Canada: New Regulatory Change To The ESA Provides Temporary Relief For Employers

On May 29, 2020, the provincial government published a new regulation that temporarily amends the treatment of temporary layoffs under the Ontario Employment Standards Act, 2000 (the "ESA"). Ontario Regulation 228/20: Infectious Disease Emergency Leave (the "New ESA Regulation") is immediately in force for non-unionized workplaces in Ontario and effectively considers COVID-19-related temporary layoffs to be a statutory leave of absence. The New ESA Regulation is the provincial government's latest response to help address some of the devastating effects of the ongoing COVID-19 pandemic on the workplace. The government's announcement is timely, as many employers are approaching the 13 week mark of the temporary layoff period for employees furloughed due to the pandemic. Such employers no longer need to worry about deemed terminations of employment (within the meaning of the ESA) occurring at the end of the 13 week layoff period.

Infectious Disease Emergency Leave

The New ESA Regulation retroactively deems certain employees whose hours of work have been temporarily reduced or eliminated, or whose wages have been temporarily reduced as a result of COVID-19 on or after March 1, 2020 to be on "infectious disease emergency leave" (the "Emergency Leave"). The Emergency Leave is not a layoff but an unpaid, job-protected form of emergency leave, similar to other extended job-protected leaves of absence under the ESA, including pregnancy and parental leave, family medical leave, or critical illness leave.

The Emergency Leave is available to employees who will not be performing the duties of their position because their hours of work are temporarily reduced or eliminated by the employer for reasons related to the designated infectious disease. Such employees are afforded all of the protections applicable to other ESA job-protected leaves of absence, including the right to reinstatement to the position most recently held (i.e. like in the case of a pregnancy/parental leave). Unlike other statutory job-protected leaves, however, the Emergency Leave does not require employers to continue contributions to a benefit plan while an employee is on a protected leave, if the employer was not making benefit plan contributions prior to May 29, 2020 for an employee on leave due to COVID-19.

No Deemed Constructive Dismissal

The New ESA Regulation also deems that temporary reductions in hours of work or wages due to COVID-19 do not constitute constructive dismissal, termination or severance of employment for the purposes of the ESA, even if such hours of work or wages have been reduced or eliminated for a period that exceeds the prescribed length of a "temporary layoff" of more than 13 weeks, or 35 weeks (if certain criteria, such as continuation of group benefit coverage, are met).

Employees will not be deemed to be on the Emergency Leave if they have already been given notice of notice of termination, or were dismissed or permanently laid off after March 1, 2020. In addition, any employee complaints made to the Ministry of Labour under the ESA claiming statutory termination pay and severance pay (if applicable) as a result of a reduction or elimination of hours or wages due to COVID-19, will be deemed to have not been filed.

Applicability

Employers must note that the New ESA Regulation is intended only as a temporary relief measure for employers. The COVID-19 period is defined as the period beginning on March 1, 2020 and ending on the date that is six weeks after Ontario's state of emergency order pursuant to the Emergency Management and Civil Protection Act is terminated or disallowed. The New ESA Regulation also does not apply where an employee was temporarily laid off for a period longer than the period of temporary layoff permitted by the ESA (i.e. for 13 weeks) prior to May 29, 2020. The New ESA Regulation also does not apply if, before May 29, 2020, the employer constructively dismissed the employee and the employee resigned from his or her employment in response within a reasonable period.

Potential Common Law Claims Still Possible

Employers should be aware that the regulatory changes to the ESA do not necessarily preclude potential claims to the Ontario Courts for common law damages for constructive dismissal due to the reduction or elimination of hours of work or wages. Many employers are aware that the Courts have, in the past, considered unilateral temporary layoffs, or significant wage or hours of work reductions, to amount to constructive dismissal under the common law. Such determinations have led to damages awards of up to 24 months' pay in lieu of notice for an employee. Only time will tell how Ontario's judicial system treats temporary reductions or elimination of hours of work, or temporary wage decreases in response to the COVID-19 pandemic, for purposes of resolving civil action disputes. In view of an employee's general obligation to mitigate losses in a civil action, it will also be interesting to see if the Ontario Courts limit the calculation of an employee's damages to the date the employer is able to return the employee to their regular hours of work and wage level.