New Ontario Employment Regulations for Constructive Dismissal Claims During the COVID-19 Pandemic

As the COVID-19 pandemic continues to disrupt our economy and workplaces in Ontario, many employees have found themselves temporarily laid-off by their employers, or, in roles with drastically reduced hours or pay. To address this increasingly common scenario, the provincial government of Ontario has introduced new employment regulations.

Constructive Dismissal Under the ESA and at Common Law

Employers do not have an unrestricted ability to temporarily lay off employees from their employment. In order for an employee to be temporarily laid off, it must be an express term of their employment contract that the employer is entitled to place the employee on temporary lay-off and recall them at a later date.

These laws are intended to promote job stability and protect employees from their employers improperly laying them off. Employers that place employees on temporary lay-off without the proper contractual provisions in place, or, employers that reduce employees’ hours of work or overall remuneration by 20% or more, are vulnerable to a claim by an employee for constructive dismissal.

The New Infectious Disease Emergency Leave Regulation under the ESA

On May 29, 2020, the Ontario government introduced a new regulation to the Employment Standards Act, 2000 which removes employees’ protection from improper temporary lay-offs and reduced hours and remuneration, and expands employers’ power to implement such changes unilaterally.

Under the Infectious Disease Emergency Leave[1] regulation a temporary reduction or elimination of an employee’s hours of work by their employer for reasons related to COVID-19, or, a temporary reduction in an employee’s wages by their employer for reasons related to COVID-19 will be deemed to not constitute a constructive dismissal under the Employment Standards Act, 2000. [2]

The regulation also converts temporary lay-offs during the COVID-19 pandemic to “infectious disease emergency leave” [3], which is an unpaid leave under the Employment Standards Act, 2000 that was recently created to allow employees to take an unpaid leave of absence from work due to COVID-19 related reasons. This effectively eliminates employees’ ability to claim constructive dismissal if they were either improperly temporarily laid off, or, if their temporary lay off exceeded 13 weeks.

Time Limits for Relying on the Regulation

Employers may only rely on the new regulation for imposing temporary lay-offs or unilaterally reducing hours or wages for the period of time beginning on March 1, 2020 and ending on whichever date is six weeks after the provincial declaration of emergency order is terminated. For example, if the province of Ontario terminates the declaration of emergency order on July 3, 2020, employers could continue to rely on the regulation until August 14, 2020 after which point the usual employee protections under the Employment Standards Act, 2000 will resume.

One time-based exception to the application of the regulation is for employees who, as of May 29, 2020, had already been on temporary lay off for a period longer than 13 weeks in a 20 week period.[4]

Certain Constructive Dismissal Claims May Survive

Notwithstanding the introduction of this regulation, employees may continue to advance constructive dismissal claims in a number of scenarios.

Employees that are exempt from the coverage of the Employment Standards Act, 2000 and unionized employees are not subject to the regulation. In the case of unionized employees, the terms of the collective agreement provisions will continue to apply in governing the terms of their employment.

One area of uncertainty concerns whether employees with contracts of employment governed by the common law, such as employees without any written employment contract, may be permitted to advance a claim for constructive dismissal at common law and argue that the new regulation does not apply to them. This argument has not yet been tested in courts or tribunals and it remains to be seen how the regulation may be interpreted in that context.

[1] Infectious Disease Emergency Leave, O Reg 228/20.
[2] Infectious Disease Emergency Leave, O Reg 228/20, s. 7.
[3] Infectious Disease Emergency Leave, O Reg 228/20, s. 4(1), s. 6(1).
[4] Infectious Disease Emergency Leave, O Reg 228/20, s. 6(2) and s. 7(2).