Jun 2, 2020  By John Hyde

COVID-19 and Temporary Layoffs

On June 1, 2020, Ontario put the brakes on deemed terminations from COVID-19 layoffs

Once businesses started to close due to COVID-19, the Ontario Ministry of Labour had exactly 13 weeks to act. That is when some of the earliest COVID-19 layoffs would have started automatically converting to terminations under the Employment Standards Act ("ESA")¸ triggering a flood of employment standards claims and billions in termination pay liabilities across the province. This week, the Ontario Government announced a new regulation to stem the foreseeable tide of deemed terminations.

What was the issue?

Under normal circumstances, a "layoff" of a non-union employee is supposed to be temporary. That is, the ESA recognizes that, after a certain period of time, a temporary layoff or reduction in hours needs to be considered a termination in order to give effect to employees’ rights under the ESA. Specifically, a temporary layoff is deemed a termination after 13 weeks (or 35 weeks, provided certain conditions are met, such as the continuation of benefits throughout the entire layoff). After this time, the termination occurs automatically, triggering termination and severance pay obligations under the ESA.

Until this week, those temporary layoff rules did not account for a state of emergency that would necessitate indefinite layoffs across the province. Many employers (for instance, and especially, restaurants) would have been forced to shell out termination pay as a result of the government’s extended lockdown orders, based on matters entirely beyond their control. This would also disproportionately affect employers dealing with the most financial strain. To prevent this unfairness, the Ontario Government installed a "release valve" before the first wave of "deemed terminations" started spilling through the floodgates.

What is the government’s solution?

The Ontario government devised a clever solution to this issue by announcing that it was extending infectious disease emergency leave for workers, a classic stroke of political spin obscuring the actual mechanics of the new legislation. Specifically, the newly enacted O. Reg. 228/20 will re-classify these reductions and stoppages of work as "Infectious Disease Leave" for the purposes of the ESA. To put it in plain language, the government has decided that workers who were laid off as a result of COVID-19 were never actually laid off – rather, they have been on "Infectious Disease Leave" all this time.

This Infectious Disease Leave is retroactive to March 1, 2020 and, will last until 6 weeks after the declared emergency has been lifted in Ontario (a date which is yet to be determined).

Does this provide any benefit to workers?

Yes. The extension of infectious disease leave will ensure that workers have job protection for as long as the leave is in effect. In other words, workers on infectious disease leave will have a presumptive right to return to their positions, whereas workers deemed to be terminated do not.

Does this "undo" previous deemed terminations?

No. Deemed terminations that occurred before May 29, 2020 (whether by the employee or the employer) still stand.

Can workers still sue for constructive dismissal?

The government’s clever twist of semantics under the ESA is not necessarily the end of the story. That is, a temporary layoff may still amount to a constructive dismissal at common law, notwithstanding any provisions in the ESA. As the Ontario Superior Court of Justice held in Michalski v Cima Canada Inc., 2016 ONSC 1925, even where a temporary layoff is issued in strict compliance with the terms of the ESA, it may still amount to a constructive dismissal at common law, triggering the employee’s right to damages in lieu of reasonable notice.

It is yet to be determined how the court will evaluate constructive dismissal claims arising out of COVID-19, particularly in light of these recent ESA amendments. Most level-headed employment lawyers have predicted that, generally, the courts will not be very sympathetic to these claims from employees. However, employers should be wary of interpreting this regulation as a free pass to cut labour costs, as the courts have consistently disapproved of opportunistic behaviour from employees and employers alike. Employers should still take heed of the general principle that employment laws exist for the benefit of employees.

Contact Hyde HR Law today for advice on these and other employment law matters related to COVID-19.

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