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Suing for Constructive Dismissal at Common Law


Brittany Taylor here with another legal update, and this one is a doozy.

You’ll likely recall that back in April, Stuart recorded a vlog regarding the Coutinho case, a groundbreaking decision which held for the first time that an employee who was placed on a temporary layoff during the pandemic had been constructively dismissed from their employment.

This decision had huge implications for employers, many of whom had no other option but to lay off employees during the pandemic, when business saw a steep decline, or when the government ordered closures. If placing an employee on a temporary layoff constituted constructive dismissal, even if it occurred during the pandemic, in the midst of impossible circumstances, then many employers could be facing significant legal liability in regards to severance. However, less than two months later, yet another Ontario court opined on this issue and shockingly reached the completely opposite conclusion.

In Taylor and Hanley Hospitality Inc., the employee in question had been laid off from her employment at the start of the pandemic in March of last year. She brought a claim for constructive dismissal as a result of that layoff. The employer in this case argued that it had been required by the Ontario government to close all of its storefronts, and some of its stores, entirely and had really been left with no choice but to lay off employees.

As in the Coutinho case, the court in Taylor was not really answering the question of whether a unilateral layoff constitutes a constructive dismissal, the law is quite settled that it does, we know the answer to that question. Instead, the question that they were trying to answer is a bit more nuanced. Essentially they were trying to understand whether or not the Ontario government removed an employee’s right to sue for constructive dismissal at common law when it amended the Employment Standards Act and created the Infectious Disease Emergency Leave.

As a quick recap on this issue, you might recall that a few months into the pandemic, the government created the Infectious Disease Emergency Leave. Now this was designed to protect employees who needed to be absent from work for reasons related to COVID-19, but these amendments also indicated that any employee who had been laid off by their employer was instead retroactively deemed to be on Infectious Disease Emergency Leave. This allowed employers to avoid the maximum time limits for temporary layoffs under the Employment Standards Act, and also provided employees on the leave with job protection. However it also meant that employees who had been forced onto a leave could not pursue a claim against their employer under the Employment Standards Act. It was not clear, however, whether this change also removed an employee’s ability to sue their employer for constructive dismissal at common law.

In Coutinho, the court found that the amendments to the Employment Standards Act clearly did not oust an employee’s right to sue for constructive dismissal at common law. It relied specifically on Section 8 Subsection 1 of the ESA which expressly states that an employee’s civil rights are not impacted by any provisions of the Employment Standards Act. It also pointed to the Ministry of Labour’s own guidance on this issue, which appeared to confirm that an employee’s common law rights were not impacted by the amendments to the Employment Standards Act.

The court wholly rejected this argument in Taylor, noting that it would create an absurd result where an employee could be on leave for purposes of the Employment Standards Act, but terminated via constructive dismissal at common law. The court noted that the common law evolves as the changing times make it necessary to do so. In this case the legislature had created the Infectious Disease Emergency Leave in response to extremely challenging circumstances, including some issues that it itself had created, such as the mandatory closures. Allowing employees to pursue claims for constructive dismissal at common law would essentially nullify the protection that the legislature had specifically granted to employers.

So now we have two completely contradictory decisions on the exact same issue.

Where does that leave us? Unfortunately it leaves us in a state of limbo for now. We’re likely going to have to wait for a higher court to weigh in on this before we get any certainty with regards to this issue, and in the meantime this remains a complex debate with compelling motivations on both sides.

On the one hand it seems grossly unfair to penalize employers for taking advantage of the helping hand that the government had extended to them in the form of Infectious Disease Emergency Leave. Many employers were in a position where layoff was the only option available to them. If the Coutinho case is followed, employers may owe substantial damages to employees, which could spell financial ruin for many.

On the other hand, some employees have now been off work without pay for over a year, and with absolutely no recourse available to them. If Taylor is followed, many have struggled to find new employment and frankly could also be experiencing financial instability.

So what is the right answer here? Well we’re going to have to wait and see.

Thank you for joining me. Please check back regularly for more legal updates and reach out to us if you have any questions.

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