The Ontario government’s decision to change temporary layoffs and constructive dismissal provisions of the Employment Standards Act has given employers some relief until the Ontario government decides to end the state of emergency.
Under this new law for the purposes of the ESA a reduction in working hours is not a constructive dismissal and temporary layoffs can be extended beyond 13 weeks for employees who are not receiving group employee benefits without triggering a deemed termination. The law is time limited and as usual there are exemptions to this new law.
This new ESA regulation effectively permits employers to keep people technically employed for the purposes of the ESA if they are laid off or working hours are reduced. It keeps employment levels artificially high. It essentially allows an employer to delay making a decision on whether to terminate an employee with a tenuous connection to the workplace as a result of COVID-19.
Although some lawyers will argue that the new ESA regulation overrides the common law I don’t think it does. Which means employers are still exposed to constructive dismissal claims from employees who have been laid off or whose hours have been significantly reduced.
A couple of examples to shine light on this common law legal exposure that employers face.
Example 1: Let’s say an employee earning $ 52 000 a year was laid off on March 16th and is still on lay off. As of June 8th the person’s lost wages were $ 11 000. If an employee believes they will be recalled to work when COVID-19 passes then I think it is unlikely the employee will commence a legal action. Especially if the person thinks the job market looks bleak once the state of emergency ends. If the employee is recalled after another 4 weeks then lost wages are $ 15000. If the person received the CERB or EI benefits during the lay off period then I don’t think most employees would sue their employer after returning to work. It is too awkward. To say nothing of being a career limiting move. In this case, the employer has dodged the bullet.
Example 2: Let’s say the same employee’s layoff is extended another 11 weeks (and the state of emergency is not extended again) and then the employer decides to terminate the employee because there is no prospect that business will recover enough to sustain current employment levels. In this case the employee has already incurred $ 22 000 in damages. The new employment regulation does not explicitly preclude the employee from starting a wrongful/constructive dismissal action in this scenario and claiming damages retroactive to the date of layoff or the reduction in working hours.
Example 2 is what the provincial and federal governments are trying to avoid. By introducing support programs like the CERB and the 75% wage subsidy and the new ESA regulation the governments are kicking the problem down the road hoping somehow the economy will quickly recover once we are past the worst of COVID-19 and employers can recall employees from layoffs or increase their work hours. The new ESA regulation is a stop gap measure that was probably needed at this stage of the COVID-19 crisis. It may not stop a flood of wrongful dismissal claims later this year that could put many organizations out of business.