Appeal court overturns ruling that COVID-related layoffs preclude constructive dismissal claims

Court declined to address if IDEL layoffs count as constructive dismissal under common law

Appeal court overturns ruling that COVID-related layoffs preclude constructive dismissal claims
Mitchell Rose is a mediator, arbitrator, dispute resolution lawyer and principal at Mitchell Rose Professional Corporation

The Ontario Court of Appeal has overturned the motion judge’s decision in the Taylor v Hanley Hospitality case that concluded that the Infectious Disease Emergency Leave Regulation (IDEL Regulation) precluded a constructive dismissal claim at common law.

Since last spring and COVID’s avalanche of layoffs, employment lawyers in Ontario awaited the appeal court’s decision to see whether temporary layoffs made under IDEL regulation would count as a constructive dismissal under common law. However, the appellate court declined to deal with the issue as it found that the motion judge made numerous errors under the Rules of Civil Procedure.

The court set aside the decision because the motion judge wrongly decided the legal issue under rule 21.01 and remitted the matter back to the Superior Court of Justice to be determined by another judge.

Law Times previously reported that contrary to decisions in Fogelman v. IFG and Coutinho v. Ocular Health Centre that a regulation under the Employment Standards Act cannot supersede common law civil remedies because s. 8(1) of the ESA states that “no civil remedy of an employee against his or her employer is affected by this Act,” Superior Court Justice Jane Ferguson came to an opposite conclusion in the Taylor case.

Mediator, arbritrator and dispute resolution lawyer Mitchell Rose says it would have been preferable if the Court of Appeal had dealt with the issue of whether the ESA provisions that created IDEL two years ago changed the common law. However, Rose says it is important that the appeal court overturned Justice Ferguson’s decision.

“Now, there are no longer competing Superior Court decisions with the accompanying uncertainty. Instead, there are two 2021 Superior Court decisions which both concluded that the IDEL provisions in the ESA didn’t alter the common law.”

An employee placed on a temporary layoff deemed IDEL can still sue for constructive dismissal if there is no provision in their employment contract permitting such layoff, says Rose. He says the Fogelman and Coutinho decisions reflect the current state of Ontario law, even if the court of appeal has not yet weighed in.

He says that the decision settles some of the legal uncertainty lawyers face when advising clients about the risks and rights regarding layoffs related to COVID-19.

“While some uncertainty remains because no one knows what the Court of Appeal might do one day if another case dealing with this issue comes before it, the law is settled enough for now that we will see constructive dismissal claims that have been in holding pattern proceed.”

Rose says existing claims will quickly proceed to mediation or motions for summary judgment as limitation periods will soon expire.

“Employers may still be able to avail themselves to other defences even if they can no longer argue that the common law was changed. Furthermore, IDEL ends on July 30, which means that many employees could soon be dismissed under the ESA in any event.”

After being laid off from a Tim Hortons (owned by Hanley Hospitality), Candace Taylor argued that the Ontario government’s 2020 amendments to the ESA that created an IDEL regulation did not displace the common law doctrine that her temporary layoff was constructive dismissal. But Justice Ferguson disagreed.

Justice Ferguson wrote that the Ontario government recognized the inherent unfairness in exposing employers to wrongful dismissal claims when the government imposed a state of emergency, forcing businesses to shut down or scale down because of the pandemic.

“It is just common sense” that the legislature recognized this unfairness and devised the IDEL to prevent a swarm of constructive dismissal claims, Justice Ferguson wrote. Accordingly, she dismissed Taylor’s action for wrongful dismissal on the Hanley Hospitality r. 21 motion for a determination of an issue without trial.

The appeal court found that Justice Ferguson erred in taking judicial notice of significant and contested facts, including the legislative context and intent behind the government’s emergency measures and their impact, without any evidence submitted by the parties.

The court wrote that Justice Ferguson failed to assume that the allegations contained in the statement of claim were true and incorrectly took views in the statement of defence as accurate because there was no reply pleading in contexts where the claim had alleged facts contrary to the defence statement.

The court decided that analytical errors tainted Justice Ferguson’s interpretation of s. 50.1 of the ESA and IDEL regulation, and that the issue was not appropriate for a rule 21 motion. Therefore, the court declined to interpret s. 50.1 of the ESA and IDEL regulation and its potential impact on common law rights because it does not resolve the fact-driven dispute between the parties.

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