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Potential issues in Ontario employment law post-COVID-19

Tuesday, May 26, 2020 @ 1:39 PM | By Arthur Zeilikman


Arthur Zeilikman %>
Arthur Zeilikman
It is now a truism that the world was blindsided by the COVID-19 pandemic. It is also impossible to predict the impact this experience will have on our lives once the crisis ends. Yet it would not be (entirely) a fool’s errand to anticipate the kind of issues the Ontario legislature and the courts would have to grapple with in the area of employment law in Ontario in the near future.

Arguably one of the most foreseeable side effects of the pandemic on the law in Ontario relates to the rules surrounding layoffs. Generally speaking, the notion that an employer cannot simply lay off an employee absent an express or implied term of contract is no longer largely within the esoteric purview of employment law experts.   

The current state of affairs has confirmed that there is a serious blind spot in the law and in most business practices of non-unionized employers. Speaking from anecdotal experience, layoffs are rarely contemplated in individual employment contracts. Now, however, reality has caught up with this omission and soon enough employers who have laid off their employees without a right to do so will have to face the possibility of legal action absent some form of statutory intervention. Some provinces have already begun to make legislative changes to address parts of this lacuna in the law, at least for the purposes of the COVID-19 pandemic.

To the extent Ontario’s Employment Standards Act is left untouched, it would be interesting to see how the courts choose to address layoff-related disputes during or post the COVID-19 pandemic. For instance, given the tremendous strain on the economy, would a global pandemic actually create an implied contractual right to lay off employees? Alternatively, would “recalled” employees who refuse to go back to work through the means of an otherwise unlawful layoff be deemed to have failed to mitigate the loss of their employment? This was always a legal possibility and cases exist to that effect already.

Yet, if under more “normal” circumstances and given the right facts an employee would be able to make an argument that a return to work is, say, humiliating, would there be an increase in employer-friendly decisions in borderline cases? For instance, would the courts be willing to display less tolerance towards more “thin skinned” employees?

What of the law of frustration — that a supervening event may absolve an employer from having to provide the employee with notice of dismissal at common law? Would a reduction in business due to COVID-19 be sufficient grounds to invoke the doctrine? In my view, likely not right away. This is because every downturn in business activity would meet the definition. Let’s remember that a company’s financial circumstances are often at the forefront of ending an employment relationship. Is the unusual source for the downturn in business — in this case, the pandemic — justifiably relevant? If so, why?

The stronger argument would be that frustration may arise out of the government’s shutdown of non-essential services since the performance of the contract will have been rendered legally impermissible and, without the necessary adaptations, impossible. If enough time has passed, it may be extremely difficult to restore the parties to their original positions. Of course, the pandemic certainly can frustrate the contract; however, it would only do so if it goes to the root of the parties’ ability to perform it. For instance, taken to extremes, this could happen if the employer or the employee dies of the virus or the mere possibility of infection would signify that the business simply cannot go on for a significant period of time due to health and safety concerns.

On that note, will technology play a role? Would an employer’s failure to utilize technology by facilitating work remotely prevent the raising of the frustration defence in the future or would courts take a more philosophically luddite approach, regarding any such workplace adjustments to be a matter of pure managerial discretion?  

Finally, will there be a reversal in the case law that an employer’s financial circumstances are neither a mitigating nor a militating factor in the assessment of the length of notice at common law? Will there be a reversal of this principle in favour of businesses that have fallen on hard times through no fault of their own? Alternatively, will the doctrine of “exceptional circumstances” — entitling employees to greater notice of termination beyond 24 months — be loosened for long-term employees given the extremely limited job market? Surely, lack of job availability will have an impact on the ability to mitigate; however, would that in itself serve to increase the actual length of notice at common law?

The COVID-19 crisis is far from over; however, it is fair to speculate that significant legal developments in employment law are likely to take centre stage in the months and, possibly, years to come. It remains to be seen just what these developments will look like.

Arthur Zeilikman is a labour and employment lawyer at Zeilikman Law in Vaughan representing employers and employees. He can be reached at 905-417-2227 or arthur@zeilikmanlaw.com

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