Emergency leave regulation ‘cannot override common law rights unless the statute clearly permits it’: lawyer
"Employers cannot impose temporary layoffs unless the employee has explicitly agreed to that possibility in the employment contract - just simply notifying an employee that they are laid off, even temporarily, doesn’t constitute consent and may result in a successful constructive dismissal claim under common law.”
So says employment lawyer Faraz Kourangi of Williams HR Law in the Greater Toronto Area, after an Ontario court found that an employer didn’t have the contractual right to temporarily lay off a worker during the pandemic.
Grenville Management is a Markham, Ont.-based company that sells, leases, and services office printers, scanners, and photocopiers. Its predecessor company hired the worker in 2006 to be a service tech and he later became an information technology (IT) specialist.
In 2014, the worker signed an employment agreement for a one-time signing bonus of $250. The new employment agreement included a provision that stated, “It is agreed that the company reserves the right to ask you… to accept a temporary layoff, during which time you may be eligible for Employment Insurance in accordance with the relevant statutes.”
Temporary layoff
On March 5, 2021, Grenville informed the worker that COVID-19 was impacting its business and it needed to temporarily reduce staff. The layoff notice stated that “we are therefore providing you notice of temporary layoff in accordance with section 56 of the Employment Standards Act, 2000 [ESA].” The notice went on to say that Grenville was requesting that the worker agree to increase the layoff from 13 weeks within a period of 20 weeks – as normally permitted by the ESA – to 35 weeks within a period of 52 weeks. It asked the worker to sign the notice if he agreed to “extend your period of temporary layoff” and he did.
In late 2021, the worker’s health deteriorated and he became unable to work. He had not searched for other employment during his layoff because he had considered himself subject to recall.
On Jan. 14, 2022, Grenville wrote to the worker that it considered him to be on infectious disease emergency leave (IDEL) under Ontario Regulation 228/20 – an emergency regulation that allowed employers to temporarily lay off employees or reduce their wages during the COVID-19 period without it being constructive dismissal. The company asked if he wished to be recalled when work became available or if he wanted to sever ties. The worker didn’t respond and Grenville didn’t follow up.
On Feb. 22, the worker commenced a lawsuit claiming that Grenville had constructively dismissed him. The IDEL expired on July 30, but Grenville didn’t reinstate the worker or contact him.
Permanent disability
On March 9, 2023, the court held an examination for discovery, at which the worker testified that he was medically unable to work and provided a medical note stating that he suffered from a permanent disability “since March 5, 2021.” Twelve days later, Grenville sent the worker’s counsel a letter recalling him back to work. The worker declined as he was unable to work due to medical issues and the company later acknowledged that it knew the worker was unable to work when it sent the recall letter.
Grenville argued that the worker was never terminated, so he wasn’t paid any severance pay, and when it recalled him he was still its employee. Alternatively, the company asserted that the worker’s disability frustrated the employment contract.
The court noted that a contract can only be frustrated “by extenuating or intervening events beyond the parties’ control” that prevented the worker from performing his job duties at the time of termination. In this case, the medical note said the worker had suffered permanent disability “since” the date of his layoff, not on the date, said the court in finding no evidence that the contract was frustrated at the time of layoff.
“The court also mentioned the fact that the employer took somewhat of an inconsistent position, because while it's asserting that the employment contract had been frustrated due to the worker’s disability, it also issued a recall letter despite knowing by then that he was physically unable to return to work,” says Fourangi.
The court also noted that, at common law, an employer has no right to lay off an employee without the employment agreement expressly providing for it. In addition, “unilateral layoff is a substantial change in employment providing grounds to sue for constructive dismissal,” said the court.
Employment agreement
The court found that the employment agreement didn’t provide Grenville with the right to impose a layoff unilaterally – it only allowed the company to ask the worker for a layoff. However, the layoff notice notified the worker of the layoff and only asked him to agree to an extension as a “take-it-or-leave-it event,” the court said, adding that the signed acknowledgment from the worker was an agreement to the extension but didn’t constitute consent to the layoff itself. Noting the power imbalance inherent in the employment relationship, the court said that the layoff notice wasn’t a genuine request for the worker’s agreement.
“The worker testified that he felt he had no choice, so his signed acknowledgement wasn’t an agreement to the layoff,” says Kourangi. “Asking for the extension of a layoff presented as a take-it-or-leave-it event is not the same as asking for consent to a layoff, so it wasn't valid consent.”
The court also applied the contra proferentum doctrine, which is that any ambiguity in the document should be construed in favour of the party who didn't draft it – in this case, the employee, adds Kourangi.
Grenville argued that the IDEL insulated employers from constructive dismissal claims related to pandemic-related layoffs. However, the court found that s. 8(1) of the ESA, which states that no civil remedy of an employee against an employer is affected by the act, prevailed, and the IDEL regulation only relieved employers of constructive dismissal provisions in the ESA.
Common law constructive dismissal
The court sided with its previous decision in Coutinho v. Ocular Health Centre Ltd, 2021 ONSC 3076 and rejected the interpretation in Taylor v. Hanley Hospitality Inc, 2021 ONSC 3135. The IDEL only shielded employers from statutory claims under the ESA, not common law claims, so the worker could sue for constructive dismissal exclusively as a court action, said the court.
“The court found that the regulation only modified constructive dismissal under the ESA, not the common law, relying heavily on s. 8(1) of the ESA, which expressly preserves employees’ civil remedies,” says Kourangi. “The court aligned with decisions like Coutinho, which held that the regulation must be read in harmony with the ESA and cannot override common law rights unless the statute clearly permits it.”
The court’s disagreement with the reasoning in Taylor, which found that reading the IDEL regulation narrowly may defy common sense, was based on the idea that regulations can’t contradict the enabling statute, adds Kourangi.
The court determined that Grenville constructively dismissed the worker. Based on the traditional Bardal factors, the court found that 10 months was an appropriate amount of reasonable notice, with an additional six months added to reflect the reduced availability of comparable employment during the pandemic.
“Because the layoff was done without contractual authority or consent, and because the regulation didn’t bar common law claims, the court found that the employee was constructively dismissed,” says Kourangi.
Although the worker made no efforts to find alternative employment, the court accepted that he reasonably believed he was on a layoff and that his subsequent health issues impaired his ability to work – noting that Grenville accepted the worker’s pain and disability for its frustration argument, so it couldn’t argue he should have been looking for work at the same time. As a result, there was no reason to reduce the worker’s damages for a failure to mitigate, the court said.
While the court acknowledged Grenville’s “tactical reliance on statutory technicality,” it declined to award punitive or moral damages. The court found an insufficient connection between Grenville’s conduct and any impact on the worker, because the company didn’t know of the worker’s permanent disability until the discovery phase of the court proceedings.
The court also found that the company’s behaviour in recalling the worker once it was aware he was unable to work, although problematic and likely upsetting to the worker, didn’t rise to the level warranting moral or punitive damages as “the rough and tumble of employment litigation can entail insults and ill-considered tactics” and there was no evidence of a connection to any consequences for the worker outside of the normal ones from termination and legal action.
Grenville was ordered to pay the worker damages equivalent to 16 months’ pay in lieu of notice.
See Richard Turcotte v. Grenville Management Inc., 2025 ONSC 3087.
