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Are Covid-19 Related Lay-Offs Constructive Dismissals?
Employment Law

Are Covid-19 Related Lay-Offs Constructive Dismissals?

By June 24, 2020March 4th, 2022No Comments

On account of the ongoing Coronavirus disease (COVID-19) pandemic (the “Pandemic”), on March 17, 2020, the Government of Ontario declared a state of emergency under section 7.0.1 (1) of the Emergency Management and Civil Protection Act. As a result of this declaration and its associated orders, several establishments and businesses were legally required to close.

Further, on March 23, 2020, the Government of Ontario ordered the mandatory closure of all non-essential workplaces, effective March 24, 2020 (the “Second Order”). The forced closure of non-essential businesses has been in effect for over a month, with the possibility of being extended as the situation evolves.

These measures have had and will continue to have, devastating effects on the economy, with some economists speculating that we are on the verge of an unprecedented recession. Many have stopped short of calling the impending financial downturn an economic depression. Tragically, a shrinking economy has resulted in thousands of employees being laid off or terminated.

This raises important legal considerations for employees who have been laid off, and for those who are on the verge of being laid off. Since temporary layoffs represent fundamental changes to the terms of an employment relationship, aren’t these layoffs always going to amount to constructive dismissals? In normal circumstances, the answer depends on several different factors, including whether such measures were contemplated in an employment contract, and whether temporary layoffs are common in the industry or sector the employer is engaged in.

Contemplation for Layoffs in Employment Contracts

If an employee’s contract does not contemplate an employer’s right to temporarily lay off the employee, and layoffs are not common in the employer’s industry, the employee has a legitimate claim for constructive dismissal at common law in the event that he or she is laid off. These considerations are irrelevant, of course, if the employee consents to the temporary layoff. However, a non-consenting employee could successfully claim that the employer’s conduct would lead a reasonable person to conclude that the employer no longer intended to be bound by the terms of the employment contract. As a result, the employer would owe the employee termination pay in the form of either statutory minimum entitlements (note – they could also be owed more than stat min but less than common law depending on the wording of the termination clause), or common law notice, depending on the existence of an enforceable termination clause.

Even if layoffs are contemplated in the employment contract, an employer’s right to take such measures is not without limit. The Employment Standards Act (the “Act”) limits layoffs to a maximum of 13 weeks in any 20 week period. A greater time frame is permitted where the employer is prepared to provide the employee with benefits during the layoff.

Covid-19 – A Wildcard

The circumstances of each situation and the features of employment contracts must be taken into account in determining whether there has been a constructive dismissal. It remains to be seen how courts will assess the Pandemic when considering the constructive dismissal claims that have materialized in the past two months. We are heading for uncharted legal territory, and the decisions that arise from these cases may shape the law on constructive dismissal for decades to come.

Some have suggested that the courts will grant exceptions and absolve employers of ‘onerous’ and rigid common law principles since the Pandemic is such an extraordinary circumstance. However, it would seem unfair for the courts to turn their backs on long-held principles of constructive dismissal in an attempt to mitigate what are undoubtedly tough circumstances for employers. Such course of action would be prejudicial to employees who already operate from a far less powerful position. It would also seem unfair to employees if the courts were to relax these long-held doctrines, causing employees to bear the brunt of the Pandemic.

What is more certain, however, is that employers seeking to release themselves of liability and defend constructive dismissal claims on the grounds of the Pandemic will bear the burden of convincing courts that legal exceptions should be made. For better or worse, the law is a stubborn creature that resists reactionary exceptions and arbitrary rules designed to curb specific situations, making the aforementioned undertaking a large mountain to climb.

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