It is time to have this chat. For non-unionized employees, the Employment Standards Act in virtually every province permits temporary lay offs up to 13 weeks in 20 before the length of the lay off deems it a termination. In such cases, the deemed termination occurs at the original lay off. Pay in lieu of statutory notice must be paid. That is, in Ontario, from one week after 3 months of work to 8 weeks after 8 years of continuous employment.
The 13 weeks can be extended to 35 weeks in 52 if employers continue paying benefits premiums. This must occur from the beginning of the lay off for the benefits which were in place before the lay off. ( there are other options that may be considered). Essentially, 35 weeks is 8 months.
Constructive Dismissal
So, does a temporary lay off, which could be slightly less than 8 months, amount to a constructive dismissal? Lots of advisors before the economic circumstances created by the pandemic would have said “yes”. They would have counselled a demand for common law pay in lieu of notice unless the parties had an employment contract that explicitly permitted lay offs. They would have argued that without prior agreement, no reasonable person would have contemplated non-continuous employment and short-term lay offs. They would have asserted that whatever the financial problems of the employer which drove the decision to lay off, those problems were the employer’s responsibility. The employee was exempt. The employee should receive up to one month for every year of service as if they received working notice.
In the context of covid-19, the proposition would be that the employment relationship should be treated as if nothing unusual was going on . The employers should be required to pay as they normally would.
Not Normal
Except, not much is normal now. Not much has been normal for many employers and employees since early March. Never have employers been confronted with orders from a Premier to close and to not open again until he declares. So, the reality is that many employees who are on lay off are there because there is no work for them, by government order. Further, because of the order there be no work, the employers are not earning any money to pay wages. This is an economic dilemma not made by the employer. It is not his/her responsibility for being in this mess. In fact, in most cases, the employer did not want to lay off anyone and does want to recall employees as soon as possible. But, since March and probably until at least the end of May, most employers have lost lost a lot of the control over their destinies.
If a lay off extends beyond 13 weeks in Ontario, lots of employees will be entitled to statutory termination pay if they are not recalled. Lay offs starting in March will get close to 13 weeks near the end of May. Unless, business has restarted and recalls can be made to work for which employers can pay, there will be a big issue. A statutory exception is required. This will be so especially, if many employees can be rehired in the weeks of June, July and August. Why would an laid off employee need to be paid notice, if she were coming back to the same job when it became possible?
Reasonableness
The traditionalists would lay the blame on the employer. They would not even wait 13 weeks. Instead, from the moment of lay off they would be claiming the removal from work was a fundamental violation of the contract. They would want a judge to declare that view was reasonable.
The question is what is reasonable treatment is this prolonged emergency that neither employment party contemplated? It is hard to say the employment circumstances are normative. It is easy to conclude that few people entering employment relationships considered complete shut downs and almost total employer incapacity to earn revenue and pay wages and bills. On this construct, constructive dismissal seems wrong. Perhaps, the most reasonable conclusion is that many of these contracts are frustrated.
Frustration of Contract
Frustration is a legal situation in contract law where something occurs that neither party contemplated which renders the contract impossible of performance. If this is found to have arisen, then the contract is deemed to have expired. It simply ends. In employment law, a frustration is neither a resignation by the employee, nor a termination by the employer. The legal result is as if the contract never existed.
Is this what we are coming to? If so, government intervention would be helpful. Our statutory rules did not contemplate the closure of the economy. Our common law notion of reasonableness would need to produce a balancing of interests between employer and employee not usually seen. Temporary lay offs are not constructive dismissals.
The Challenge
Taking these considerations into account, are employers and employees ready to make new contracts to account for both the past and the future? Times are changing and we need to be proactive to advance our cause. Government cannot be expected to identify and solve all our problems.