Is a Lay-Off By an Employer a Constructive Dismissal?

a male employee looking out of office window while wearing a face mask

On May 29, 2020, Ontario Regulation 228/20 (“the Regulation”) was passed under the Employment Standards Act (“ESA”). The Regulation amended the ESA to provide that temporary layoffs, including a temporary reduction or elimination of hours or a reduction of wages due to COVID-19 during the COVID-19 period, does not constitute a constructive dismissal under the ESA.

In determining whether the Regulation precludes a plaintiff’s common law right to sue for constructive dismissal, the court first considered section 8(1) of the ESA, which provides that “no civil remedy of an employee against his or her employer is affected by this Act.” The court then considered the Ministry of Labour’s Guide to the Employment Standards Act, which states that the Regulation does not apply to what constitutes a constructive dismissal at common law.

The court concluded that Ocular’s unilaterally imposed layoff constituted a constructive dismissal at common law.

This decision confirms that the Regulation does not preclude an employee from claiming that they have been constructively dismissed at common law when an employer imposes a unilateral layoff.

On April 27, 2021, the Superior Court of Justice, in Coutinho v Ocular Health Centre Ltd., 2021 ONSC 3076 confirmed that the Regulation does not affect an employees’ rights under the common law to claim constructive dismissal for unilaterally imposed layoffs.

However, three weeks later, the Court in Taylor v. Hanley Hospitality ruled that Coutinho was wrongly decided and should not be followed.

In Taylor, the Court determined that the government-enacted Regulation operates to displace the common law. Thus, where an employee is temporarily laid off pursuant to the Regulation, this temporary layoff does not constitute a dismissal under the ESA, nor does it constitute constructive dismissal at common law. The Court reasoned that to apply the interpretation put forward in Coutinho would render the Regulation meaningless, which "offends the rules of statutory interpretation".

It remains to be seen how these two cases will be reconciled.

If you or a loved one have been temporarily laid-off, you may be entitled to receive the help you deserve. Contact us at JEWELL RADIMISIS JORGE LLPand a member of our team will be happy to assist you.

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