On May 29, 2020, Ontario passed Regulation 228/20 under the Employment Standards Act ("ESA"). As a result of this new regulation, non-unionized workers who had their hours reduced or eliminated due to COVID-19 are deemed retroactively to be on Infectious Disease Emergency Leave, which is an unpaid, job-protected leave under the ESA. The regulation applies retroactively from March 1, 2020, and initially was set to expire on September 4, 2020, six (6) weeks after the state of emergency ended. This period of time is referred to in the Regulation as the "COVID-19 period". Our initial blog, which explains the impact of the Regulation on employer and employee rights, can be found here.
On September 3, 2020, the government of Ontario announced that the COVID-19 period would be extended until January 2, 2021.
Impact of the Regulation and the Extension of the COVID-19 Period
As a result of the Regulation and the government's latest announcement, non-unionized employees who have been temporarily laid off between March 1, 2020, and January 2, 2021, for reasons related to COVID-19 would be deemed to be on Infectious Disease Emergency Leave.
Under the ESA, an employee who has been laid off for more than 13 weeks in any period of 20 consecutive weeks (or for at least 35 weeks in any period of 52 weeks, if certain other conditions are met) will be deemed to have been dismissed from their employment. This constructive dismissal would then entitle the employee to statutory termination pay, as well as severance pay (if certain other criteria are met).
The extension of the COVID-19 period to January 2, 2021, means that there will be no deemed terminations arising from temporary layoffs until after January 2, 2021, provided that the reason for the layoff was related to COVID-19. As noted by the government of Ontario, the Regulation can relieve employers from substantial payments to their employees, which can make a difference in times where the business is already struggling to survive the economic effects of the pandemic.
Does the Regulation Alter the Common Law related to Temporary Layoffs and Constructive Dismissal?
As set out above, an employer has a right to temporarily lay off employees under the ESA. However, it is well-established law that an employer does not have a common law right to temporarily lay off an employee, even if the employer complies with the provisions of the ESA. This would result in a constructive dismissal at common law.
The common-law prohibition of temporary layoffs in Ontario can be altered if there is an express term in an employment contract that permits an employer to temporarily layoff employees in accordance with the ESA.
In order for the common law to be altered by a statute, there would need to be express language in the statute to that effect, which is not the case here. In fact, the ESA expressly states that "no civil remedy of an employee against his or her employer is affected by this Act" and the Regulation does not contain any language which would modify this section of the ESA.
In the event that the common law provides a greater right or benefit to an employee than their ESA entitlements, the common law will prevail. However, an employer can limit an employee's entitlements by contract, as long as the contract ensures that the employee will not receive less than their minimum ESA entitlements.
COVID-19 has resulted in unique and unprecedented circumstances for both employers and employees and how the courts will interpret and apply Regulation 228/20 (and the most recent amendment to the COVID-19 period) remains to be seen. The courts may still find that employees have been constructively dismissed at common law, but may award less generous severance package to employees. The specific facts which resulted in the temporary layoff or reduction in hours or wages will also be relevant.
If the common law remains unaltered, many temporary layoffs due to COVID-19 would be unlawful and may result in the employee's entitlement to a common law notice period and significant severance payouts for employers.
Key Takeaway for Employees:
Employees who have been temporarily laid off during the COVID-19 period and were waiting until after September 4, 2020, to claim statutory termination pay and severance pay from their employer arising from a deemed termination of their employment will now have to wait until after January 2, 2021. However, assuming that there was no lay-off provision in their employment contract, employees in this situation should consider taking the position that the lay-off was in contravention of the common law, their employment was constructively dismissed, and that they are therefore entitled to a common law notice period.
Key Takeaway for Employers:
Employers will not be obligated to pay out hefty sums for severance pay and termination pay under the ESA until after January 2, 2021, with respect to employees who have been temporarily laid off due to COVID-19, and may therefore wish to consider extending temporary layoffs until January 2, 2021. However, the Regulation does not bar employees from pursuing an action in common law and it is unclear at this stage how courts will interpret and apply this Regulation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.