Case In Point

Court Finds IDEL Regulation Under ESA Precludes Constructive Dismissal Claim at Common Law

Case In Point

Court Finds IDEL Regulation Under ESA Precludes Constructive Dismissal Claim at Common Law

Date: June 10, 2021

In Taylor v. Hanley Hospitality Inc., the Ontario Superior Court considered the interaction between the Infectious Disease Emergency Leave regulation (IDEL Regulation) made under the Employment Standards Act, 2000 (ESA) and a claim for constructive dismissal at common law. It held that the IDEL Regulation precludes a constructive dismissal claim where employees’ hours are reduced or eliminated as a result of the pandemic.

In this case, the plaintiff was temporarily laid off from her employment on March 27, 2020 as a result of the COVID-19 pandemic. The plaintiff was recalled to her employment effective September 2, 2020 and continues to be employed. She brought a claim for constructive dismissal respecting the period for which she was temporarily laid off. The fact that the plaintiff was laid off for reasons related to COVID-19 was not in dispute.

Absent an agreement to the contrary, at common law a unilateral layoff by an employer typically constitutes constructive dismissal. Section 7 of the IDEL Regulation—which was enacted by the government shortly after the pandemic began—says something different than the common law. It provides that if an employer temporarily reduces or eliminates an employee’s hours of work or wages for reasons related to COVID-19 during the prescribed “COVID-19 period,” the reduction or elimination will not constitute a constructive dismissal.

Relying on the IDEL Regulation, the defendant argued that the plaintiff was deemed to be on emergency leave and that the temporary elimination of her employment duties and work hours did not amount to constructive dismissal. The plaintiff argued that the IDEL Regulation does not displace the common law doctrine that a layoff is a constructive dismissal.

The Court agreed with the employer. It emphasized that the government enacted the IDEL Regulation to neutralize the effect of the government’s decision to shutter businesses across the province in response to the COVID-19 pandemic. When the government forced businesses to close, thereby forcing layoffs, it exposed employers to a risk of constructive dismissal claims. To avoid these consequences, the legislature enacted the IDEL Regulation. In this context, the Court held it is clear that the legislature’s intention in enacting the IDEL Regulation was for it to displace the common law respecting layoff and constructive dismissal. It stated that “All temporary layoffs relating to COVID-19 are deemed to be IDELs, retroactive to March 1, 2020 and prospective to the end of the COVID-19 period.”

Where the IDEL Regulation applies, the Court explained that a layoff is no longer a layoff at common law. Rather, the layoff is an IDEL and the normal rights for statutory leaves under the ESA are applicable. The Court was clear that, where the circumstances described in the IDEL Regulation apply, arguments respecting layoff at common law are inapplicable.

The Court’s decision in this case is in direct conflict with an earlier Ontario Superior Court decision, Coutinho v. Ocular Health Centre Ltd., in which that court held that the IDEL Regulation does not constitute a defence to a claim of constructive dismissal at common law. The Court addressed Coutinho head-on, stating that the analysis in the decision is “wrong in law.” In particular, it said that the court in Coutinho failed to properly apply the principles of statutory interpretation and that it also improperly interpreted section 8(1) of the ESA to mean that the ESA may not displace the common law. To the contrary, in Elsegood v. Cambridge Spring Service (2001) Ltd., also a constructive dismissal case, the Court of Appeal said the opposite.

The Court engaged in an analysis of statutory interpretation, including a discussion of Legislative intent, to arrive at its conclusion. The decision will be of welcome assistance to employers arguing that temporary layoffs related to COVID-19 do not constitute constructive dismissal.

It remains to be seen, given the conflicting decisions on point, whether this case will be appealed.