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Interpreting Ontario’s new employment regulation: O. Reg. 228/20

Thursday, June 18, 2020 @ 12:54 PM | By Sean O’Donnell

Sean O'Donnell %>
Sean O'Donnell
On May 29, 2020, the Ontario government somewhat unexpectedly issued O. Reg. 228/20 which limits the liability of employers relative to layoffs and/or constructive dismissal claims that occur during the COVID-19 pandemic.

The pandemic has placed a significant burden on employers, particularly those who were declared “non-essential” and those unable to transition their employees to work-from-home (WFH). Accordingly, many employers made the difficult decision to place employees on temporary layoff or reduce their hours of work and/or pay, all of which can amount to a claim of constructive dismissal under normal circumstances.

Fearing a potential flood of incoming constructive dismissal claims, the Ontario government delivered this regulation in a timely fashion as employers would have otherwise been required to bring back many employees no later than the 13-week maximum layoff period under the Ontario Employment Standards Act (ESA) in order to avoid deemed terminations, in which termination pay and (if applicable) severance pay would be owed.

Understandably, strict application of layoff and constructive dismissal laws would have compounded what is an already disrupted and hurting economy. As many layoffs stretched into months, entire workforces would have been deemed terminated, but for this regulation.

The effect of the regulation is to convert “COVID-19-related layoffs” into an indefinite leave of absence, eliminating the possibility of deemed terminations under the ESA. Further, the regulation provides that reduction or elimination of hours of work, or a reduction in wages, in response to COVID-19 is not a constructive dismissal.

Overall, the regulation will provide welcome relief to employers of non-unionized employees. In most cases where employers have had to reduce employee wages and/or hours in response to the pandemic, employees should now be deemed to be on infectious disease emergency leave (IDEL).

Importantly, however, the regulation also raises various concerns and unanswered questions for the employment bar, and soon, the courts, to wrestle with. In particular, three distinct points require attention.

First, the regulation amends the ESA relative to layoff and constructive dismissal, but it is unclear as to the impact it may have on the common law’s consideration of these issues. In other words, does the regulation change the common law regarding constructive dismissal? Some have argued this regulation has changed decades of common law with one short piece of legislation.

However, the more astute view would be that in order to change the common law, the government would have to include explicit language to that effect. Section 8 of the ESA states that “no civil remedy of an employee against his or her employer is affected by this Act.” While the common law can be overridden by statute, the Supreme Court of Canada has made clear that, “statutory language must be clear and unambiguous to override the common law” (Chrysler Canada Ltd. v. Canada (Competition Tribunal) [1992] 2 S.C.R. 394). The regulation does not override s. 8 of the ESA, nor the common law.

Second, the regulation stipulates that employees will be deemed to be on IDEL only for reasons “related” to COVID-19. What level of correlation will be required in order to satisfy the language of “related?” How far can this be interpreted? Does it have to be the primary reason? Can employers rely on the regulation when there are ancillary reasons not related to COVID-19? What about a minimal disruption to a business, such as a minor decrease in revenue?

The regulation does not define or elaborate on what circumstances satisfy reasons “related” to the designated infectious disease. This will be for lawyers to argue and the courts to decide. Employers who have had to close their business to comply with provincial orders will certainly fall into the category of “related.” However, employers who rely on unrelated drops in business revenue but nevertheless attempt to rely on this regulation will be acting in bad faith and in clear violation of its intended purpose.

Third, questions remain as to how the regulation will impact an employee’s reinstatement following the reopening of an employer’s business. Employees on statutory leave have the right to be reinstated to the position they most recently held with their employer, provided it still exists, or to a comparable position, provided it does not. Importantly, an employer’s failure to reinstate an employee is a breach of the ESA and, following a complaint with the Ministry of Labour, an employer may be ordered to reinstate the employee in addition to damages.

Prior to the regulation, an employer would have been free to recall or not recall employees as it saw fit. Of course, if the employer opted not to recall an employee, it would incur termination liabilities, but nevertheless retained the option to make its own choices. However, during the “COVID-19 period” (March 1, 2020, until six weeks after the emergency order is lifted), if work is available, employees must be recalled to their positions or employees may have a claim for reinstatement and/or damages. Therefore, in one small sense, this could serve to benefit employees.

Courts will be addressing these issues in the near future and will need to balance the competing objectives of an employer’s desire and need to survive during this pandemic contrasted with an employee’s right to assert constructive dismissal when an employer unilaterally changes an essential term of the employment contract and/or evinces an intention to no longer be bound by the contract (Potter v. New Brunswick Legal Aid Services Commission [2015] 1 S.C.R. 500).

Sean O’Donnell is an advocate at SJOLegal with extensive experience in employment, human rights and civil litigation, having practised for Canada’s leading litigation firms in these areas, among myriad other areas of law. He was called to the bar in 2010. This article was written with the assistance of Carter G. Perks, student-at-law.

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