The COVID-19 pandemic has led to unprecedented layoffs across the country. In certain circumstances, layoffs have been considered constructive dismissals under Ontario’s Employment Standards Act, 2000 (“ESA” or “the Act”) and the common law. However, in May 2020, the Ontario government introduced Ontario Regulation 228/20 Infectious Disease Emergency Leave (“IDEL Regulation”), which clarified that a temporary reduction or elimination of an employee’s work hours or wages during the pandemic for reasons related to COVID-19 would not be considered a layoff or constructive dismissal under the Act (rather, the employee would be deemed to have been placed on an infectious disease emergency leave). It remained unclear whether the same principle would apply to constructive dismissal claims under the common law. The decision in Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 [Coutinho] is the first case to comment on the issue.
I. The case of Coutinho v. Ocular Health Centre Ltd
In Coutinho, an Office Manager at an ophthalmic clinic was placed on a temporary layoff after the clinic was forced to close (the principals and ophthalmologists of the clinic were involved in a dispute over business matters, including an allegation that they were not following COVID-19 health and safety guidelines). The employee in this case was not provided any work or pay during her layoff period. She sued the employer, claiming it had constructively dismissed her and sought $200,000 in damages for constructive dismissal and punitive/aggravated damages. The employer brought a motion for summary judgment, seeking dismissal of the employee’s lawsuit.
The employer took the position that the layoff was related to COVID-19 reasons (because there were legitimate concerns that the doctors in the clinic were not complying with COVID-19 guidelines). Therefore, the IDEL Regulation applied and precluded a finding of constructive dismissal under the ESA. The employer went on to argue that the Regulation ought to be extended in application to the common law, given the unprecedented nature of the pandemic and its impact on employers and employees. The employee’s lawsuit ought to, therefore, be dismissed.
The employee argued that the IDEL Regulation did not apply because her layoff was not due to reasons related to COVID-19, but rather due to a business dispute. Further, even if the Regulation applied, neither it nor the ESA precluded the employee from claiming constructive dismissal under the common law. Therefore, the constructive dismissal lawsuit ought not be dismissed.
The Court held that it did not have to decide whether the layoff was due to COVID-related reasons because, ultimately, the IDEL Regulation did not preclude the employee from claiming constructive dismissal under the common law. The interpretation of the Regulation was constrained by the language of its enabling statute, the ESA. Section 8(1) of the ESA states that “no civil remedy of an employee against his or her employer is affected by this Act”. Therefore, section 8 prevailed and the employee was permitted to claim constructive dismissal under the common law.
Under the common law, an employer has no right to lay off an employee, absent an agreement to the contrary. There was no such agreement in this case, so the employee’s layoff constituted a constructive dismissal. In terms of damages, the court found that the employee had fully mitigated her losses, but the employee could be entitled to her ESA termination pay entitlements (in the amount of ~ $6,000), which was an issue to be determined at trial. Therefore, the court dismissed the employer’s motion for summary judgment.
II. Takeaways
Coutinho is an important decision on the issue of whether layoffs constitute constructive dismissals at law. Not only is it the first time a court is deciding on the question of whether layoffs during the pandemic constitute constructive dismissals under the common law, but it provides important commentary on the limits of the IDEL Regulation. It clarifies that the Regulation does not preclude employees from making constructive dismissal claims under the common law, and if a constructive dismissal is found under the common law, a court could award the employee their ESA termination entitlements.
There will likely be many other cases litigated on this issue and the case law will continue to develop.
If you’re an employee and have been laid off during the pandemic – or an employer who is looking to lay off your employee(s) – contact a Turnpenney Milne lawyer to better understand how to navigate this complicated area of the law.