It has been a month since a Superior Court Judge delivered his controversial ruling in Coutinho v. Ocular Health Centre Ltd., finding that employees who were on Infectious Disease Emergency Leave ("IDEL") could exercise their common-law right to sue their employer for constructive dismissal. This was the first case to discuss the legality and functionality of the new IDEL, which was introduced as Regulation 228/20 to the Employment Standards Act ("ESA") in May 2020.
This Regulation allowed employees whose hours or wages were reduced or eliminated due to COVID-19 to be on IDEL retroactive from March 1, 2020 to September 25, 2021. More importantly, this Regulation converted temporary layoffs into deemed IDEL for the duration of the COVID-19 period, which reduced the number of constructive dismissals, layoffs and termination claims.
The ruling in Coutinho sent shockwaves throughout the employment law industry. It set an unprecedented view for how the judiciary interpreted the new IDEL leaving many lawyers and employers to question its purpose in the first place. However, on June 7th, another Superior Court Judge faced the same question in Taylor v Hanley Hospitality and came to a different conclusion.
Candace Taylor was temporarily laid off in March 2020 due to COVID-19 and brought a constructive dismissal claim against her employer, Hanley Hospitality. Hanley brought a Rule 21 Motion to strike Taylor's claim for constructive dismissal on the basis that IDEL applied to both statutory constructive dismissal claims and common law constructive dismissal claims. The Judge found in Hanley's favour ruling that Taylor's layoff was in fact an IDEL by virtue of the Regulation, and as such, she could not bring a constructive dismissal claim under the ESA or the common law. In other words, the Court clarified that all temporary layoffs, reductions or eliminations of an employee's hours of work by the employer for reasons related to COVID-19 do not constitute constructive dismissal.
The Court adopted a practical and contextual approach to the interpretation and application of Regulation 228/20 and confirmed that it must be interpreted to apply to all constructive dismissal claims. The Judge noted that otherwise it would be "absurd" if employees could be on IDEL for ESA purposes but terminated by constructive dismissal under the common law.
The Court acknowledged that almost every Canadian has had their employment interrupted by the COVID-19 pandemic and notes that it is essential to remember the context of IDEL and the purpose of the Regulation. By declaring a state of emergency, the Ontario government forced employers to cease their operations and limit their services. As a result, employers were exposed to constructive dismissal claims under the ESA. In recognizing this problem, the legislature amended the ESA and created the IDEL to address the employment impacts of the pandemic. Based on this context, the Judge stated that it should be obvious that the legislature's intention in amending the ESA was to protect employers from inherent unfairness, which in large part would be due to the government's actions. This addition to the ESA was a critical response to the changes occurring in Ontario's job market.
Further, the Court considers the recent decision in Coutinho and puts employers' minds at ease, declaring that the case had been wrongly decided because Justice Broad's analysis was "wrong in law." The Court states that in Coutinho, Justice Broad did not consider the context of the IDEL or the purpose of the Regulation. She asserts that the Court's analysis offends the rules of statutory interpretation as the analysis rendered the ESA meaningless. She agrees with the Court of Appeal and states that section 8.1 of the ESA has never been interpreted as preventing the ESA from displacing the common law. But rather, that statutes enacted by the legislature did, in fact, displace the common law.
This case is considered a “win” for Ontario employers as it serves as an effective defence for common law constructive dismissal claims arising from COVID-19 related layoffs. While this decision provides employers with some much-needed clarity from the unpopular Coutinho decision, they should still be wary as both cases are in direct conflict on the legality and functionality of the new IDEL. It is likely that the Court of Appeal will need to weigh in on this issue and provide further guidance on this matter. Until then, employers should continue to be cautious when placing employees on leave as the IDEL Regulation only applies to employees until September 25, 2021. After that, the lay-off clock starts ticking again and employers can soon be back on the hook if they do not prepare to have staff return to work.