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Author:
Arjun Dhir

Date:
2021.06.29

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THE EMPLOYERS' EDGE

Ontario Court Once Again Weighs-in on IDEL vs. Constructive Dismissal Debate

Less than three weeks ago, the Employers’ Edge blog wrote about the recent decision in Taylor v. Hanley Hospitality Inc., where the Ontario Superior Court (the “Court”) held that temporary layoffs or infectious disease emergency leaves (“IDEL”) occurring during the COVID-19 Pandemic did not constitute a constructive dismissal at common law.

This represented a reverse in course from the Court’s April 2021 decision in Coutinho v. Ocular Health Centre Ltd., where it was held that an employee who was placed on IDEL had effectively been constructively dismissed, and was entitled to common law damages for wrongful dismissal. You can review the Employers’ Edge blog on that decision here.

As such, it should really come as no surprise that the Court has once again shifted direction in the new Fogelman v. IFG decision, released earlier this month.

Facts

The circumstances faced by the defendant employer that ultimately precipitated this legal dispute, are highly reminiscent of those encountered by countless other businesses across Ontario throughout the COVID-19 Pandemic.

On or around March 16, 2020, the defendant employer, a specialized financial services recruitment agency, suffered a significant downturn in business resulting directly from the COVID-19 Pandemic. Accordingly, they were forced to temporarily lay-off a number of employees, including the plaintiff employee.

Upon being laid off, the plaintiff retained counsel who immediately advised the defendant that they viewed the allegedly illegal lay-off as a constructive dismissal. The defendant  disagreed and was not prepared to make any payments on account of termination or severance pay allegedly owing to the plaintiff in accordance with the Ontario Employment Standards Act, 2000 (the “ESA”) or at common law.

Decision

IDEL or Constructive Dismissal?

The Court began its analysis by confirming that the defendant did not have the contractual right to lay-off the plaintiff in the absence of an express provision permitting them to do so.

Second, as the Court had done in the earlier Coutinho decision, they referenced the Ontario Ministry of Labour bulletin entitled “COVID-19: temporary changes to ESA rules” which discussed the applicability and limitations of the IDEL, specifically indicating: “These rules do not address what constitutes a constructive dismissal at common law.

Finally, the Court relied on s. 8(1) of the ESA, which provides that the ESA does not supercede the civil remedies otherwise available to an employee at common law.

As such, and given that the plaintiff was pursing his civil remedies, the Court held that the temporary lay-off or IDEL, did in fact constitute a constructive dismissal and the plaintiff was thus owed his common law entitlements.

Impact of CERB on Damages

Next, the defendant argued that the Court should reduce the damages award by any Canada Emergency Response Benefit (“CERB”) payments received by the plaintiff.

The Court did not spend expend very much effort considering this argument and we will follow in suit.

In this regard the Court simply stated that they will defer to the recent decision in Iriotakis v. Peninsula Employment Services Limited (which the Employers’ Edge blog also wrote about in March 2021), where it was found that that CERB payments should not be treated as income for purposes of mitigation.

Punitive Damages

As if this decision was not going bad enough for the employer, the Court awarded an additional payment of $25,000 on account of punitive damages, relying on the following behaviour on the part of the defendant employer:

  • They were “not well behaved” in their dealings with the plaintiff over the termination;
  • At no time was the plaintiff advised of the prospects of being recalled to work, notwithstanding the defendant’s temporary lay-off notice ensuring they would; and,
  • They deliberately made it difficult for the plaintiff to effect service of the Statement of Claim, notwithstanding the COVID-19 Pandemic.

In addition to the foregoing, the Court gave special consideration to the defendant’s refusal to provide the plaintiff with any statutory entitlements under the ESA once it received notice that the plaintiff considered the lay-off to be constructive dismissal. The Court noted that, “the failure to comply with the ESA is an independent wrong that is outrageous and reprehensible behaviour deserving of punitive sanction”, ultimately determining that, “the [defendant’s] refusal to pay anything to the [plaintiff] was an attempt to play hardball with him.

Key Takeaways

As noted above, the Employers’ Edge blog has written above this issue many times over the past several months. We anticipate that decisions falling on either side of the Coutinho and Taylor continuum will continue to be released based on the facts of each case until the Court of Appeal steps in to offer a more substantive judgment on these issues.

However – until that happens, we recommend employers fasten their seatbelts, as it will surely continue to be a bumpy ride for employers as we make our way out of the pandemic. We also recommend that employers have their employment contract templates reviewed by expert legal counsel based on a number of Court decisions in the last several years dealing with enforceability issues.

If you have questions about the effect of this decision on your business, concerns about your employment agreements or have any other questions about COVID-19 or other employment issues, the lawyers at CCPartners are available to assist.

With news and developments relating to the COVID-19 Pandemic occurring at a rapid pace – be sure to stay tuned to our Employers’ Edge Blog and Lawyers for Employers Podcast series. The team at CCPartners will continue to update our readers and listeners on all other pertinent developments regarding benefits and legislative changes related to COVID-19.

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