New Ontario Regulation Provides Some Relief to Employers but Leaves Important Questions Unanswered

On Friday, May 29, 2020, Ontario’s government issued Regulation, O.Reg 228/20, under the Employment Standards Act (“ESA”). Its most significant effects have to do with the options that are available to employers with regard to terminating or laying off its employees due to COVID-19-related reductions in business and the rights of employees to sue for pay if they are not recalled back to work after 13 weeks.

Employment Law Changes

Employees who have had their working hours or wages reduced or eliminated since March 1, 2020, will now be considered to be on Infectious Disease Emergency Leave. Employees cannot be fired while they are on leave and they are entitled to return to work six weeks after Ontario’s State of Emergency is removed.

Normally, employees who have been laid off for a period longer than thirteen weeks are considered to have been fired. They can sue for additional pay and, in some cases, severance pay. Due to the Regulation, employers no longer have to worry about the thirteen-week limit for layoffs, provided the limit had not been reached prior to May 29, 2020.

Normally, when employees have their working hours or wages cut, they have the option of resigning and claiming “constructive dismissal.” Constructive dismissal means when an employer changes the essential terms of an employee’s employment contract and the employee resigns rather than agreeing to the changes. The employee will be considered to have been fired and will be entitled to extra payment of wages and, in some cases, severance pay. The Regulation, however, states that a reduction in a worker’s hours or wages will not show that there is constructive dismissal if it occurred during the COVID-19 period which starts on March 1, 2020 to six weeks after the State of Emergency is lifted.

The confusion arising from the Regulation comes from the fact that the right of employees to claim constructive dismissal does not come solely from the ESA; there are also laws created by judges, called the common law, which gives employees the right to sue for constructive dismissal. For example, where the ESA allows employers to allow temporary layoffs, subject to certain conditions, the common law says that a temporary layoff will be considered a constructive dismissal unless the employee agreed in writing to the layoff.

While it is very clear that the Regulation has taken away the rights of employees to sue for constructive dismissal under the ESA, it is unclear whether the common law right to sue in Court for constructive dismissal is affected by the Regulation. For example, the Regulation takes away the right of employees to file a grievance for constructive dismissal to the Ontario Labour Relations Board, but those same employees would, arguably, still be entitled to sue for constructive dismissal in the Superior Court of Justice.

As the Regulation has created such uncertainty, it seems inevitable that these questions will either be answered in the Courts or through further legislation. It will be very interesting to see whether the Government of Ontario will release further Regulations to provide clarity on this issue or how Courts will rule on the issue if lawsuit require this issue to be dealt with. In either event, Walker Law will continue to follow this issue closely and provide updates as the new developments occur.

We are hosting a webinar on July 9, 2020 on employment law where we will discuss this issue. If you are interested in participating, please sign up here: https://zoom.us/webinar/register/WN_WhEC2QnnR8qTXtRiZMkc4w

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