Is a Temporary Layoff under the ESA a termination at common law?

by | Jun 9, 2021 | For Employers

When the COVID pandemic hit Ontario, many employers temporarily laid off employees because business revenues plummeted. To address these massive layoffs, the Ontario government introduced O. Reg. 228/20: Infectious Disease Emergency Leave  (the ¨IDEL Regulation¨) under the  Employment Standards Act (the ¨ESA¨)  which provides, among other things, that temporary layoffs that take place between March 1, 2020, to September 25, 2021, are deemed not to be a termination under the ESA. 

One  judge has summarized the IDEL Regulation as follows:

The IDEL Regulation provides that five conditions be satisfied for the rules under the Regulation to apply, as follows:

  1. The employee is not represented by a trade union;
  2. The employee is subject to a temporary reduction or elimination in hours of work and/or wages;
  3. It must be the employer that temporarily reduces or eliminates the employees’ hours of work and/or wages;
  4. The temporary reduction of elimination of the employees’ hours of work and/or wages must have occurred for reasons related to COVID-19;
  5. The above four conditions must occur during the defined COVID-19 period.

However, at common law, a temporary layoff generally constitutes a termination unless the employee agrees that it is not. 

So the $ 64,000 question has been whether the IDEL Regulation has changed the common law as it relates to COVID related layoffs.

In the last two months, one judge has said no and one judge has said yes. So until this issue is considered by the Ontario Court of Appeal (and perhaps the Supreme Court of Canada) lawyers really do not know how to advise their clients on this issue.

This blog discusses these two conflicting cases.

Case # 1

First up was an April 17, 2021 decision, which was decided by way of summary judgment. In that case the employee was placed on a temporary layoff effective May 29, 2020. The laid off employee found another job starting on July 22, 2020. The employee claimed  that nothing in the ESA took away her rights at common law.

The judge agreed and in coming to this conclusion noted that  ¨…section 8(1) of the Employment Standards Act, 2000 (the “ESA”) which provides as follows: 8 (1) Subject to section 97, “no civil remedy of an employee against his or her employer is affected by this Act.” and noted than section 97 did not apply.  

Case # 2

Most recently, on June 7, 2021 a judge considered a case where the employee was temporarily laid off on March 27, 2020 and was recalled to work on September 3, 2020. The employee claimed he was ¨terminated¨ at common law on March 27, 2020, and was entitled to lost wages between March 27, 2020, and his recall date. The employer claimed he was ¨temporarily laid off¨ as permitted by the ESA and therefore no termination pay was owing. 

The judge agreed with the employer and explicitly disagreed with the April 17, 2021 decision. In   coming to this conclusion the judge noted the courts have never said the ESA ¨does not or cannot displace the common law.¨ The judge also stated: ¨The employee cannot be on a leave of absence for ESA purposes and yet terminated by constructive dismissal for common law purposes. This is an absurd result.¨

These two judges are like two ships passing in the night. 

Lessons to Be Learned:

  1. Add a temporary lay off clause to your employment contract so it is clear that a temporary lay off under the ESA is not a termination.
  2. If you do not recall an employee to work before a temporary layoff expires under the ESA, then your organization may be liable for lost wages during the temporary lay off, which could amount to up to 15 months pay.
  3. The impact of the IDEL Regulation on wrongful/constructive dismissal cases will continue after we get past the third wave of the COVID pandemic. Tens of thousands of employees (if not more) have been temporarily laid off under the IDEL Regulation. These employees have two years from the date of their temporary layoff to commence a legal action. If the appeal courts do not settle this issue before March 2022, then I predict many employees will commence legal proceedings shortly before the two year limitation period expires to preserve their rights.

For over 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416 317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

 

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