COVID employer protections leave laid-off workers in limbo
Not very long ago, with businesses in free-fall and employees dismissed or laid off in unprecedented numbers, the Ontario government jumped into the fray to protect employers that laid off employees at any time after March 1, 2020.
The legislation, the Infectious Disease Emergency Leave (IDEL), was an amendment to the Employment Standards Act. It was originally to last for only a few months but was repeatedly extended, and has been once again extended until Sept. 25. But that is not the limit of an employer’s respite. As of Sept. 25, assuming it is not extended again, an employee’s layoff can continue under the ESA for another 13 weeks. If benefits are paid during the layoff, it can continue for 35 more weeks, until May 28, 2022.
In other words, at least under the ESA, employees will have no recourse whatsoever if they were laid off suddenly and without pay for reasons related to COVID. And employers will have almost another full year of protection from recourse, having had more than 15 months already.
Employees have claimed this legislation massively favours employers. And they are right. But employers, too, were imperilled by our contemporary plague and if they had to pay wrongful dismissal damages or maintain employees on staff many would not have survived and their employees would have become unemployed anyway — without any recourse whatsoever. At least through the IDEL legislation, the legislature presumed, employees retained a right to recall at the end of the IDEL and layoff periods. And, if they are not recalled, then they could sue for wrongful dismissal. What a chimeric right.
The reality is somewhat different than the legislative scheme. Given that a layoff can now last for more than two years, few employees can survive without income and most will soon find other work in what I predict will be a Grand Reopening, long before any recall. That is why most employers, protected by this legislation, have already called back the employees they would like to return and let the others languish hoping they move on elsewhere.
The big legal question is whether employers who relied on this legislation are protected from a lawsuit for constructive dismissal.
I break those employers down into two categories: The first are those minority of businesses ordered by government to close, such as casinos or for a time, restaurants. In those cases, government order dictated a layoff and an employer would have the defence of what is called frustration in any lawsuit for dismissal. An employee of such an employer will have no recourse if laid off. Then there are the vast majority of employers who had their businesses severely handicapped, even ruined, but cannot claim the government ordered them closed.
Can an employee laid off from those employers sue for constructive dismissal? The traditional law in Canada is straightforward: Absent a previous history of layoffs or a contract permitting layoffs, a layoff is a constructive dismissal and economic difficulty is no defence. Does the IDEL legislation change that?
We have now had two completely conflicting decisions of Ontario Superior Court judges. The first, which I have discussed previously, was Coutinho v Ocular Health. The decision held that, given that the Employment Standards Act states it does not interfere with Common Law (court developed) rights, employees who are laid off can claim constructive dismissal. Of course, if they do not sue fairly quickly after their layoff they are deemed to accept that layoff and lose their right to sue until others, but not themselves, are recalled, or this extended period permitted for layoff by IDEL and employment standards has expired. That is a view I favour, and the Coutinho case was, in my view, predictable.
But on April 21, Justice Jane Ferguson of the same court, involving Candace Taylor and Hanley Hospitality, a Tim Hortons dealer, came to the opposite conclusion. It found that any employee laid off during this extended IDEL period as a result of COVID could not claim constructive dismissal in the courts from their employer. She found that the IDEL legislation was explicitly intended to prevent just that.
Now I happen to know, from meetings with the Ministry of Labour at the time, at which I and some members of my firm and a few other lawyers were invited to, that the legislature did not intend IDEL to preclude constructive dismissal court actions. But courts are supposed to rely on the wording of the legislation itself, regardless of what might be the actual legislative intention.
Until the Ontario Court of Appeals decides this, some months into the future, any employee in Ontario who is laid off and sues for constructive dismissal, possibly having resigned from their job in the process, is now at risk of a court finding that that resignation was entirely voluntary. They therefore risk losing the settlement they presumed to obtain, their right to return to their job, dismissal damages if they are not recalled and will have to pay costs to the employer from the court action. I believe the Taylor case will likely be overturned but with two judges having come to the opposite result, there is now uncertainty.
For those who have not already taken such action and have been laid off for months without income, given the cost of litigation, they can no longer prudently take the risk of suing. And those employee law firms trolling for clients through the pandemic, promising them large dismissal settlements, may end up having some embarrassing explaining to do.
Got a question about employment law during COVID-19? Write to Howard at levitt@levittllp.com.