What is constructive Dismissal?

The phrase “constructive dismissal” refers to a situation where, while an employer has not expressly terminated an employee, the employee alleges that the employer’s actions amount to a repudiation of his or her employment contract.

It arises when an employer’s conduct evinces an intention to be no longer bound by the employment contract. The Canadian courts have taken a flexible approach in determining whether an employer’s conduct evinced a choice to no longer be bound by the contract: Potter. The court has identified two approaches. – In the first, the court identifies an express or implied term that has been breached and then determines whether the breach was sufficiently serious to constitute constructive Dismissal. – In the second, the court considers whether the employer’s conduct more generally shows that the employer intended not to be bound by the contract. The second approach permits the court to find that an employee has been constructively dismissed without identifying a specific fundamental term of the employment contract that has been breached where the employer’s treatment of the employee makes continued employment intolerable.

An employee who successfully establishes that a constructive dismissal has occurred would effectively trigger his or her termination entitlements under a contract of employment or, absent a contract with a valid termination provision, at common law.

What is a Temporary Layoff?

Employment Standards Act legislation in Ontario and the Canada Labour Code Canada provides employers with the ability to temporarily lay off an employee without triggering a dismissal for purposes of such legislation. Where an employee remains on layoff beyond the maximum permitted duration for a temporary layoff, the layoff will be considered a termination and will trigger the employee’s statutory entitlements to pay in lieu of notice of termination (and, where applicable in Ontario and under the Canada Labour Code, severance pay).

ESA and Canada Labour Code may provide comfort to the employers that they are not running afoul of the legislation. It will not protect an employer from potential claims of constructive Dismissal, except where an employee has an employment contract that confers explicitly on the employer a right to lay off temporarily.

At common law, the risk will remain that a laid-off employee may allege that their employer has repudiated or fundamentally breached their employment agreement by having been sent home without pay.

Constructive dismissal claim arising from a layoff will also likely depend on: (a) whether the employer continues any benefits or payments during the layoff period; (b) the duration of any layoff; and (c) how the need for the layoff is communicated to the employee.

Changes Made by Government:

On May 29, 2020, the Ontario government issued a new Regulation 228/20 intended to adjust termination liability under the Employment Standards Act, 2000 (the ESA) in response to the realities of the COVID-19 pandemic.

According to this new issued Regulation 228/20, certain changes to employees’ hours of work and wages are not a “constructive dismissal” and effectively extends the expiration of temporary layoffs that were undertaken due to Covid-19, by considering certain employee to be infectious disease emergency leave.

Affect on an employee: The government modified certain conditions that would otherwise trigger statutory termination and severance payments to employees who would have finished their temporary layoff period in the coming weeks. Government intention seems to support the business to carry on their business without being impacted by legal implications due to Covid-19. These temporary rules apply retroactively to March 1, 2020, and will expire six weeks after the declared emergency ends and do not apply to employees represented by a trade union.

Ministry of Labour complaints deemed not to have been filed

The Regulation also provides that complaints filed with the Ministry of Labor that a temporary reduction or elimination of an employee’s hours of work or a transient decrease in an employee’s wages (each, a “Change”) constitutes the termination or severance of the employee’s employment are deemed not to have been filed if the Change occurred during the COVID-19 Period for reasons related to COVID-19, with some exceptions.

Options Available to Employees.

EI benefits and other federal supports Employees who take infectious disease emergency leave may be entitled to employment insurance benefits or additional federal government financial support. For information, visit the federal government’s COVID-19 Economic Response Plan website or contact Service Canada’s Employment Insurance Automated Telephone Information Service at 1-800-206-7218.

Access to judge-made Common Law Remedies New Regulation 228/20 impact is confined to claims for termination or severance benefits under the ESA. Section 8 of the ESA states that “no civil remedy of an employee against his or her employer is affected by this Act.” Hence a dismissed employee can go to court to seek a higher level of common law damages for wrongful Dismissal than is provided under the ESA.

Although statutory provision can override the Common Law provision, the current Regulation is not precise if it will override the Common law.

Damages for Breach of Contract: Another remedy available to the employee under common law is a claim for Standard breach of contract damages. Which is the ability to continue to work and sue for the wages they would have earned had the employer complied with their agreement. This remedy is independent of constructive Dismissal and is not impacted by regulation 228/20.

If you consider yourself to be constructively dismissed, members of Minhas Lawyers employment group can help you to navigate through these times.

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