To be or not to be… Constructive Dismissal?

Recall that the Regulation 228/20 (the “Infectious Disease Emergency Leave” Regulation), alters the Employment Standards Act (“ESA”) in relation to a claim of constructive dismissal. It deems that any claim filed with the Ministry concerning a constructive dismissal related to a temporary reduction or elimination of work and/or of wages for reasons related to COVID-19 during the “COVID-19 period” has not been filed. The limited exceptions are where an employee’s employment is:

  • permanently ended, including by the employer’s refusal or inability to continue the employment, a permanent discontinuance of all of the employer’s business at an establishment (defined by the ESA) or a lay off for a period longer than a defined temporary lay-off under the ESA that occurred before May 29, 2020;
  • terminated by a notice of termination and the employee resigns such notice;
  • terminated and/or severed due to a constructive dismissal accepted by the employee before May 29, 2020;  
  • a permanent, unilateral change to the terms and conditions of employment (e.g., hours, wages, location of employment and the like); and
  • changes, temporary or permanent, to the terms and conditions of employment unrelated to COVID-19.

What does a deemed no filing mean? 

Applicable only during the COVID-19 period (or another pandemic), these amendments to the ESA completely change the rules regarding what is and is not a constructive dismissal for ESA purposes. The intent of these changes are to nullify claims for ESA termination pay and/or statutory severance due to COVID-19 related reasons. However, changes to the ESA are not the end of the story concerning the law of constructive dismissal.  This is because an unpaid lay off or temporary reduction in hours of work and/or wages – before and after May 29, 2020 – will still amount to a constructive dismissal under our common law regardless of how it is treated under the ESA. Importantly, the Ontario government did not go so far as to connect the changes under the IDEL Regulation to the limitation on civil remedies sections of the ESA.

What do the limitations on civil remedies of the ESA provide?

The limiting sections of the ESA are sections 8, 97 and 98.  These sections prevent employees from riding two horses at the same time – that is pursing a civil and an ESA claim arising out of the same facts.      

Section 8 provides that subject to Section 97 (i.e., when a civil proceeding is permitted relative to an employment standards complaint), no civil remedy of an employee against their employer is affected by this Act.  Particularly, section 97 provides that an employee who files an ESA complaint for an alleged failure to pay wages or comply with Part XIII (Benefit Plans) may not commence a civil action with respect to the same matter – except where the employee withdraws the ESA complaint within 2 weeks of filing it.  In relation to wrongful dismissal actions, section 97 specifically provides that an employee who files an ESA complaint alleging an entitlement to termination pay or severance pay may not commence a civil proceeding for wrongful dismissal if the complaint and the proceeding would relate to the same termination or severance of employment regardless if the dollar amounts are dissimilar or not all inclusive of the potential losses.  This is a very beneficial provision for employers as common law wrongful dismissal damages are generally much more substantial than the ESA termination and severance pay entitlements.

Section 98 on the other hand provides the opposite of section 97.  Under section 98 an ESA complaint is not permitted where the employee has already commenced a civil wrongful dismissal proceeding.  There is no ability to undo or withdraw the civil suit under section 98 as there is to withdraw the ESA complaint under section 97 (within 2 weeks of filing it).  Such a withdrawal in normal circumstances is far less likely to occur under section 98 than under section 97. An employee’s entitlements under the common law for wrongful dismissal are likely more substantial –to a maximum of approximately 24 months (absent exceptional circumstances) than the employee’s minimum statutory entitlements under the ESA (maximum of 8 weeks’ notice or termination pay and 26 weeks for statutory severance pay (i.e. approximately 8 months maximum).  That being said, in the context of the pandemic, it could become more relevant given litigation delays expected due to the closure of our courts under the declared state of emergency. It may be a quicker way for an employee to generally receive a payment or to receive any payment from an employer that the employee fears may become insolvent due to the ongoing negative economic impact of the extended declared state of emergency.               

What does this lack of connection mean?  

Unless there is another update to the IDEL Regulation to connect its changes to the limitations on civil proceedings sections of the ESA, nothing has actually been altered concerning an employee’s ability to pursue a constructive dismissal action under the common law where the changes are permanent, not connected to the declared state of emergency or fall outside of the limitations under the IDEL Regulations.  

Meaning what?  

  • If you don’t have a contractual term in your employment contract that permits you, as employer, to place your employees on an unpaid temporary lay off or to reduce their hours and/or pay and the change you implement is a significant (i.e., 5% reduction won’t do it) you will be exposed to a valid wrongful dismissal claim (i.e., constructive dismissal).  
  • Where you are dealing with a temporary unpaid layoff and you have no contractual provision entitling you to engage in one, the fact that the employee is unpaid has been found by the Courts to go to the very root of the employment relationship (where the employee doesn’t consent to the change).  This because the essence of every employment relationship is the exchange of labour for pay.  When that exchange ceases, the cessation of this exchange is a constructive dismissal at its purest.  
  • By operation of law, a constructive dismissal is another sort of “deeming” provision.  There is a lack of both the employer’s intent to terminate the employment relationship and any voluntariness on the employee’s part to resign.  In such circumstances an employee is interpreted as accepting the ending of the employment relationship if it is done within a reasonable period of time of the employer’s significant change. 
  • If the employee agrees to or accepts through acquiesce the employer’s unilaterally changes (i.e., doesn’t act on them in a reasonable period of time), there is no constructive dismissal.  There is condonation.

The double-edge sword of the IDEL Regulation’s “Deemed No-Filing” Provision:  

Like the deemed swapping out of a temporary lay off for an infectious disease emergency leave during the COVID-19 period, this deemed “no-filing” of prescribed constructive dismissal claims under the ESA is an entirely new legal concept meant to assist employers and employees in dealing with their current employment realities during the pandemic.  

Given the chosen temporal parameters of this provision, it does not actually affect the numerous early constructive dismissal cases related to COVID-19 pandemic.  Why?  Unlike the deemed no dismissal/swapping out provision of the IDEL Regulation – this deemed no filing provision was not made retroactive to March 1, 2020 (i.e., before the state of emergency was first declared) when many lay offs occurred.  It is only applicable to claims of constructive dismissal due to a temporary change related to COVID-19 made after May 29, 2020. 

The decision as to timing of application of these deeming provisions may have been made with the same thinking as to the what to do with benefits not continued during a layoff for the deemed infectious disease leaves of absence.  You can’t undo what has already been ended and/or what is already being processed as the same cannot be easily undone.      

Given the intricacies of assessing whether there is or isn’t a constructive dismissal and how best to respond to such a claim, it is important to receive informed legal advice.  The employment lawyers at Sullivan Mahoney LLP are available to assist you with such advice.


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