Ontario Government Provides Temporary Relief from ESA Termination and Severance Provisions in Response to COVID-19
Date: May 31, 2020
On Friday, May 29, 2020, the Ontario government published a new regulation under the Employment Standards Act, 2000 (ESA) that is intended to provide temporary relief from the ESA’s termination and severance provisions for employers whose operations have been shut down or otherwise curtailed by COVID-19 – O. Reg. 228/20, Infectious Disease Emergency Leave (IDEL Regulation).
In this FTR Now, we will review the primary means by which the government has accomplished its goal, and some key limitations that apply. Most notably, the new rules providing relief from the ESA’s termination and severance provisions do not apply to unionized employees. Rather, the ESA’s usual temporary layoff rules will continue to apply in unionized workplaces.
There are three basic components in the IDEL Regulation by which the government’s goal is achieved: (1) changes to infectious disease emergency leave (IDEL); (2) deeming certain employees not to be on layoff; and (3) deeming certain actions not to be a constructive dismissal.
We will review the scope of each of these in turn. In our review, we will be referring to a “COVID-19 Period,” which is a new defined term in the IDEL Regulation and which runs retroactively from March 1, 2020 to the date that is 6 weeks after the date that the state of emergency in Ontario comes to an end.
Changes to Infectious Disease Emergency Leave
The first component of the IDEL Regulation comprises changes to the application of the infectious disease emergency leave provisions of the ESA. The IDEL Regulation confirms that COVID-19 is a designated infectious disease for the purposes of the ESA, and that entitlement to the original IDEL (for both union and non-union employees) remains retroactive to January 25, 2020. We reviewed the new IDEL provisions of the ESA in detail in our March 19, 2020 FTR Now.
The key change for employers of non-union employees is that the IDEL Regulation creates a new category of IDEL, which is engaged where an “employee’s hours of work are temporarily reduced or eliminated by the employer for reasons related to” COVID-19. More importantly, where an employee does not perform their duties because their hours have been temporarily reduced or eliminated because of COVID-19, the employee is deemed to be on an IDEL during those periods of time throughout the COVID-19 Period.
Consider, for example, employers who temporarily closed their business in response to the COVID-19 pandemic, whether because the business was ordered closed by government order or because of the general downturn in the economy caused by the pandemic. If employees had their hours temporarily reduced or eliminated as a result, those employees are now deemed to be on an IDEL under the ESA. The deemed IDEL covers the entire COVID-19 Period, so may be deemed to have been in place retroactively to a date no earlier than March 1, 2020, and may continue for up to 6 weeks after the state of emergency in Ontario comes to an end.
As the employees are deemed to be on an ESA leave of absence, the IDEL Regulation provides that the ESA’s usual protections for ESA leaves apply to employees who are on a deemed IDEL. However, there are important modifications to the requirements to continue employee participation in the benefit plans listed in subsection 51(2) of the ESA:
- If an employee had stopped participating in a benefit plan as of May 29, 2020, the employee does not have a right to continue participating in the benefit plan during the COVID-19 Period.
- If an employer had stopped its contributions to a benefit plan as of May 29, 2020, the employer is not required to make contributions to that benefit plan during the COVID-19 Period.
This is important for employers who had temporarily laid off employees without continuing employee benefit plans as the employers will be relieved from the obligation to provide continued participation in those benefit plans to their employees who are now deemed to be on an IDEL (which would be the usual requirement under the ESA). However, for those employers who have continued benefit plans for their employees and continued to make their portion of the benefit plan contributions, it appears that the obligations to maintain those benefit plans and make contributions will continue to apply while the employees remain on deemed IDEL.
There are two key categories of exceptions to the deemed IDEL rules. If either of these categories applies, the employees will not be deemed to be on an IDEL:
- The first category will apply if, at anytime on or after March 1, 2020, the employer takes steps to terminate the employment relationship. This could occur where the employer (i) actually terminates the employee’s employment, (ii) closes its entire business at an establishment, or (iii) has given or gives notice of termination to an employee and the employee resigns in response as specifically permitted by the ESA. (The IDEL Regulation provides that an employer and employee may agree to rescind a notice of termination, in which case the employee could access the deemed IDEL if other requirements are met.)
- The second category will apply if, before May 29, 2020, the employee had already been (i) deemed terminated or severed under the ESA as a result of an earlier layoff, or (ii) constructively dismissed and had resigned within a reasonable time.
In all other cases, non-union employees whose hours of work have been reduced or eliminated as a result of COVID-19 are now deemed to be on an IDEL under the ESA for all such time during the COVID-19 Period.
Deeming Certain Employees Not to be on Layoff
The second key component of the IDEL Regulation relates to non-union employees whose hours of work have been reduced or eliminated, or whose wages have been reduced, for reasons related to COVID-19 during the COVID-19 Period. For these employees, the IDEL Regulation provides that the ESA’s usual termination and severance rules related to layoffs do not apply, and that the employees are effectively deemed not to be on layoff for the purpose of those sections. As with the deemed IDEL provisions, this will only apply during the COVID-19 Period.
There are two key exceptions to this rule where employees will remain subject to the ESA’s usual layoff rules:
- First, if an employee is or was laid off as part of a complete closure of a business at an employer’s establishment, they will be treated as having been terminated and severed under the ESA’s usual rules.
- Second, this new rule will not apply if before May 29, 2020, the employee’s employment had already been deemed terminated or severed under the ESA as a result of an earlier layoff.
Deeming Certain Actions Not to be a Constructive Dismissal
The final component of the IDEL Regulation is that it deems certain actions of an employer made in response to COVID-19 not to be a constructive dismissal if they occur during the COVID-19 Period (i.e. between March 1, 2020 and up to 6 weeks after the state of emergency is lifted) and are for reasons related to COVID-19:
- a temporary reduction or elimination of an employee’s hours of work, or
- a temporary reduction in an employee’s wages.
The primary exception is that this deeming rule will not apply if, before May 29, 2020, the employee had already been constructively dismissed and had resigned within a reasonable time.
The IDEL Regulation makes it clear that the new rules also apply to assignment employees who are employed by temporary help agencies.
It also provides some guidance on how to determine if an employee’s hours of work or wages have been reduced. In brief, for employees with a regular work week, the default comparator week will be the last regular work week before March 1, 2020, while for employees without a regular work week, the comparison will be to the average of the 12-week period preceding March 1, 2020. We will not review these provisions in detail, and the text of the IDEL Regulation should be consulted.
The IDEL Regulation also provides that certain complaints filed with the Ministry alleging that a temporary reduction or elimination of hours of work or a temporary reduction of wages constitutes a termination or severance of employment are deemed not to have been filed if the reductions were made in response to COVID-19 during the COVID-19 Period. This rule is quite technical and has a number of exceptions, and employers should consult the text of the IDEL Regulation and seek legal advice if you have received a complaint under the ESA.
Takeaways for Employers
The IDEL Regulation will provide welcome relief to a wide range of employers of non-unionized employees who have either had to completely shut down their operations, curtail hours of work or reduce employee wages in response to the COVID-19 pandemic. In most cases where this has occurred, the employees should now be deemed to be on an IDEL and not to be on layoff under the ESA. This should be the case regardless of how employers originally characterized the cessation of work at the outset of the pandemic (whether as a temporary layoff, leave of absence, or otherwise).
However, several words of caution are in order.
The IDEL Regulation amends the ESA rules related to layoffs and constructive dismissal, and it is unclear what impact it may have on the common law’s consideration of these issues. While the IDEL Regulation and the fact of an employee being deemed to be on an ESA leave will undoubtedly be raised by employers in defence of any common law claims for constructive dismissal, employers should not automatically assume that the IDEL Regulation would justify a temporary layoff or wage reduction in the absence of express contractual provisions. Rather, legal advice should be sought in all cases where employers would be considering either of these actions with respect to your employees.
It is also important to keep in mind that the IDEL Regulation addresses only temporary reductions, and only those temporary reductions related to COVID-19. Moreover, the relief provided by the IDEL Regulation will only continue for 6 weeks after the state of emergency is lifted. If employers are not able to resume full pre-pandemic operations or pay pre-pandemic wages by that time, the usual ESA rules will be re-engaged.
Employers will also need to carefully consider the exceptions to the IDEL Regulation. For example, if employees were laid off prior to March 1, 2020 and/or were not laid off in response to the COVID-19 pandemic, the new deeming rules may not be engaged. Similarly, the impact of the IDEL Regulation on employees who may have already claimed a deemed termination or constructive dismissal is complex, and legal advice should also be sought in all such cases.
If you have any questions related to the IDEL Regulation and its impact on your organization, please contact Paul Broad, Simon Mortimer, George Vuicic, Mark Mason, Craig Rix or your regular Hicks Morley lawyer.
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