With the rise of the COVID-19 pandemic, we are currently navigating through unprecedented times. We have been keenly watching to see how employment law would or would not shift in order to address the unique issues faced by employers and employees. As the end of the 13-week temporary layoff timeline approaches for many employees, we now have very helpful insight into how employee hour and wage reductions will be interpreted under the Employment Standards Act, 2000 (“ESA”) as it relates to temporary layoffs and constructive dismissals during the COVID-19 pandemic.

On May 29, 2020, the Ontario government filed Regulation 228/20: Infectious Disease Emergency Leave, relieving provincially regulated employers from certain ESA termination/severance provisions for non-unionized employees whose hours or wages have been reduced due to COVID-19 and which creates a new category of infectious disease emergency leave.

Period where Hours/Wages are Reduced Deemed not a Layoff

Normally, the ESA permitted employers to place employees on temporary layoff (reducing an employees wages by more than half their regular weekly earnings) without it being considered a termination. This could be done for a maximum (1) up to 13 weeks in a 20 consecutive week period or (2) more than 13 weeks in a 20-week period but less than 35 weeks of layoff in a 52 week period if the employer fulfilled one of a list of options (such as continue benefits throughout the layoff period). If the employee is on temporary layoff for anytime passed the maximum, the ESA automatically deems them to be terminated which triggers the termination and severance provisions of the ESA.

Regulation 228/20 sets out that an employee who would normally be considered on layoff due to a reduction in hours of work/wages for reasons related to COVID-19 will be deemed not to be on the layoff for the purposes of the termination and severance provisions. Therefore, this provision has the effect of freezing the temporary layoff period timelines such that an employee on temporary layoff can remain on layoff beyond the maximum 13 or 35 week periods without it resulting in an automatic termination.

This is only applicable during the COVID-19 period, which is defined as March 1, 2020 until six (6) weeks after the state of emergency in Ontario ends. This does not apply to employees who, before May 29, 2020, were terminated or severed because of an earlier layoff or because the employer’s entire business closed.

Hours/Wages Reduction Deemed not a Constructive Dismissal

There is caselaw which supports that, absent the employee’s agreement (such as an explicit term in an employment agreement), significant wage or hour reductions like the ones we have seen in response to the COVID-19 pandemic would amount to constructive dismissal under the ESA, triggering termination and potentially severance entitlements.

However, Regulation 228/20 outlines that, during the COVID-19 period, a temporary reduction or elimination of an employee’s work hours or wages for reasons related to COVID-19 is not considered a constructive dismissal under the ESA. This does not apply to employees terminated or severed before May 29, 2020 because the employee was constructively dismissed and the employee resigned within a reasonable time.

We note that, while Regulation 228/20 changes the ESA in respect of temporary layoffs and constructive dismissals, the Court’s view on these issues under the common law remains uncertain. Therefore, while it may not amount to constructive dismissal under the ESA, the question remains as to whether the changes will impact an employee’s right to sue for constructive dismissal under the common law when employee hours and/or wages are reduced in the absence of a contractual provision explicitly allowing for same. Employers are encouraged to seek legal advice regarding specific cases they may be dealing with.

New Category of Infection Disease Emergency Leave

As discussed in our previous newsletter, the ESA was recently amended to provide provincially regulated employees with unpaid job protected leave during a declared emergency or designated infectious disease emergency. Regulation 228/20 adds the following category to the list of employees entitled to job protected leave during the COVID-19 pandemic:

“The employee’s hours of work are temporarily reduced or eliminated by the employer for reasons related to the designated infectious disease.”

Regulation 228/20 automatically deems employees falling under this category to be on job protected leave during the COVID-19 period. There are two groups of employees who are exempt from this job protected leave:

  1. Employees terminated or severed on or after March 1, 2020 because the employer
    1. has chosen to dismiss the employee;
    2. closed its whole business; or
    3. notified an employee of their dismissal and the employee resigned prior to the dismissal taking effect;
  2. Employees terminated or severed before May 29, 2020 because the employee
    1. was constructively dismissed and the employee resigns; or
    2. was laid off for a period longer than the period of a temporary lay-off.

Regulation 228/20 also contains specific provisions which speak to an employer’s obligation (or exemption therefrom) to continue employee benefits in certain circumstances.

Regulation 228/20 has significant implications for employers’ decisions during the COVID-19 pandemic. The lawyers at Heeney Vokey LLP would be happy to discuss how these changes specifically impact your organization.