Court of Appeal makes employment lawyers wait for clarity on Covid-19 leave

Employment lawyers will have to wait a little longer for the highly contentious debate over a pandemic-related leave to be settled after the Court of Appeal for Ontario declined an opportunity to weigh in, says Toronto civil litigator Stephany Mandin.

The provincial government enacted the Infectious Disease Emergency Leave (IDEL) in the early days of the pandemic as a way protect the employment rights of employees who stayed at home for reasons related to Covid-19.

However, amendments passed soon after meant that any employee on reduced hours or temporarily laid off as a result of the pandemic was deemed to have taken an IDEL, limiting their rights to termination and severance pay.

Ever since, the employment law bar has been locked in a dispute over whether employees laid off under the new law can make claims for constructive dismissal.

Many hoped that the Court of Appeal would settle the issue once and for all when it agreed to hear the appeal in Taylor v. Hanley Hospitality Inc., but the ruling proved a damp squib when the three-judge panel sidestepped the central question as it granted the appeal on more technical grounds.  

Despite the disappointment, Mandin, principal of Mandin Law, says the Court of Appeal was right not to intervene.

“These are very fact-driven cases, so I think it makes sense for the case to go back to the Superior Court to be decided on a more fulsome record,” she says.  

In normal non-pandemic times, there would be no such doubts over constructive dismissal claims, because temporary layoffs lasting more than 13 weeks generally become terminations under Ontario’s Employment Standards Act if benefits are not continued, triggering termination and severance payments to employees based on their length of service.

The deemed IDEL program actually ended over the summer, which means that the regular termination and severance rules prescribed by the ESA will apply to any layoffs that occurred after July 30. But the debate will rumble on as trial judges continue to hear cases involving employees laid off over the course of the previous two years, Mandin says.

“These cases are still funneling their way through the courts,” she adds.

So far, trial judges have given both camps reasons to celebrate. The first word from the court on the issue came in a case known Coutinho v. Occular Health Centre Ltd., which involved an ophthalmic clinic sued for constructive dismissal by one of its technicians after she was laid off in May 2020.

The employer moved to have the claim summarily dismissed, arguing that the temporary reduction in the worker’s hours fell under the IDEL regulations and did not constitute constructive dismissal. But Justice David Broad sided with the worker, finding that nothing in the IDEL regulations prevents a claimant from alleging constructive dismissal under the common law in civil court.

In the Taylor case, which involved a woman temporarily laid off from a Tim Hortons franchise in March 2020, an Ontario Superior Court judge originally found that the IDEL regulations had changed the common law as well as the ESA, barring employees from claiming constructive dismissal under either route if the basis for the claim was their placement on the leave.

However, the Court of Appeal found that the lower court judge erred in dismissing the case on a Rule 21 motion, which allows cases to be settled on the pleadings alone, without the need for any evidence. Rather than simply assuming the facts in the statement of claim were true, the trial judge incorrectly accepted facts in the statement of defence as true because they were not subsequently rebutted by the plaintiff in a reply, the appeal court concluded.  

Still, there was some consolation for employment lawyers who hoped for a more substantive ruling in Taylor, according to Mandin.

“The decision provides assistance to lower courts and to future litigants because of how it clarifies the use of Rule 21,” she says.

Returning the case to the Superior Court could allow the plaintiff to build an evidentiary basis to cast doubts on the employer’s motives for her layoff, according to Mandin, who says that the real reasons behind layoffs will be critically important to outcomes at trial.

“The real issue in many of these cases is whether the IDEL is being used as a sword against employees, as opposed to a shield from the threat of losing their jobs,” she says. “Some have placed their employees on IDEL in good faith for reasons related to Covid, but others are taking advantage by placing them on unpaid leave for alternative purposes.”

“Each case will turn on the specific factual matrix and the issues of credibility at play,” Mandin adds.