Businesses Beware: Contrary to Belief, Ontario's New Layoff Provisions Will Not Prevent "Laid-Off" Employees from Suing
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As if life during the pandemic hasn't been confusing enough! During the past several months, much has been made of the Ontario government's new regulations when it comes to employee layoffs. If you can recall, earlier in the Summer, the Ford government made some noteworthy "tweaks" to the normal definition of layoffs in Ontario. Previously, the Province's employment law mostly allowed layoffs to last no longer than 13 consecutive weeks. Instead, for the past few months now, the ordinary Ontario definition of "layoff" has been broadened considerably. In fact, as it stands, the Ford government has allowed employee layoffs to be considered "emergency leaves". This was made into law with the Ontario government's Infectious Disease Emergency Leave ("O. Reg. 228/20: Infectious Disease Emergency Leave").
Most likely reasons why the Ford government chose to turn "layoffs" into "emergency leaves" are for the following: Previously, if a business decided to layoff an employee past the 13 week layoff window described above - that would be the equivalent of a constructive dismissal. Therefore, employees would be entitled to severance under the Employment Standards Act (ESA). That being said, by layoffs now being classified as "emergency leaves", this 13 week window for constructive dismissal purposes is no longer applicable. Basically, the Ford government was doing a solid to small and medium size businesses - the businesses that would be most effected by pandemic-related layoffs. Had the Ontario government not done this, many small to medium size businesses could have faced multiple lawsuits from employees claiming "constructive dismissal".
There's just one important detail that the Ontario government never really mentioned: employees can still sue for constructive dismissal under the common law. In other words, Ontario's Infectious Disease Emergency Leave is not applicable to common law lawsuits for constructive dismissal.
What exactly is common law constructive dismissal you might ask? Employee severance pay is not one and the same. In Ontario, severance pay is usually classified as being either under the Employment Standards Act (ESA) or the common law. The golden rule is typically this: under the ESA, an employee's severance is usually calculated as one week of severance for every year worked (i.e. if you've worked two years with the same Employer, the ESA would usually grant you two weeks). Under the common law, it's more like for every year worked with the same Employer, you get one month's severance (i.e. if you've worked two years with the same Employer, the common law would usually grant you two months). To say the least, this is a very noteworthy difference.
Therefore, when an employee has been laid off longer than what the law provides, this will be constructive dismissal - basically the equivalent of being wrongfully dismissed. However, given all of this, will the common law apply to layoffs instead of the ESA, allowing employees to by-pass Ontario's recent layoff legislation in order to sue their employers? The answer is YES - if certain conditions are met.
If you are a small to medium size business, I would ask the following questions: Did you have all of your employees sign employment contracts that specified that layoffs could occur in compliance with the ESA? If you did, the ESA will likely apply to layoffs (i.e. The Ontario government's extended layoff measures will apply). However, if your employees never signed employment contracts with your business or your employment contracts never specified that layoffs would be compliant with the ESA - you could be in trouble. This is where I would sound the horn: such scenarios could very well make your business vulnerable to the dreaded common law - a boon for employees.
Are you a small to medium size business that has employment law and HR issues? I would like to hear from you. If you are a laid-off employee who is unsure if you can sue your employer, I would like to hear from you as well! At our law practice, we take pride in representing both businesses and employees!
Aaron Miller is an Ontario licensed lawyer, who has a passion for employment law and all areas of law related to small to medium size businesses. Outside of the law, Aaron has a passion for soccer, hockey, bodybuilding, fishing and hiking with his beautiful partner, Courtney. Aaron can be reached at 416-659-6665 and firstname.lastname@example.org.