Despite the IDEL regulation, the ques- had not inquired whether she might be tion remained: Could an employee still The IDEL regulation and the common law called back to work before commencing CONSTRUCTIVE DISMISSAL CONSTRUCTIVE claim that a layoff or substantial reduction Ocular argued that, given the unpreced- the lawsuit. In other words, Coutinho had in hours related to COVID-19 constituted ented emergency brought on by COVID-19, jumped the gun in taking the position that a constructive dismissal at common law? the IDEL regulation ought to preclude both she had been dismissed. According to the recent Ontario court deci- statutory and common law constructive The motions judge rejected this argu- sion, the answer is yes. dismissal claims — that is, a layoff related ment, ruling Coutinho was entitled to treat to COVID-19 should not constitute a the unilateral layoff as bringing the employ- What happened? constructive dismissal under either the ESA ment relationship to an end, and further, Jessica Coutinho was employed with Ocular or common law. that Coutinho did not have any obligation Health Centre Ltd. as an office manager at This seemed like a reasonable and to first inquire whether Ocular might call one of its two clinics in Ontario. A dispute appropriate approach. The rapid onset of her back to work. arose between the principals of Ocular and the pandemic caused many businesses to As for damages, Coutinho had fully miti- the doctors practicing out of its Cambridge, dramatically scale down or close operations gated her losses as of July 22, 2020 — less Ont., clinic where Coutinho worked. The with little notice. It therefore seemed fair than two months after being laid off. The CASE IN POINT : CASE

Canadian HR Reporter, 2021 June 16, 2021 | Canadian Law Today Employment June CREDIT: BLUE PLANET STUDIO i STOCK CREDIT: BLUE PLANET STUDIO actual dollar value of the claim was there- dismissal claim arising in that particular scen- governed by a written employment agree- fore quite limited. Nevertheless, the court ario would be addressed. ment that gave Ocular the right to tempor- ruled Coutinho was entitled to statutory arily lay her off, or had Coutinho consented termination pay under the ESA, subject to Lessons for employers to the layoff, this claim could have been Ocular’s claim it had cause to terminate COVID-19 may not be accepted as excep- avoided. This is because, absent an express her employment, which remained the tional. The court was not satisfied that the or implied provision in the employment outstanding issue for trial. exceptional nature of the pandemic justi- contract or consent, there is no right to Significantly, the judge did not explain fied a broad and liberal reading of the IDEL layoff at common law. how Coutinho could possibly be entitled to regulation, such that it could extinguish a Historically, most employment agree- statutory notice in light of the clear language common law constructive dismissal claim. A ments have not included a layoff provision. of the IDEL regulation that extinguished similar result was reached in a recent Alberta However, moving forward, this may not be any claim for constructive dismissal under decision, Kotsteckyj v. Paramount Resources the case. We recommend that every employer the ESA. This may be an issue explored if Ltd., where the Alberta Court of Queen’s review their employment contracts and the decision is appealed. However, given Bench held that a reduction in compensa- consider including a layoff provision. But do the relatively low value of the claim, the tion (16 per cent to 20 per cent) resulting not simply change your employment agree- employer may choose to forgo an appeal. from a COVID-19 cost savings program was ments without legal advice, as a unilateral Even if this decision is not appealed, it may a constructive dismissal. In both decisions, change of this nature may be unenforceable. have limited impact on employers for two the court applied a traditional constructive reasons. First, if an employee has been laid off dismissal analysis and was not prepared For more information, see: for a prolonged period of time (more than a to consider the unprecedented impact • Coutinho v. Ocular Health Centre Ltd., 2021 few months) without making any objection, COVID-19 has had on Canadian employers. ONSC 3076 (Ont. S.C.J.). the employer may successfully argue that An employment agreement can reduce • Kotsteckyj v. Paramount Resources Ltd., 2021 the employee acquiesced to the layoff. This risk. Had Coutinho’s employment been ABQB 225 (Alta. Q.B.). is because in order to establish constructive dismissal, an employee must object to a ABOUT THE AUTHOR unilateral change to the terms of employment Priya Sarin within a reasonable period of time. Priya Sarin is a lawyer with Sherrard Kuzz LLP, an employment Second, many layoffs during the pandemic and firm representing employers in Toronto. resulted from forced closure of a business due She can be reached at (416) 603-0700 (main), (416) 420- to a government order. The Coutinho deci- 0738 (24 hours) or by visiting www.sherrardkuzz.com. sion did not comment on how a constructive

Canadian HR Reporter, 2021