New COVID Case Law Provides Some Guidance for Workplaces

Kalen Ingram
Posted June 25, 2021 Category: Businesses, News & Updates

Employers have faced exceptional circumstances during the COVID-19 pandemic.  Large-scale layoffs, widespread remote work arrangements, new health and safety precautions, new federal worker benefits, a wage subsidy program, and new COVID-related leaves of absence were just some of the myriad of issues confronted by employers.

As employment lawyers, we regularly rely on precedent case law to advise our clients on how a statutory requirement should be interpreted, or how to respond to circumstances in the workplace.  With the unprecedented nature of the COVID pandemic, however, relevant case law was not readily available. Questions remained. Some of the more pressing questions included:

  1. Will the pandemic result in an increase in the assessment of reasonable notice periods?
  2. Does the infectious disease emergency leave under the Employment Standards Act oust the common law of constructive dismissal?
  3. Will CERB payments be deducted from wrongful dismissal damages?

We are beginning to see case law emerge on these issues which you can review in further detail below.

  1. Will the pandemic result in an increase in the assessment of reasonable notice periods?

Recent cases have maintained that the reasonable notice period is to be determined by the circumstances existing at the time of termination. This means that if an employee was terminated prior to the pandemic (Yee v. Hudson Bay Company, 2021 ONSC 387) or prior to the impact of the pandemic on the economy being known (Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998), the assessment of the reasonable notice period should not consider the economic downturn that took place following the employee’s termination to extend the reasonable notice period. 

While we have yet to see any cases add an explicit “bump” to the reasonable notice period for employees terminated after the pandemic began, it is safe to assume that where there is evidence to suggest that the availability of similar jobs was diminished by the COVID pandemic, the assessment of the reasonable notice period will be increased. This is not really a new principle.  The availability of similar employment has been a factor that has been considered in assessing reasonable notice periods since 1960.

  1. Does the infectious disease emergency leave under the Employment Standards Act oust the common law of constructive dismissal?

This has been one of the more hotly debated issues.  In May of 2020, the provincial government introduced O. Reg. 228/20 (the “IDEL Regulation”), which deemed employees who were laid off for reasons related to COVID-19 or who had their hours or wages reduced for reasons related to COVID-19 to be on an Infectious Disease Emergency Leave.  The IDEL Regulation explicitly states that a reduction or elimination of an employee’s hours or wages would NOT be considered a constructive dismissal for the purposes of the Employment Standards Act. This left the question as to whether such a reduction in hours and wages might be considered a constructive dismissal under the common law.

Two cases have now been released on this issue and, unfortunately (for the interests of clarity), they arrived at different results.

  • In Coutinho v. Ocular Health Centre Ltd, 2021 ONSC 3076, the Court determined that the IDEL Regulation did not affect the employee’s right to pursue a civil claim for constructive dismissal after the employee was laid off/placed on an Infectious Disease Emergency Leave. The Court relied heavily on section 8 of the ESA which states that the ESA does not affect an employee’s ability to pursue a civil claim against their employer. 
  • Conversely, in Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135, the Court reached the opposite result, stating that to rule otherwise would render the IDEL meaningless. This Court interpreted section 8 of the ESA differently, stating that it does not prevent the ESA (in particular, the provision proclaiming that a laid-off worker is on a leave of absence and not constructively dismissed) from displacing the common law (in particular, the common law principle that a layoff constitutes a constructive dismissal where there is no contractual layoff provision). The Court in Taylor stated explicitly that the decision in Coutinho was “wrongly decided” and that its own conclusion was “common sense”.

As these cases do not yet provide any clarity on this issue, we continue to encourage employers to exercise caution in reducing employees’ hours and/or wages, despite the continued availability of a deemed IDEL under the IDEL Regulation, if such reductions are not already established terms of employment.

  1. Will CERB payments be deducted from wrongful dismissal damages?

On this issue, we also have two cases which arrived at different conclusions:

  • In Hogan v. 1187938 B.C. Ltd, 2012 BCSC 1021, the Court held that CERB payments received by a terminated employee SHOULD BE DEDUCTED from their wrongful dismissal damages. The Court was guided by the principle that in assessing damages for wrongful dismissal, an employee should be put in the economic position he would have been in had reasonable notice of the termination been provided. Based on this principle, the Court determined that “if the CERB payments are not deducted, [the employee] would be in a better position than he would have been in [if he had received reasonable notice of his termination].
  • Conversely, in Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998, the Court held that CERB payments received by the employee post-termination SHOULD NOT BE DEDUCTED from his wrongful dismissal damages. The employee’s compensation, in this case, was significantly commissioned based. He had a base salary of $60K but, with commissions, he earned over $145K in 2019.  The Court seemed to be swayed by the fact that the Employee’s income during the 3-month reasonable notice period would not come close to what he previously earned, emphasizing that on these facts, it would not be equitable to reduce the employee’s wrongful dismissal damages by the amount of CERB payments he received.

While these two cases came to different results, together they suggest that CERB payments received by the employee should be deducted from their wrongful dismissal damages, unless to do so would lead to an inequitable result.

We will continue to monitor and provide updates as case law emerges that provide guidance on the many unique legal issues that the pandemic has introduced into the workplace. Please do not hesitate to reach out to our team with any questions.

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Kalen Ingram
Posted June 25, 2021 Category: Businesses, News & Updates

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