Answers around constructive dismissal, severance pay, full terminations
With new rules recently introduced by the Ontario government reclassifying employees temporarily laid off to those who are on leave, what are the new implications and regulations employers have to consider as part of pandemic recovery?
Canadian HR Reporter spoke with Ashon Simpson, labour and employment lawyer at Achkar Law in Toronto, about the ins and outs of the new employment regime.
Q: Which employees does this apply to?
A: “It’s narrow in focus and it applies to employees, not bargaining-unit members in a union; and of those employees, it applies to those whose employment contracts sufficiently limit them to the entitlements of the Employment Standards Act [ESA].
“Whereas the [previous] rules prevent things such as constructive dismissals due to layoffs, under the new regulations and rules here, it seems to only be targeting those under the ESA.
“If somebody were to have a very open agreement or even no official employment agreement at all… such employees might be entitled to common-law entitlements and, unfortunately with the pandemic reality that we’re sitting in, we don’t have guidance from the court as of yet as to how the pandemic would affect allegations of constructive dismissal.”
Q: How will this affect severance pay?
A: “If the employees are not terminated, then essentially they are going to be sitting at home on leave. Now, in such circumstances, they wouldn’t be entitled to severance pay, however, there are circumstances that have been noted in the regulations where employees who were terminated up to March 29… would have the same entitlements that they would have otherwise under the ESA: Those employees would be entitled to their severance.
“However, if they are brought back, which the regulations do allow employers to do, suddenly it’s more like being on leave rather than being terminated. It preserves their positions but such people might not be getting the severance that they would otherwise be entitled to.”
Q: Who benefits, employers or employees?
A: “I think that the legislature tried to strike a balance between the two [in that] employees who are affected by COVID-19, who might have otherwise lost their jobs without this protection, those people would have jobs to go back to and I understand that the legislature wants to retain the province’s productive capacity.
“At the same time, the legislature has tried to protect employers from a surge in lawsuits that might occur due to circumstances that may not be within their control, such as if somebody works a very client-facing industry such as a restaurant and they can’t afford to keep their employees; the legislature wants to make sure that those people are able to come back to their jobs.
“Both employers and employees will be halfway happy, if that makes any sense. Where a lot of employees who have employment contracts that limit them to the ESA, they’ll be halfway happy in that they have a job to go back to, but may not be able to claim termination entitlements right now.
“Employers with such contracts will be happy that they are somewhat protected from termination-style lawsuits. But, at the same time, they have to now really drill down into these new regulations to make sure that that they’re in compliance and that they haven’t done anything to violate the regulation in that they officially terminated the employee and they just haven’t brought them back.”
Q: How will the new regulations affect benefits coverage?
A: “Benefits are going to be tricky because some employment contracts may preserve employees’ entitlements to benefits throughout the temporary layoff period. But, a lot of the time, the employment contract won’t weigh in on benefits at all.
“If somebody is laid off or finds himself on the new emergency leave, those workers might have limited items to benefits and that goes back to being halfway happy.”
Q: How should full terminations be handled now?
A: “Employers will really want to make sure that they’re following the new rules correctly and that their specific circumstances are reflected and their decision-making. I would recommend to any employer who’s considering a termination, especially now, to seek legal advice so that a lawyer can look at their specific employment circumstances and determine whether termination is right for them at this stage.
“They should keep in mind that the government is protecting their employees’ rights to have their jobs back. If they are, their employment contract is restricted to the Employment Standards Act. And I can understand why some employers may wish to make a termination decision at this stage due to business decisions or economic realities, but anyone considering it should give a moment of pause and engage with people who can analyze their issue with specificity.”
Q: What do the new rules says about constructive dismissal?
A: “The regulation does restrict constructive dismissal under the Employment Standards Act, but we don’t have any guidance from the court as to whether this affects constructive dismissals that are alleged at common law.
“The courts are curtailed in their ability to hear cases right now. But when the cases start to come out, and the courts haven’t had the opportunity to review constructive dismissals that take place during this time, then we’ll have a better idea at that stage. As it sits right now, the regulation doesn’t appear to restrict employees who are entitled to common-law terminations, and common-law notice too, to be restricted from constructive dismissal.
“While employees can claim constructive dismissal, we have no way of knowing, at least right now, whether that will be successful.”
Q: Will other provinces follow suit?
A: “There are features of the law that other provinces may wish to emulate as we all deal with this. A recognition of leaves for employees who may have been affected by COVID-19 over the past few months may be something provinces wish to consider.”
“The regulation, as it’s written right now, is somewhat confusing as it does leave some doubt as to the status of employees [who are] entitled to common-law notice. In terms of the question of unionized employees, that might be something that needs to be addressed because numerous unions out there are probably struggling with these very same questions.
“If other provinces are considering the legislation, they would do well to look on where the Ontario regulation could be clarified.”
Q: What specific areas need to be clarified?
A: “The areas concerning constructive dismissal definitely, because it’s going to be a question mark for employers as we move forward. And also time periods in terms of when employees are not protected from termination because as it sits right now, people who were terminated but perhaps not due to COVID-19, prior to May 29, may still have terminations; of course people after that date may not be deemed to be terminated instead, they’re able to claim the emergency leave.”
“Clarifying those aspects of the legislation would be very effective to provide certainty for both employers and employees moving forward.”
“One area that I also want to clarification on is when employees are deemed not to be on layoff. The regulation does offer some exceptions, such as when employees are laid off as part of a complete closure of a business [but] I’d like to see clarification on what that means because, as we’ve seen unfortunately, some businesses have had to close their doors due to COVID-19. And if that’s captured under the regulation, there’s some doubt in that respect.”
The Ontario Federation of Labour recently slammed the Ontario government's new rules.
In talking to legal experts, we have also looked at key questions around What do we do when a worker refuses to come back to work?, How to deal with vacation time and 6 key questions on the return to work.