What you need to know about COVID-19, temporary layoffs, constructive dismissal and wrongful termination in Ontario.

When an employer wants to lay off an employee (even temporarily) they must include an express or implied term in their employment agreement giving them that right. If the employment contract does not allow an employer to lay off its workers, any employees that are laid off may be considered to have been “constructively dismissed”. Because employees are entitled to advance notice that their employment will be coming to an end when an employee is constructively dismissed they are entitled to compensation for the lack of notice and may bring a wrongful termination claim.

Even where an employment contract does give the employer the right to lay off its employees, the layoff provisions (and the layoff itself) must comply with Ontario’s Employment Standards Act (“ESA”) or again, the employees could be considered constructively dismissed.

To simplify, there are generally 3 situations an employee that has been placed on a temporary layoff may find themselves in:

  1. The employee is laid off and there is NO temporary layoff clause in the employment agreement (employees with no employment contract are also in this category). The employee may be constructively dismissed.
  2. The employee is laid off and THERE IS a temporary layoff clause in the employment agreement, but the temporary layoff clause is invalid OR the layoff is not in accordance with the ESA. The employee may be constructively dismissed.
  3. The employee is laid off, the employment contract allows for a layoff and the employment contract and the layoff both comply with the ESA. In this case the employee would NOT BE constructively dismissed.

Most often, the first two situations will apply, and an employee on a temporary layoff may consider themselves as having been constructively dismissed.

Even if you think the employment contract provides the employer with the right to lay off workers, you should consult with an Ontario Employment Lawyer to be sure. Regardless, this post will explain the two more common situations employees that have been temporarily dismissed due to COVID-19 may find themselves in.

1. The employee is laid off and there is NO temporary layoff clause in the employment agreement

It is a fundamental term to an employment contract that employees will attend work and receive a salary from their employer throughout the duration of the employment relationship. When an employer lays an employee off, without a contractual right to do so, they have altered or breached a fundamental term of the employment agreement to the extent that the employee is entitled to treat themselves as having been (in effect) terminated from their employment. In legal terms this is called a “constructive dismissal”. However, the employer can rebut the constructive dismissal if an employee expressly accepts the layoff or is deemed to have accepted the layoff in the circumstances. For this reason, it is normal for the employee to provide notice to the employer that they do not accept the layoff and demand to be returned to work. If the employer does not comply, the employee can bring a complaint to the Ministry of Labour to recover any notice and severance pay they may be owed as a result of being terminated. Alternatively, the employee may bring a claim for wrongful dismissal against the employer by suing the employer in the Ontario Courts (see what happens if I am constructively dismissed below).

2. The employee is laid off and THERE IS a temporary layoff clause in the employment agreement, but the temporary layoff clause is invalid OR the layoff is not in accordance with the ESA.

The main purpose of the ESA is to recognize that (in most circumstances) there will be unequal bargaining power between employers and employees. As such, the ESA sets the legal bare minimums to govern employment relationships in Ontario. Where an employment contract provides an employer with the right to temporarily lay off an employee, the layoff clause itself must be ESA compliant or may be void. If the clause is void, the employer will not have the right to lay off an employee and the employee may be deemed constructively dismissed. When a layoff clause is valid, and an employer has the contractual right to lay off employees, the layoff itself must abide by the rules in the ESA or the employee may be constructively dismissed.
Under the ESA an employer (with the contractual right to lay off employees) may only lay off an employee temporarily. A layoff that is not a “temporary layoff” is deemed to be a termination if:

  • The layoff lasts longer than 13 weeks in a period of 20 consecutive weeks

OR

  • The layoff lasts longer than 35 weeks in a period of 52 consecutive weeks and (among other factors) the employee does not receive substantial payments from the employer, benefits under a retirement or pension plan, and supplementary unemployment benefits.

Temporary Layoffs, Infectious Disease Emergency Leave and COVID-19

UPDATE: On September 3, 2020, the Ontario government amended O. Reg 228/20 Infectious Disease Emergency Leave (explained below) to further extend the period where employees will consider to be on emergency leave and not on a temporary layoff until January 2, 2021. As a result, on January 3, 2021, the temporary layoff timelines in the ESA will start to run (13 weeks and 35 weeks respectively) AGAIN, employers must have a layoff clause in their employment contract in order to place employees on a layoff. This amendment may not change an employee’s common law claim to constructive dismissal.

As a result of COVID-19, the Ontario Government passed O. Reg. 228/20 INFECTIOUS DISEASE EMERGENCY LEAVE which amends the Employment Standards Act with the effect of temporarily suspending the rights of employees who were laid off as a result of COVID-19 to claim constructive dismissal under the ESA. Under the new regulation, employees that were laid off after April 30, 2020, are deemed to be on “Infectious Disease Emergency Leave” (and therefore not laid off for the purposes of the ESA) until 6 weeks following the day the declared state of emergency is lifted by the Ontario Government. As the state of emergency has now been lifted, starting September 4, 2020, the normal ESA timelines for temporary layoffs will begin to run again. The employee’s time spent previously laid off will not count towards the length of the layoff so that the earliest an employee can claim they were terminated under the ESA will be just over 13 weeks from September 4, 2020.

NOTE: the regulation only suspended employees’ rights to bring a complaint to the Ministry of Labour that the layoff constituted a termination of their employment entitling the employee to statutory notice and perhaps severance pay under the ESA. The regulation MAY NOT affect employees’ rights to claim they have been constructively dismissed under the common law and to bring a legal claim against their employer for wrongful dismissal and much larger compensation in the form of Reasonable Notice pay.

What Happens When an Employee is Constructively Dismissed?

When an employee is constructively dismissed they have not been provided with advance notice that their employment is coming to an end or pay-in lieu of actual notice. As a result, they have a claim for compensation either under the Employment Standards Act to the Ministry of Labour or by starting an action in the Ontario Courts for wrongful dismissal. Read more about wrongful termination in Ontario here.

If you need legal advice from a small business lawyer, book your free legal consultation with Supply Law today.