Second ruling on whether a COVID-related layoff is constructive dismissal produces opposite result

‘We have now this complete state of uncertainty,’ says employment lawyer Stuart Rudner

Second ruling on whether a COVID-related layoff is constructive dismissal produces opposite result
Stuart Rudner, Rudner Law

A month after a Superior Court Judge found employees laid off under Ontario’s Infectious Disease Emergency Leave Regulation (IDEL) retained their common-law right to sue for constructive dismissal, the second judgment on that question has reached the opposite result.

In Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135, which was released Monday, Justice Jane Ferguson rejected the argument that the IDEL regulations under the Employment Standards Act cannot disarm employees of the common-law right to sue for constructive dismissal. That argument had been successful a little over a month ago in Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076.

“We have now this complete state of uncertainty,” says Stuart Rudner, an employment lawyer and managing partner of Rudner Law. “Because we have two courts, within a period of about a month, that have interpreted the exact same issue in completely different ways.”

“We're going to have a lot more cases. And of course, neither of these decisions are binding on other Superior Court judges. So, neither of them sets a precedent in that sense… The fact that we've already got an inconsistency really suggests, to me, that the Court of Appeal needs to get involved here.”

With COVID creating mass layoffs and hour-reductions, the employment bar eagerly awaited the courts weighing in on the legality of these moves. The first answer came in April, when Superior Court Justice David Broad rendered his decision in Coutinho v. Ocular Health Centre Ltd.

Office manager Jessica Coutinho had sued her former employer for constructive dismissal after she was laid off in spring 2020. Occular Health moved for a summary judgment and argued that given the severity of COVID’s impact on employees and employers, the IDEL Regulation should be interpreted to apply to, both constructive dismissals pursuant to the ESA, as well as at common law.

Coutinho argued s. 8 of the Employment Standards Act was clear that nothing in the Act affects an employee’s common-law rights. Justice Broad agreed and dismissed Occular’s motion.

After the Coutinho decision, Rudner says lawyers were advising clients with related claims that the current state of the law favoured employees.

“And now, of course, we've got a new decision which favours employers,” he says. “And that's a challenge for anyone who's litigating one of these cases – you honestly don't know which way the judge is going to go.”

In Taylor v. Hanley Hospitality Inc., the plaintiff, Candace Taylor, was laid off March 27, 2020 from a Tim Hortons operated by the defendant. Taylor argued Ontario’s COVID-related regulations under the ESA did not “displace the common-law doctrine that a layoff is a constructive dismissal.”

“I do not agree, in these times of COVID-19,” said Justice Ferguson.

Justice Ferguson said she agreed with Hanley Hospitality’s submissions on Coutinho. First, the fact that “it offends the rules of statutory interpretation to give an interpretation that renders legislation meaningless” was never addressed in the case. The defendant also submitted that s. 8(1) of the ESA “has never been interpreted to go as far as the court went in Coutinho” and that the courts have never held that the section prevents the ESA from displacing common law. In fact, the Court of Appeal said the opposite in a constructive dismissal case, finding s. 8(1) “merely confirms that the ESA is not the exclusive forum” for redress related to the Act.

Hanley Hospitality argued that the court in Coutinho failed to consider and appreciate the context in which the layoffs arose. The legislature created the problem by activating the state of emergency, requiring businesses to shut down or scale down. This forced employers to lay off employees and exposed those employers to claims of constructive dismissal. To avoid putting them in that position, the legislature amended the ESA and created the regulation.

“The legislature solved the very problem that it had created and took away the exposure that arose from its own action; it should be obvious to the world what the legislature’s intention was by doing so,” said the defendant.

Justice Ferguson said she agreed that the Ontario Government “recognized the inherent unfairness” in exposing employers to constructive dismissal claims.

“If they did not take action, these claims would only serve to make the economic crisis from the pandemic even worse. It is just common sense. The plaintiff’s action is dismissed.”

If putting an employee on IDEL is not a constructive dismissal, that employee could be off on leave, with no income, for almost a year and a half and have no remedy at law, says Rudner.

“So, it's a really difficult position that employees would be in if this ruling is the one that stands,” he says.

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