On May 29, 2020, Ontario filed O. Reg. 228/20 Infectious Disease Emergency Leave (the “Regulation”) under the Employment Standards Act, 2000 (“ESA”), which temporarily but substantially changes the legal landscape related to layoffs, leaves, and constructive dismissal in the context of COVID-19 for non-unionized employers in Ontario. We provided an initial update on this Resource Centre over the weekend to place this new development on employers’ radars. As promised, in this article we provide more detailed analysis of the Regulation, including the aspects of the regulation that are still unclear, and what it means for your business.
Changes to Layoffs
Under section 6 of the Regulation, the reduction or elimination of an employee’s hours, or the reduction of an employee’s wages, by an employer for reasons related to COVID-19 (the “Designated Changes to Hours/Wages”) in the period beginning on March 1, 2020 and ending six weeks after Ontario’s ongoing state of emergency—which is currently scheduled to continue until June 30 but could be extended further—ends (the “COVID-19 Period”) does not constitute a layoff under the ESA. This is a clear change from the normal operation of the ESA, where temporary eliminations or reductions in wages of at least 50% in a week generally constitute layoffs and are therefore subject to the ESA’s limits on the duration of layoffs.
However, it is important to note that there are two exceptions to section 6 of the Regulation.
First, the Designated Changes to Hours/Wages can still constitute a layoff where the employer has permanently discontinued all of their business at an establishment, such as the closing of a store, warehouse, or office. Therefore, where an employee was placed off of work or otherwise experienced a reduction in wages of 50% or more because their workplace has been permanently closed for reasons related to COVID-19 it does constitute a layoff under the ESA and the Regulation.
Second, the Designated Changes to Hours/Wages can still constitute a layoff where an employee’s employment was deemed to be terminated before May 29, 2020 because they had been laid off for a period longer than the maximum layoff duration permitted under the ESA. To be clear, this second exception would only apply where an employee had been laid off for more than 13 (or more than 35 weeks where the employee continued to receive benefits or other less common criteria were met) before May 29, 2020.
Changes to Leaves
The Regulation has prescribed a new circumstance in which employees are eligible for the recently-enacted Infectious Disease Emergency Leave (“IDEL”) under the ESA (for more information on this leave, please read our recent article), deemed employees to have taken an IDEL in certain circumstances, and modified certain obligations in respect of the IDEL.
Under section 4 of the Regulation, employees are now entitled to an IDEL where they are not performing the duties of their position because their hours have been temporarily reduced or eliminated by their employer for reasons related to COVID-19. This is a substantial expansion to the existing eligibility criteria.
Moreover, under section 4 of the Regulation, employees whose hours of work are temporarily reduced or eliminated due to COVID-19 during the COVID-19 Period are deemed to be on an IDEL. Therefore, employees will now be considered to be on an IDEL and to have been on an IDEL for any time during the COVID-19 Period during which they are/were not performing the duties of their position because their hours have been temporarily reduced or eliminated by their employer for reasons related to COVID-19.
However, there are important exceptions to this rule whereby an employee will not be considered to be on an IDEL, including where:
- their employment was permanently terminated on or after March 1, 2020;
- they were laid of because of a permanent discontinuance of all business at the employer’s establishment on or after March 1, 2020;
- the employer gave the employee notice of termination of their employment and the employee subsequently resigned with at least 2 weeks of written notice on or after March 1, 2020;
- the employer constructively dismissed the employee and the employee resigned in response before May 29, 2020; or
- the employer laid the employee off for longer than a temporary layoff before May 29, 2020.
Finally, although employers are generally required to continue employee benefits during ESA leaves, in circumstances where an employer stopped an employee’s benefits as a result of a temporary layoff between March 1 and May 29, 2020, the employer is not required to reinstate the employee’s benefits while the employee remains off work, despite that the employee is now deemed to be on leave rather than layoff.
Changes to Constructive Dismissal
Section 7 of the Regulation deems that the Designated Changes to Hours/Wages do not constitute constructive dismissal, except where the employer permanently terminated the employee’s employment or constructively dismissed the employee and the employee then resigned in response before May 29, 2020.
The Regulation also deems any complaint filed with the Ministry of Labour claiming constructive dismissal due to the Designated Changes to Hours/Wages not to have been filed if it occurred during the COVID-19 Period for reasons related to COVID-19, subject to limited exceptions.
What do These Changes Mean for Employers?
The changes implemented by the Regulation in respect of layoffs, leaves, and constructive dismissal have massive implications for Ontario employers during the COVID-19 pandemic.
The changes to layoffs instituted by the Regulation are great news for Ontario employers that have reduced or eliminated employees’ hours of work and/or reduced employees’ wages for reasons related to COVID-19, or that may need to do so during the COVID-19 Period. This is because it will not be counted as a layoff under the ESA so long as neither of the narrow exceptions discussed above apply. Therefore, such employers will not have to worry about the maximum periods of temporary layoff set out in the ESA during the COVID-19 Period, as their employees are deemed not to have been laid off during this time. This provides Ontario employers with a lot more flexibility in that they can lay employees off during the COVID-19 Period for longer than would otherwise be allowed under the ESA and it will not result in a deemed termination due to the length of the layoff.
As the declaration of emergency will continue until at least June 30 and these temporary changes will remain in place until 6 weeks after the emergency is over, the COVID-19 Period, and employers’ ability to lay employees off without it being counted as a layoff, will likely extend until at least August 11, 2020.
Although the changes to the IDEL instituted by the Regulation do create new protections for employees who are deemed to on an IDEL, employees deemed to be on a leave in these circumstances have fewer protections than employees on ESA leaves generally are afforded. In particular, although the IDEL is a job-protected leave, section 5 of the Regulation explicitly provides that an employee will not be deemed to be on a an IDEL where their employment is permanently terminated after March 1, 2020. In effect, these deemed leaves are not truly job-protected as ESA leaves generally are, and employers can still terminate the employment of laid-off employees that are now deemed to be on an IDEL because they will no longer be deemed to be on an IDEL upon such termination. Nonetheless, the Regulation does create the following new protections for employees faced with the Designated Changes to Hours/Wages:
- any employee benefits that an employee deemed to be on an IDEL was receiving as of May 29, 2020 must be continued for the duration of the leave;
- the time during which an employee is deemed to be on an IDEL is included in their length of service for the purposes of their ESA entitlements; and
- upon reinstatement, an employee who was deemed to be on an IDEL must be paid at a rate equal to the greater of that which they most recently earned with the employer and the rate that they would be earning if they had worked throughout the leave.
Employers will need to take care to ensure that they do not violate the ESA by failing to comply with these obligations, and particularly the third protection, which in effect means that once the temporary regulation is no longer in effect, employees whose wages and hours were reduced or who were temporarily put off work because of COVID-19 will have to be reinstated to their full hours and wages.
The changes instituted by the Regulation related to constructive dismissal are either good news or great news for employers, depending on how broadly these provisions are interpreted. At present, it is unclear whether section 7 of the Regulation only applies to constructive dismissals for the purposes of the ESA, or for the purposes of the ESA and the common law. This is not specified in the Regulation and is currently a hot topic of debate among employment lawyers.
If the Regulation only applies to constructive dismissals for the purposes of the ESA, then employers that reduce or eliminate employees’ hours, or reduce employees’ wages, in the circumstances specified in the Regulation would not be liable to provide such employees with their termination of severance entitlements under the ESA because of such reductions, but could still be liable for common law reasonable notice arising from constructive dismissal (which tends to be a substantially greater entitlement). That said, even if the Regulation does not apply to constructive dismissal under the common law, employers may not be liable for damages for constructive dismissal under the common law in such circumstances if they have enforceable termination clause limiting their employees’ termination entitlements to those set out in the ESA. On the other hand, if the Regulation applies to constructive dismissals for the purposes of the ESA and the common law, then all non-unionized Ontario employers could reduce or eliminate employees’ hours and/or reduce employees’ wages in the circumstances specified in the Regulation without any risk of such changes constituting constructive dismissal and entitling employees to termination entitlements under the ESA or common law.
We will continue to monitor this situation and provide prompt updates regarding any new developments to keep your organization In the Know.
This blog is provided as an information service and summary of workplace legal issues. This information is not intended as legal advice.