Constructive dismissal is where an employer makes a unilateral change to the employer-employee relationship outside the scope of the original employment contract. Changing a fundamental aspect of the agreement, such as placing an employee on a temporary layoff unless this possibility is indicated in the contract, without consent, may be considered termination. 

This article looks at whether a layoff caused by COVID-19 could constitute constructive dismissal. We also look at a recent decision of the Court of Appeal for Ontario in which a Tim Hortons employee made such a claim.

What is constructive dismissal?

There are different forms of constructive dismissal. Relevant to this discussion is where an employee demonstrates that the employer has, by a single unilateral act, breached an essential term of the employment contract by a single unilateral act. This form of constructive dismissal might be found where there has been a significant change to the employee’s role, working environment or salary, such as when an employee has been placed on a temporary layoff. 

If an employee is constructively dismissed, they are entitled to pay in place of reasonable notice and potentially severance pay, even if they have resigned voluntarily.

COVID-19 related amendments to the Employment Standards Act 

In March 2020, the Employment Standards Act 2000 (ESA) was amended to create a new category of leave – the infectious disease emergency leave (IDEL). The ESA prescribes the circumstances in which an employee is entitled to IDEL without pay if the employee will not perform their position duties because of a declared emergency. 

Under the Infectious Disease Emergency Leave Regulation 2020 (IDEL Regulation), made in May 2020, COVID-19 was designed as an infectious disease for the purpose of entitlement to IDEL for a period ending on July 30, 2022.

Relevantly, the IDEL Regulation provides that:

• An employee whose hours of work are temporarily reduced or eliminated by the employer, or whose wages are temporarily reduced by the employer, for reasons related to the designated infectious disease during the COVID-19 period is not considered to be laid off under the ESA unless there is a permanent discontinuance of the employer’s business at an establishment.
• A temporary reduction or elimination of an employee’s hours of work, or an employee’s wages, by the employer for reasons related to the designated infectious disease does not constitute constructive dismissal if it occurred during the COVID-19 period.

However, section 8(1) of the ESA says that no civil remedy of an employee against his or her employer is affected by the Act.

An employee claims constructive dismissal following temporary layoff in March 2020

In Taylor v Hanley Hospitality Inc., the plaintiff employee argued that she was placed on a temporary layoff without pay in March 2020. She claimed that the defendant’s employer, which operated as Tim Hortons, continued its operations with a reduced staff and that her temporary lay-off was, therefore a business decision made in response to unfavourable economic conditions and not related to COVID-19.

The employee commenced an action for damages for constructive dismissal in July 2020. She was later recalled to her employment in September 2020. 

The employer argued that it had no choice but to temporarily lay off over 50 employees following the Ontario Government’s declaration of a state of emergency and imposition of emergency measures to curb the spread of COVID-19. It claimed that the employee was on IDEL and was never terminated.

Contrary to prior Superior Court decision, judge decides that layoff because of COVID-19 precludes constructive dismissal claim

The motion judge dismissed the employee’s claim, finding that the employee was on IDEL and therefore was deemed not to be laid off or constructively dismissed for all purposes. Her Honour said that section 8(1) of the ESA simply meant that the ESA does not set out an exclusive forum for addressing matters set out in the Act. In other words, the employee can make a complaint under the Act or seek redress in the courts.

Her Honour concluded:

I agree with Tim Hortons that exceptional situations call for exceptional measures. The Ontario Government recognized the inherent unfairness in subjecting employers to wrongful dismissal claims as a result of the government imposing a state of emergency. If they did not take action, these claims would only serve to make the economic crisis from the pandemic even worse. It is just common sense.

This decision disagreed with a prior decision in which the Superior Court decided that the IDEL Regulation did not affect an employee’s right to pursue a constructive dismissal claim at common law.

Court of Appeal overturns decision and declines to decide whether COVID-19 layoff can constitute constructive dismissal

The Tim Hortons employee succeeded on appeal. The Court of Appeal decided that the motion judge erroneously dismissed the employee’s action by agreeing with Tim Hortons’ version of the facts, even though they were disputed by the employee and not subject to adjudication at a trial. For example, the parties disagreed as to the reasons for the employee’s layoff. 

As a result, the Court of Appeal sent the case back for determination before another judge of the Superior Court.

The Court of Appeal refused to interpret the ESA and IDEL Regulation, deciding that the statutory interpretation issue should not be resolved separately from the factual issues in the case. As a result, whether an IDEL precludes a constructive dismissal claim has not yet been determined at the Court of Appeal level.

Contact Haynes Law Firm in Toronto for Guidance on Constructive Dismissal 

Haynes Law Firm helps employers and employees throughout Ontario achieve effective solutions to legal issues and conflict management in employment law and civil litigation. We help employees seek appropriate remedies for constructive dismissal. Paulette Haynes has in-depth experience litigating constructive dismissal claims, making her an extremely effective advocate for her employee clients. Paulette also works with employers to proactively address potential areas of concern before they become a problem. Avoid unintentionally triggering costly constructive dismissal claims with our trusted guidance. Please contact us online or call us at 416.593.2731.