The Infectious Disease Emergency Leave Regulation and its limited impact thus far on common law constructive dismissal due to lay-offs

By Nicole A. McAuley

On April 27, 2021, the Ontario Superior Court of Justice released its first decision interpreting the Infectious Disease Emergency Leave Regulation O Reg 228/20 (“IDEL Regulation”) under the Employment Standards Act, 2000, SO 2000 c 41 (“ESA”). Therein, Justice D. Broad determined that employees who were temporarily laid-off because of the COVID-19 pandemic can be successful in constructive dismissal claims at common law, despite the IDEL Regulation.

Early on in the pandemic, there were a large volume of temporary lay-offs by employers who do not typically utilize lay-offs. Pre-pandemic, the case law in this area was well established: where an employment agreement does not contain an enforceable provision allowing for a temporary lay-off, a laid-off employee is deemed to have been constructively dismissed. As many employers had not taken such actions previously, their employment agreements did not contain lay-off provisions. While most of these lay-offs were done out of necessity as a result of the employers’ financial hardship, it was unclear how they would be treated by the courts going forward.

In an attempt to protect employers from constructive dismissal claims in an already precarious time, the province enacted the IDEL Regulation under the ESA.  While  employers could not be sure how the IDEL Regulation would be applied in future legal actions, it was hoped that, given the economic implications of the pandemic, the IDEL Regulation would shield employers from such actions. Based on this first decision, these efforts do not appear to have been successful thus far.

Coutinho v. Ocular Health Centre Ltd. 2021 ONSC 3076

The defendant in this matter operated ophthalmic clinics in Cambridge and Kitchener, Ontario. The plaintiff was employed as the office manager of the Cambridge clinic. In April 2020, a commercial dispute between the defendant’s principals and doctors led to the clinic shutting down. The dispute included allegations that the clinic staff and its doctors had failed to comply with social distancing procedures, among other things.

The plaintiff arrived at work on May 1, 2020 to find the locks had been changed. She was advised that the office was closed, but she would be paid. On May 29, 2020, she received a letter from a principal of the defendant informing her that she had been placed on a temporary lay-off and would no longer receive a salary.

The plaintiff issued a Statement of Claim on June 1, 2020 alleging constructive dismissal. Therein, the plaintiff took the position that nothing in the ESA or its regulations eliminated her common law right to pursue a civil claim for constructive dismissal. She argued that the existing case law on lay-offs should prevail.

The defendant took the position that the plaintiff’s hours of work were temporarily reduced for reasons related to COVID-19. She was therefore deemed to be on Infectious Disease Emergency Leave, as contemplated by the IDEL Regulation. Pursuant to the IDEL Regulation, the temporary reduction of the plaintiff’s hours did not constitute a constructive dismissal and therefore the plaintiff had no cause of action.

The defendant moved for summary judgment on this basis. It argued that given the severity of the impact of COVID-19, the IDEL Regulation should be interpreted to apply to constructive dismissal pursuant to the ESA as well as at common law.

Unfortunately for employers, Justice Broad found that the IDEL Regulation did not affect the plaintiff’s right to pursue a claim for constructive dismissal at common law, and dismissed the summary judgment motion. The starting point for Justice Broad’s analysis was section 8(1) of the ESA, which provides:

Subject to section 97, no civil remedy of an employee against his or her employer is affected by this Act.

Section 97 had no application to the case at hand. Relying upon section 8(1), the Court found that the IDEL Regulation could not be interpreted to remove an employee’s right to pursue a common law action for constructive dismissal.

The decision also highlighted the Ministry of Labour, Training and Skills Development’s document titled “Your Guide to the Employment Standards Act: Temporary Changes to the ESA Rules”. Therein, it stated, amongst other things:

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.

Justice Broad found that the guide was helpful to understand the legislative intent of the IDEL Regulation as it relates to constructive dismissal. The Court relied upon evidence of this intention in coming to its decision.

The decision did not address whether the common law on constructive dismissal and lay-offs needs to be updated to reflect the unique circumstances of the global pandemic. It is not clear, based on the decision, whether extensive arguments to this effect were advanced by the employer in this case. It remains unclear, if such arguments were made in future actions, whether the Court would support such changes. Understandably, that is certainly the hope of many employers.

It is likely there will be many more decisions to come on this subject, and it is expected that the Ontario Court of Appeal will be asked to weigh in at some point. We will continue to pay close attention to all such developments, as this highly anticipated issue continues to unfold.