What It Means for Employers, Employees… and their Legal Advisors
The Problem: Why Were Changes Needed?
Since March 2020, there have been widespread temporary layoffs (or a reduction in wages or hours) due to COVID-19 related business slow down or (hopefully) non-permanent shutdowns.
As June approached, employers of non-unionized employees in Ontario-regulated workplaces were facing the 13-week deadline where temporary layoffs automatically become terminations under the Employment Standards Act, 2000 (“ESA”) giving rise to termination and severance pay obligations, even if the employer hoped to eventually recall a laid-off employee to work.
There were two notable exceptions to the 13-week deadline so that the layoff deadline becomes a date less than 35 weeks: Benefits continuation or an agreement in writing. However, not all employees had benefits to begin with, nor would they necessarily agree to a recall date that exceeded 13 weeks (and they would probably be entitled to a signing bonus for the agreement to be enforceable).
At the same time, employers faced a related problem: Despite the ESA having an intricate protocol for temporary layoffs, under the common law there is no such thing as a temporary layoff unless it is provided for in an enforceable employment contract. Therefore, many employees without such a contract could claim that they had been constructively dismissed under the common law because of a temporary layoff allowed by the ESA. If those employees were ultimately successful, they would be entitled to damages for wrongful dismissal. Employers were, therefore, hoping for the Ontario government to change the ESA to address these issues.
The government made its move on Friday, May 29, 2020 when it released a new regulation under the ESA (O. Reg. 228/20 which pertains to “Infectious Disease Emergency Leave”). However, instead of benefiting employers by extending the 13-week layoff deadline and clearly changing the common law (even temporarily), the government made some unforeseen changes that appear to be of greater benefit to employees.
Two key takeaways from O. Reg. 228/20:
A COVID-19-related layoff is now an infectious disease emergency leave
1. Until further notice, the ESA temporary layoff deadlines are now irrelevant for COVID-19 related layoffs since March 1. This takes some pressure off employers and can save them from having to make severance payments. Some employers will also be relieved from maintaining group benefits. However, the government achieved this by deeming these layoffs to be an unpaid, statutory leaves of absence dubbed Infectious Disease Emergency Leave (or “IDEL”). Like all leaves under the ESA, IDEL creates special rights for employees and certain obligations for employers that do not exist in a temporary layoff scenario.
2. While on an initial reading of O.Reg. 228/20 it appears that the government temporarily eliminated the common law rule that temporary layoffs amount to constructive dismissal without a contractual right to layoff, a closer reading of it and the ESA as a whole may not support such a quick conclusion.
Unfortunately, we’ll have to live with some uncertainty until the government clarifies (or changes) its position, or the issue is ultimately brought before a judge for interpretation (which will not be an easy task when the courts are not yet fully operational and will be backlogged once they are.)
Not only that, but we may see an increase in constructive dismissal claims in the meantime.
The Fine Print
Here is my full take on IDEL. If you are not an employment-law nerd, an employee or employer, or ridiculously curious (like me), then you may wish to skip the following fine print, and rejoin me at the section below this, What You Must Know.
O. Reg. 228/20 begins by establishing a “COVID-19 period” (“the period beginning on March 1, 2020 and ending on the date that is six weeks after the day that the emergency declared by Order in Council 518/2020 (Ontario Regulation 50/20) on March 17, 2020 pursuant to section 7.0.1 of the Emergency Management and Civil Protection Actis terminated or disallowed”). In plain English: We have been in the COVID-19 period since March 1, 2020 and will be until further notice from the Ontario government.
Infectious Disease Emergency Leave (“IDEL”)
It then goes on to state that employees are entitled to an unpaid emergency leave absence during the COVID-19 period if the employee’s hours of work are temporarily reduced or eliminated by the employer for reasons related to coronavirus (COVID-19). This is the IDEL. It is deemed to have started on March 1, 2020. It applies during the COVID-19 period and includes anyone who was already temporarily laid off for reasons related to COVID-19. Note though that if the employee is recalled to work during the COVID-19 period, then they may no longer be on IDEL if their hours of work are no longer reduced.
With some exceptions, all requirements and prohibitions under the ESA that apply to any leave will apply to IDEL. This includes an employee’s right to reinstatement at the conclusion of the COVID-19 period to the position that the employee most recently held with the employer, if it still exists, or to a comparable position if it does not. Not surprisingly, an employee deemed to be on IDEL does not need to advise an employer of the leave. In fact, it is my view that it is the employer who now needs to tell a laid-off employee that they are on a COVID-19 Leave as soon as possible. As well, an employee may voluntarily go on an IDEL even if they are not deemed to be on one.
Further, an employer is not required to make its contributions for any of the following plans if the employee on IDEL stopped participating in any of them as of May 29, 2020: group pension, life insurance, accidental death, extended health, dental or any prescribed type of benefit plan (“benefit plan”). As well, if an employer of an employee in a COVID-19 Leave was not making contributions for any benefit plan as of May 29, 2020, the employer is not required do so.
When an Employee is not on IDEL
Most terminations and severance after March 1, 2020 or before May 29, 2020 result in the affected employee deemed not to have been on IDEL.
A Reduction in Hours, Wages is not a Layoff
With some exceptions, an employee whose hours of work are temporarily reduced or eliminated by an employer, or whose wages are temporarily reduced by the employer, for reasons related to COVID-19 during the COVID-19 period is exempt from the application of sections 56 (termination) and 63 (severance) of the ESA for the purposes of determining whether the employee has been laid off. The employee is not considered to be laid-off under those sections of the ESA.
Reduction in Hours, Wages not a “Constructive Dismissal”
The most controversial (and potentially confusing) part of O. Reg 228/20 deals with “constructive dismissal.” It states that with some exceptions, the following does not constitute constructive dismissal if it occurred during the COVID-19 period:
a) A temporary reduction or elimination of an employee’s hours of work by the employer for reasons related to COVID-19.
b) A temporary reduction in an employee’s wages by the employer for reasons related to the designated infectious disease.
This includes what we formerly recognized as a temporary layoff, a reduction of an employee’s pay due to a COVID-19 related reduction in business, or a temporary closure of a business.
But are employers now spared from the potential claims from constructive dismissal claims for damages under the common law for COVID-19-related work or wage reductions during the COVID-19 period?
I do not know—and nor does anyone else—at least for now.
One view is that the common law has not been changed. Instead, employees in the situation described above have not been constructively dismissed for the purposes of claiming ESA termination pay and (if applicable) severance pay, which is often far less than common law pay in lieu of notice. Had the government intended to change the common law then it could have explicitly said so, and it should not have been changed in a regulation- especially since the ESA provides that it doesn’t affect an employee’s civil (common law) remedies.
The other view is that the common law has in fact been temporarily changed. Why else would the government go to the effort of using the phrase “constructive dismissal” in relation to a reduction or elimination of hours and wages – especially when it has already increased employee rights through the creation of IDEL? Further, why should someone be able to sue an employer for wrongful dismissal for a situation which the government, as of this writing, has deemed to be a leave of absence? Under this interpretation, the government is balancing employee and employer rights.
In the end, this is a matter for the courts – or the government – to decide.
What You Must Know
If you skipped The Fine Print and you are now rejoining us, welcome back! In addition to the Two Key Takeaways above, here is what you must know about O. Reg 228/20:
1. Employees and employers must quickly determine if, in fact, a post-March 1, 2020 layoff or other reduction in hours or wages is due to reasons related to COVID-19 so they will understand their rights and obligations.
2. Employers need no longer worry about the 13-week Temporary Layoff deadline for employees properly on IDEL.
3. Employers should not terminate employees, or reduce their hours, or assume that an employee has abandoned their job until further notice and without seeking the advice of an experienced employment lawyer. They should also exercise caution before recalling employees at the end of IDEL if they believe they can not reinstate the employee to the position most recently held by the employee.
4. Some employers might not be obligated to continue employee benefits during the COVID-19 period.
5. It would be wise for employers to communicate with employees properly on IDEL leave to update them about the changes to the law and what the implications re for them, along with other vital information.
6. Similarly, employees who have been temporarily laid off since March, or who now find themselves terminated or not reinstated to the same position if they are recalled should immediately seek legal advice from an experienced employment lawyer.
7. As a mediator, I recommend that lawyers and paralegals refrain from giving advice to employers or employees based only on a quick reading of O. Reg 228/20, or a preferred interpretation about the constructive dismissal section. A client’s expectations and tolerance for risk need to be carefully managed, especially during these trying times when predictability in general is at an all-time low. There are no slam dunks, and this area of the law will continue to evolve for the foreseeable future.
If you are an employee or employer, I can help you with any COVID-19 related or other workplace issues. I have more than 25 years’ experience as an employment lawyer with satisfied, repeat clients.
If you are a lawyer or paralegal looking to hire a mediator or mediator-arbitrator for your employment law dispute, I have been a mediator for over a decade. I have also been regularly conducting virtual employment mediations via videoconference during the COVID-19 period.
This blog is for educational purposes only and is not intended as legal or other professional advice.