Ontario court rules temporary-layoffs due to COVID-19 don’t prevent constructive dismissal claims

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KPA Lawyers - July 19, 2021

It may seem redundant to say that the impact of the COVID-19 pandemic in Ontario has caused unprecedented changes in how and where many of us work.
 
One such change was the Ontario government’s introduction of Ontario Regulation 228/20 to the Ontario Employment Standards Act (“ESA”) entitled Infectious Disease Emergency Leave (“IDEL”). Among other things, the IDEL Regulation provided for unpaid leave from work for workers who contract and need to recover from COVID-19.
 
Section 7(1) of the IDEL regulation also provided that an employee cannot sue their employer for constructive dismissal under the ESA where there the employer had temporarily reduced an employee’s hours of work or wages for reasons related to the impact of COVID-19.
 
In the recent case of Coutinho v. Ocular Health Centre Ltd. 2021 ONSC 3076 (“Coutinho”), the Ontario Superior Court of Justice dealt with the issue of whether or not the IDEL Regulation could prevent a Plaintiff from claiming that they had been constructively dismissed at common law.
 
Before we look at this case, its helpful to understand what we mean by constructive dismissal and where it comes from…
 
Constructive Dismissal
 
In general, a constructive dismissal occurs when an employer unilaterally changes a material term of an employment agreement, and in response an employee resigns from their employment. Constructive dismissal can arise under a specific piece of legislation or through decisions of the Courts (referred to as, common law).
 
Constructive dismissal is a complex legal topic, and a detailed discussion of the concept is beyond the scope of this post. If you are an employee or employer who is confronting a possible constructive dismissal situation, you should consider consulting an employment lawyer to seek advice on how to best protect your legal rights.
 
The Coutinho Case
 
The Defendant, Ocular Health Centre Ltd. (“Ocular”) owned and operated two ophthalmic clinics in Kitchener and Cambridge Ontario, respectively. The Plaintiff, Jessica Coutinho began working for Ocular as an Opthalmic technician in 2014 and was promoted to an Office Manager position in 2019.
 
As a result of a dispute between the Doctors and Ocular management arising from multiple matters, including the alleged failure of some staff to comply with COVID-19 protocols, management changed the locks. On May 1, 2020, management advised Ms. Coutinho and two of the Doctors that the office was closed, and they would not be permitted to enter.
 
Following the lockout, management advised Ms. Coutinho that the office was closed, and she would be paid until further notice. On May 29, 2020, she received a letter from Ocular stating that she was being placed on a temporary layoff, and would be paid up to the date of the layoff.
 
In June 2020, Coutinho sued Ocular seeking $200,000 for constructive dismissal and punitive or aggravated damages. in satisfaction of her common law and statutory entitlements.
 
In defending the action, Ocular argued, among other things, that pursuant to the IDEL regulation Ms. Coutinho’s work was temporarily eliminated due to the impact of COVID-19 and as such the Ocular’s actions did not constitute constructive dismissal.
 
It is noteworthy that some of the Doctors who were formerly employed by Ocular opened a new practice in July 2020. As part of their new venture, they employed Ms. Coutinho and provided her with a higher salary than she had previously received from Ocular.
 
The Decision
 
The matter proceeded before the Ontario Superior Court of Justice on a Motion for Summary Judgement brought by Ocular. Ocular argued that the operation of the IDEL regulation meant that no constructive dismissal occurred, and the action should be dismissed.
 
Justice Broad held that the IDEL Regulation did not affect the Plaintiff’s ability to enforce a lawful right deriving from common law.
 
The Court considered the underlying legal framework for the for the IDEL Regulation by examining section 8(1) of the ESA which provided:
 
8 (1) Subject to section 97, no civil remedy of an employee against his or her employer is affected by this Act.
 
Section 97(2) of the Act says, in part:
 
(2) An employee who files a complaint under this Act alleging an entitlement to termination pay or severance pay may not commence a civil proceeding for wrongful dismissal if the complaint and the proceeding would relate to the same termination or severance of employment.
 
The Court found that as Coutinho had not made a claim for termination or severance pay under the ESA, section 97 did not apply and she could rightfully bring an action for constructive dismissal.
 
The Court then addressed the interpretation of the temporary layoff provision in section 7(1) of the IDEL where Justice Broad wrote:
 

 

This is demo content.“[43] In my view, the scope of s. 7 deeming a temporary lay-off for reasons related to COVID-19 to not constitute a constructive dismissal is constrained by s. 8(1) of the ESA. It is not possible to reconcile the interpretation of the IDEL Regulation urged by Ocular with the section of the statute which unequivocally provides that an employee’s civil remedy against her/his employee shall not be affected by any provision of the Act.”

 
This means a temporary lay-off due to COVID-19 can still constitute constructive dismissal regardless of the IDEL Regulation. Further, the Regulation does not prevent an employee from seeking damages from their employer when they are terminated or laid off.
 
The Court also affirmed the long-held position that statutory entitlements (i.e. those payable under the ESA) are different from damage entitlements at common law, and so the fact that Ms. Coutinho was now working at a higher salary, did not mean that she was not entitled to termination and/or severance pay as required by the ESA.
 
The Court dismissed the Defendant’s motion for summary judgement and ordered that the case proceed to trial only on the issue of whether Coutinho’s employment was terminated for cause.
 
Key Takeaways
 
This case is significant as it is the first time the Court has provided guidance regarding the scope and application of the IDEL Regulation, and in particular the prohibition against constructive dismissal claims that it contains.
 
While the decision makes clear that the Regulation is only effective during the COVID-period, it serves as a cautionary tale to employers who may think the IDEL regulation shields them from liability. Under the IDEL Regulation, employers may still be held liable for common-law employment damages when they terminate or lay off employees for reasons related to the COVID-19 pandemic. It also illustrates that the Court will be wary of utilizing the IDEL Regulation to curtail an employee’s rights at common law.
 
Author’s Note
 
The author graciously acknowledges Barry Fisher and Emilie Aloe for their assistance in completing this post.
 
___________________________________
About the Author
 
Devon Sivill is an experienced lawyer and member of the Civil Litigation Group at KPA Lawyers P.C. He maintains a virtual practice and is proud to serve clients across Ontario.
 
Devon’s practice encompasses all areas of civil litigation with a particular emphasis on employment and human rights law.

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