Check-in on the Impact of COVID-19 on Wrongful Dismissal Litigation

The COVID-19 pandemic has had a broad-ranging impact on employment law since March 2020. Now that we are 18 months into the pandemic, employers may find it helpful to have a check-in on how Canadian courts have, to date, considered the impact of the pandemic on wrongful dismissal claims arising from layoffs and terminations during this period.

In this Raising the Bar, we consider four ways in which the pandemic has impacted wrongful dismissal litigation.

1) The Pandemic’s Impact on Notice Periods

When assessing a plaintiff’s entitlement to common law reasonable notice of termination, courts consider a number of factors, including the availability of alternate employment. During the pandemic, courts have regularly been asked to consider the impact of COVID-19 on the job market.

In keeping with the fact-intensive nature of assessing notice periods, Ontario courts have taken a careful and fact-specific approach when considering the effect, if any, of the COVID-19 pandemic on the reasonable notice period.

In Yee v. Hudson’s Bay Company, the Ontario Superior Court found that “terminations which occurred before the COVID pandemic and its effect on employment opportunities should not attract the same consideration as termination after the beginning of the COVID pandemic and its negative effect on finding comparable employment.” The Court ultimately concluded that the plaintiff – whose employment was terminated in August 2019, more than a year and a half prior to the start of the pandemic – was not entitled to a longer period of notice.

Where a plaintiff was dismissed right at the onset of the COVID-19 pandemic in mid-March 2020, just days before the provincial government declared a state of emergency, the Court in Kraft v. Firepower Financial Corp., found that the pandemic impacted the plaintiff’s ability to secure new employment. The Court granted an additional month of notice due to the impact of the pandemic.

The Court in Lamontagne v. J.L. Richards & Associates Limited took judicial notice of the fact that a “global health emergency was brewing” and that there was a “threat of a possible global pandemic” when the plaintiff’s employment was terminated in mid-February 2020. This was considered as one of many factors in assessing the appropriate period of reasonable notice.

In Iriotakis v. Peninsula Employment Services Limited, the Court considered the pandemic’s impact on the plaintiff’s job search in the context where the plaintiff’s employment was terminated in late March 2020. The Court held that the pandemic’s impact on the economy and job market was highly speculative and uncertain as to degree and duration at the time.

2) Setting-Off CERB

Some employees whose employment has been terminated or who have been laid off during the pandemic have received the federal Canada Emergency Response Benefit (CERB) or employment insurance benefits. As a result, Canadian courts have had to grapple with whether CERB payments ought to be deducted from wrongful dismissal damages awards.

In Iriotakis, the Ontario Superior Court declined to deduct CERB payments from the wrongful dismissal damages award. Justice Dunphy clarified that unlike employment insurance, “CERB was an ad hoc program and neither employer nor employee can be said to have paid into the program or ‘earned’ an entitlement over time beyond their general status as taxpayers of Canada.” Finding that the benefit of $2,000 per month was considerably less than the plaintiff’s employment earnings, Justice Dunphy found it would not be equitable to deduct CERB from the plaintiff’s damages for reasonable notice.

By contrast, the British Columbia Superior Court in Hogan v. 1187938 B.C. Ltd. stated that “if CERB payments are not deducted, the plaintiff would be in a better position than he would have been in if there had been no breach of the employment contract. But for his dismissal, the plaintiff would not have received the benefit.” Distinguishing the facts at hand from Iriotakis, the B.C. Court concluded that CERB payments received by the plaintiff ought to be deducted from the damages award.

As the Nova Scotia Supreme Court recently noted, more questions are being asked about the nature of the ad hoc CERB program as the country begins to gradually move out of the pandemic. It remains unknown whether the federal government will require recipients of CERB to repay payments from damages awards for wrongful dismissal going forward.

3) Job-Protected Infectious Disease Emergency Leave or Constructive Dismissal?

Ontario’s Infectious Disease Emergency Leave regulation (IDEL Regulation) came into effect on May 28, 2020 and applies retroactively to the “COVID-19 period” beginning on March 1, 2020. Under the IDEL Regulation, a temporary reduction or elimination of an employee’s hours of work or wages is deemed not to constitute a constructive dismissal under the Employment Standards Act, 2000 (ESA) if it occurred during the COVID-19 period for reasons related to a designated infectious disease.

The case law interpreting the impact of the IDEL Regulation on constructive dismissal claims at common law remains, at the time of writing, uncertain. Currently, there are conflicting decisions from the Ontario Superior Court about the impact of the regulation on such claims.

In Coutinho v. Ocular Health Centre, Justice Broad rejected the employer’s position that the IDEL Regulation constituted a defence to a claim of constructive dismissal. He distinguished between constructive dismissal under the ESA and constructive dismissal at common law and found that while the IDEL Regulation precluded a claim for constructive dismissal under the ESA, it did not take away (or otherwise affect) the plaintiff’s ability to pursue a claim for constructive dismissal at common law. This reasoning was subsequently adopted in Fogelman v. IFG, 2021 ONSC 4042.

In Taylor v. Hanley Hospitality Inc., however, Justice Ferguson reached the opposite conclusion, explicitly rejecting the approach taken in Coutinho. Justice Ferguson found that the provincial government enacted the IDEL Regulation to neutralize the effect of its decision to shutter businesses across the province in response to the 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, Justice Ferguson held it was clear that the legislature’s intention in enacting the IDEL Regulation was for it to displace the common law respecting layoff and constructive dismissal.

Both decisions have been appealed and therefore employers will need to await the decisions from an appellate court for a further update on the state of law in Ontario.

4) Workplace Vaccination Policies and Constructive Dismissal

The introduction of COVID-19 vaccines has provided hope that, with vaccinations, the pandemic can be brought under control. Many Canadian employers have implemented, or are currently considering implementing, mandatory workplace vaccination policies. Employers should be aware that such vaccination policies may entail legal risks. A couple of potential risks are addressed below.

Where an employer introduces a mandatory vaccination program and an employee refuses to be vaccinated, that employee could attempt to claim that its introduction constitutes an alteration of the fundamental terms and conditions of their employment, amounting to constructive dismissal. In a claim of constructive dismissal, the employee would be required to prove that the imposition of the policy constitutes a significant change to a fundamental term or condition of their employment such that it constitutes a dismissal. Further, if an employee’s employment is actually terminated due to a failure to comply with a mandatory vaccination policy, the employee may – depending on the circumstances – be entitled to notice of termination pursuant to their employment contract or the common law. Both of these issues would be assessed within the context of the unfolding pandemic and the provisions of the specific policy adopted by the employer.

As workplace vaccination policies have only recently begun to be introduced, we have not yet seen a Canadian court weigh in on these issues.

Conclusion

We will continue to watch with interest how courts will treat issues like the impact of the pandemic on reasonable notice, the interaction between the IDEL Regulation and constructive dismissal, and the implementation of workplace vaccination policies. We look forward to keeping readers updated as the law develops in these areas.

Should you have any questions about the issues raised in this Raising the Bar, please contact Ed O’Dwyer, Eleanor Vaughan or your regular Hicks Morley lawyer.

The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Hicks Morley Hamilton Stewart Storie LLP and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Hicks Morley Hamilton Stewart Storie LLP. ©

Raising the Bar