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Why pandemic temporary layoffs could still cause business headaches

How two branches of law intersected in a recent and notable case

Emond Harnden associate Kyle Shimon on temporary layoffs
Emond Harnden associate Kyle Shimon

While the pandemic is seemingly in the rearview mirror, many businesses are still grappling with the fallout.

One example is a recent case that revealed some confusion around the rules concerning temporary layoffs and the Infectious Disease Emergency Leave (IDEL). The IDEL was the leave introduced by the Government of Ontario to deal specifically with the COVID-19 pandemic.

Kyle Shimon, an associate with employment law firm Emond Harnden, says these different leaves and various intersecting areas of employment law have created an understandable amount of confusion for employers. “The Employment Standards Act, 2000 explicitly states that you can lay off employees on a temporary basis; however, that isn’t always the case and it can have expensive consequences for employers,” said Shimon.

Where statute law and common law collide

The Employment Standards Act, 2000 (“ESA”) outlines minimum employment standards.  However, the common law may provide greater protection in some areas, such as temporary layoffs.  Unless employers specify in an employment contract that the lesser ESA protections apply exclusively, employees may be entitled to the protection of both sources of law.

“These two parallel sources of employment law usually work hand-in-hand. But where they conflict, as in the case with temporary layoffs, it becomes easy for employers to look at just one source of law,” said Shimon. 

Employers may not be aware of this gray area and look only to the ESA for guidance. 

“Most employers don’t realize that despite the ESA saying temporary layoffs are allowed, common law courts may take it upon themselves to call that temporary layoff a constructive dismissal and order damages against the employer,” said Shimon.

It creates an odd situation where courts can effectively require employers to repeat a provision of the ESA in a written employment contract to protect themselves against a future claim.

How the pandemic muddied the waters

When COVID-19 hit, many employers were forced to temporarily lay off some or all of their employees.

The Ontario government introduced the IDEL by regulation.  The regulation provided that employees whose hours were temporarily reduced or eliminated due to COVID were deemed to be on IDEL instead of being on a temporary layoff.  Additionally, under the regulation, COVID-related reduction or elimination of hours was deemed not to be constructive dismissal under the ESA.

However, the question remained whether a COVID-related temporary layoff constituted constructive dismissal at common law.  In spite of the pandemic being largely behind us, court decisions that address issues around these temporary layoffs and IDEL leaves are still only coming out now.

The Pham vs. Qualified Metal Fabricators Ltd. case is a notable one.  Pham was a 20-year employee who was temporarily laid off in March 2020.  Pham claimed that he was constructively dismissed, as he had not consented to the layoff.

“The company’s initial defense was that Pham had been laid off for so long without saying anything, that he had condoned the layoff and relinquished his right to sue the company for constructive dismissal,” said Shimon.

The Superior Court judge agreed and dismissed Pham’s claim, but the Ontario Court of Appeal clarified two points of the law when they overturned the initial decision.

The Court said that condonation is expressed by positive action.  Employers can’t infer from silence that an employee acquiesced to being laid off. The Court also stated that employees are entitled to reasonable time to assess their situation before claiming constructive dismissal.

Secondly, the Court of Appeal found that there was no express or implied term in Pham’s contract allowing him to be temporarily laid off. The fact that other employees had been laid off was not enough to constitute an implied term in his contract allowing a layoff.  “The employer couldn’t assume there was a common understanding about the possibility of a temporary layoff,” said Shimon.

The bottom line is that employers need to be aware that while the ESA may allow for temporary layoffs, the common law may provide greater protection.  Employers can address this issue by putting in place an enforceable written employment contract which stipulates that a temporary layoff may occur and will not constitute constructive dismissal.

If you want to learn more about this or any other gray area in employment law, get in touch with Kyle Shimon or any other lawyer at Emond Harnden.