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Good News for Employers … For Now: The Impact of Ontario’s New Employment Standards Act Regulation

5 minute read

On May 29, 2020, the Ontario government quietly introduced a new regulation to the Employment Standards Act (the “ESA”)[1] that has the potential to drastically impact the application of constructive dismissal in the context of the COVID-19 pandemic. For now.

Ontario Regulation 228/20, titled Infectious Disease Emergency Leave, has three significant components:

  1. Employees whose hours of work have been temporarily reduced or eliminated by their employer for reasons related to COVID-19 are deemed to be on “emergency leave”, a leave of absence without pay, as of March 1, 2020.[2] This triggers certain rules and obligations in the ESA related to emergency leaves, including requirements for the continuation of benefits and a right to return to work.
  2. An employee whose hours of work are temporarily reduced or eliminated by their employer, or whose wages are temporarily reduced by their employer, for reasons related to COVID-19 is not considered to be laid off.[3] This comes just in time to prevent temporary layoffs that began at the start of the COVID-19 pandemic from automatically becoming terminations pursuant to the ESA.[4]
  3. A temporary reduction or elimination of an employee’s hours of work by their employer, or a temporary reduction of an employee’s wages by their employer, for reasons related to COVID-19 does not constitute constructive dismissal.[5] Typically, pursuant to the doctrine of constructive dismissal, material cuts to wages or hours of work would be considered to be fundamental breaches of contract that may be treated as constructive dismissal, entitling the employee to damages in relation to the applicable notice period for the termination. For any employees who have already filed complaints with the Ministry of Labour claiming that a COVID-19 related temporary reduction in hours or work wages constitutes a termination of employment, the new regulation deems those complaints unfiled.[6]

The full impact of these changes is difficult to assess right now. Some ramifications are clear, such as for laid-off employees whose benefits and return to employment are now protected, and for employers and employees who don’t want COVID-19 related lay-offs to turn into terminations. However, much is unclear. For example, under the new regulation, an employee is considered to be on emergency leave if their hours are not only eliminated, but reduced – meaning an employee could be considered to be on leave even if they are still working 80% or more of their normal hours, as long as the reduction is related to COVID-19. There seems to be little logic in this approach.

Additionally, the new regulation is aimed at employment changes necessitated by COVID-19, but provides no standard or guidance as to what constitutes a change “for reasons related to [COVID-19]”. It is possible that some employers may try to take advantage of this lack of definition by seeking to make material employment changes without recourse, relying on the protections in the new regulation even if COVID-19 has only a tenuous or superficial impact on their business.

Potentially the most significant change – that relating to the application of constructive dismissal – is far from clear.

In the short term, employers will likely benefit from the provision deeming temporarily reduced work hours or wages not to constitute constructive dismissal. Employers now have a strong response against complaints that changes to work hours or wages necessitated by COVID-19 constitute constructive dismissal, at a time when reduced profits may make it difficult or impossible for employers to pay what could be substantial termination payments to multiple affected employees.

In the longer term, however, employers may ultimately be held accountable for employment changes arising from COVID-19. The ESA provides that “no civil remedy of an employee against his or her employer is affected by this Act”.[7] This is because the ESA and the common law are separate legal regimes: in the event of a wrongful termination, employees can choose whether to pursue a claim in court for breach of contract (a common law claim), or file a complaint with the Ministry of Labour for breach of the ESA. As a result, despite the new ESA regulation, employees may still be successful in pursuing common law constructive dismissal claims related to COVID-19 in court.

Once courts resume wider operations, we can expect to see many employers raising the new ESA regulation as a defence against constructive dismissal claims. It remains to be seen whether courts will be sympathetic to the economic circumstances of employers harmed by COVID-19 and similarly limit constructive dismissal claims, thereby sparing employers from the economic ramifications of employment changes during the COVID-19 pandemic, or whether the courts will maintain the common law rights afforded to employees and apply the constructive dismissal doctrine as before.

For the time being, employers are expected to welcome these changes, but the long-term impact for both employers and employees is far from clear.

[1] Employment Standards Act, 2000, SO 2000, c 41.
[2] O Reg 228/20, s. 3(2).
[3] O Reg 228/20, s. 6(1).
[4] Section 56(1)(c) of the ESA provides that an employer has terminated an employee where a lay-off is for a period “longer than the period of a temporary lay-off”, which, for unpaid lay-offs, is up to 13 weeks in any period of 20 consecutive weeks.
[5] O Reg 228/20, s. 7(1).
[6] O Reg 228/20, s. 8(1).
[7] ESA, s. 8(1).

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