COVID-19 layoff found to be constructive dismissal

There has been a question burning in the minds of members of the employment bar for over a year now.

Many employers have reduced their employees’ hours – or laid them off entirely – and have cited the COVID-19 pandemic as the cause. Before the pandemic, except in some cases where an employee’s contract specifically allowed for such changes, these employer actions would have amounted to unambiguous breaches of the employment contract by the employer that would permit the employee to bring a constructive dismissal claim.

But these are uncertain times, and the question employment layers have been wrestling with is whether a claim for constructive dismissal would be successful if the layoff or reduced hours were imposed because of the unprecedented circumstances brought about by the COVID-19 pandemic.

Our courts depend on precedent, so it’s difficult to predict what they will do in an unprecedented time.

The question was further complicated by the passing of Ontario Regulation 288/01: Infectious Disease Emergency Leave, which was implemented to help businesses cope with the drastic economic downturn caused by the pandemic. The Regulation sets out that an employee who has had their hours reduced or eliminated has not been laid off; they are deemed to be on an “infectious disease emergency leave” instead. In addition, the reduction or layoff is deemed not to be a constructive dismissal as defined in the Employment Standards Act, 2000.

You might think this regulation would be the end of the story, but it’s not quite that simple. To understand why, it’s important to understand that there is a difference between an employee’s rights under the Employment Standards Act, and their rights under the common law.

The Employment Standards Act sets out just the minimum entitlements and protections afforded to employees in Ontario. But the common law (judge-made law based on previously adjudicated claims) sets out the “defaults” that apply where an employee hasn’t been restricted to the statutory minimums. In most respects, the common law provides greater rights to employees than the Act. And an important section of the Act, s. 8(1), states that no civil remedy of an employee against their employer is affected by the Act.

As a result, many employment lawyers have argued that an employee can still successfully claim constructive dismissal at common law, despite the Emergency Leave regulation: it is argued that the regulation only applies to constructive dismissal under the Employment Standards Act itself – but not at common law. Others, however, have argued that the impacts of the regulation are farther reaching, and that it can extinguish common law claims as well.

Thanks to the recent decision of Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076, we finally have some clarity on the issue.

Coutinho worked as an ophthalmic technician for the Ocular Health Centre Ltd. at a clinic in Cambridge, Ontario. A dispute around COVID-19 safety protocols led to the Cambridge clinic being closed and Coutinho being laid off from her position in May 2020. She was brought back by Ocular at a different clinic in July 2020, but she brought a claim for constructive dismissal regardless.

Ocular sought to have Coutinho’s claim dismissed on the grounds that a layoff during COVID-19 was not a constructive dismissal because Coutinho was, instead, on an infectious disease emergency leave.

The Court determined that s. 8(1) of the Act applied, and that the layoff was a constructive dismissal despite the wording of the Regulation. The Court also took notice of a Ministry of Labour publication called “Your Guide to the Employment Standards Act: temporary changes to ESA rules“ which contained the words “these rules affect only what constitutes a constructive dismissal under the ESA. These rules do not address what constitutes a constructive dismissal at common law.”

In other words, even though the Regulation may say that an employee can be laid off without it being considered a constructive dismissal, the common law says otherwise and an employee may still be able to bring a successful constructive dismissal claim as a result. It should be noted that this is the first time the Courts have wrestled with the issue, and there may be future decisions that call this ruling into question. For the time being, however, it is good law.

If you are an employee wondering whether your employer can be held responsible for reducing your hours or laying you off, or if you are an employer wondering what actions you can fairly take to keep your business afloat during these unprecedented times, it’s best to speak with an experienced employment lawyer who can give you a professional opinion. A local Hamilton lawyer with experience in employment law can help you understand your rights and obligations and fight for you in a civil lawsuit if necessary.

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