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COVID-19: Government of Ontario's New Regulation Addresses Layoffs and Constructive Dismissals under the Employment Standards Act, 2000

June 1, 2020

Background

Over these past few weeks, there has been a great deal of concern related to the layoff provisions of the Employment Standards Act, 2000 ("ESA"). As discussed in our previous newsletter, employers have the ability under the ESA to lay off employees for a maximum of 13 weeks in a consecutive 20-week period or, in certain circumstances, 35 weeks in a consecutive 52-week period. At the end of the applicable temporary layoff period, the employee's employment is deemed to have been terminated if they are not recalled to work. This then triggers an obligation on employers to provide ESA termination pay and in some cases severance pay. 

We have heard from many of our clients that they are not able to take advantage of the longer 35-week layoff period. As a result, we wrote to the Ministry of Labour and to the Premier's Office in early May 2020 to alert them to the impending 13-week deadline that would impact businesses across the province if action was not taken. On Friday, such action was taken by the Ontario Government when it published O. Reg. 228/20 under the ESA.

O. Reg. 228/20 fundamentally alters how constructive dismissals and temporary layoffs are treated under the ESA. Under O. Reg. 228/20, layoffs that have occurred during the COVID-19 pandemic will be deemed to be job protected leaves. In addition, the Regulation declares that reductions in wages and hours during the pandemic are not to be a constructive dismissal in certain circumstances. Please note that the Regulation does not change entitlements for unionized employees.

Emergency Leave Instead of Deemed Terminations

As we wrote about previously, the Ontario Government passed a new "Emergency Leave: Declared Emergencies and Infectious Disease Emergencies" on March 19, 2020, to address employee absences from the workplace due to COVID-19. We had posited at that time that most employees would be able to take advantage of the new Emergency Leave rather than being placed on a layoff. O. Reg. 228/20 does just this, by deeming an employee to be on the new Emergency Leave when:

"The employee's hours of work are temporarily reduced or eliminated by the employer for reasons related to the designated infectious disease."

There are special rules that apply to an employee who is deemed to be on the new Emergency Leave, including:

When Employee Not on Leave

Not all employees will automatically be placed on the Emergency Leave. The Regulation does not convert terminations that were completed after March 1, 2020, into leaves, and temporary layoffs that exceeded the maximum number of weeks permitted by the ESA prior to May 29, 2020, are not impacted by this legislation. More specifically:

Finally, an employee who has already been given written notice of the termination of their employment shall not be considered to be on the Emergency Leave, unless the employer and employee agree to withdraw the notice of termination.

Reduction in Employee's Hours, Wages is Not a Layoff

The new Regulation clarifies that the temporary reduction or elimination of an employee's hours of work, or a temporary reduction in an employee's wages, for reasons related to COVID-19 during the "COVID-19 Period," shall not be considered a lay off under Sections 56 and 63 of the ESA. This does not apply where:

Reduction in Employee's Hours, Wages is Not a Constructive Dismissal

The new Regulation has clarified that the following does not constitute constructive dismissal if it occurred during the "COVID-19 Period":

Note that if prior to May 29, 2020, "the employer constructively dismissed the employee and the employee resigned from his or her employment in response to that within a reasonable period," then that will continue to be treated as a constructive dismissal pursuant to the ESA.

Conclusion

This new piece of legislation converts certain layoffs into leaves, and clarifies that certain wage reductions are not constructive dismissals, in order to reduce an employer's liability for ESA termination pay or severance pay due to COVID-19. However, there are other concerns that continue to be present:

We will continue to monitor these areas and provide you with further updates as they become available. Please note that this bulletin is intended for informational purposes only and does not constitute legal advice or an opinion on any issue. We strongly recommend that you contact your Miller Canfield lawyer with your specific questions in regards to this Regulation so that those questions can be addressed properly with you.

This information is based on the facts and guidance available at the time of publication, and may be subject to change.