COVID-19 Layoffs in Ontario Are Now Leaves of Absence: Time for Employers to Breathe a Sigh of Relief?
An Update: Effective September 16, 2021, the government extended the deemed Infectious Disease Emergency Leave (deemed “IDEL”) under the Employment Standards Act, 2000 (“ESA”) Regulation to January 1, 2022. It had previously been set to expire on September 25, 2021. Additional information is available here.
A Reminder: There may be further changes, including more last-minute changes to the Regulation, before January 1, 2022. The information set out here is current as of September 22, 2021.
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Many businesses have been drastically impacted by the COVID-19 pandemic resulting in the need to temporarily reduce their workforces or wages/ hours of work. Achieving those reductions has seemed risky.
Until this past week, employers have been worried about potential constructive dismissal claims and/or termination costs. As my colleague Janet Lunau explained in her recent blog about temporary layoffs:
Under the ESA, these layoffs are permissible, but at common law, they are not unless the employer has:
Express prior authorization from the employee (usually in the employment contract or a collective agreement); or
Current consent.
Even when a temporary layoff was permitted, the ESA set out caps on how long it could last before it was deemed to be a termination.
The shorter of the two temporary layoff time periods was 13 weeks total in any period of 20 consecutive weeks (a “13-week layoff”). For employers that laid off employees in March 2020, that 13-week deadline was quickly approaching though, in some cases, businesses remained closed.
With concerns mounting, late last Friday, the Ontario government quietly swooped in to change the law and effectively cancel the approaching deadline.
Ontario Regulation 228/20 - Infectious Disease Emergency Leave (the “New Regulation”) and Layoffs
With the enactment of the New Regulation, the Ontario government has changed the rules regarding non-unionized employees whose hours of work temporarily reduced or eliminated by their employer for reasons related to COVID-19. These employees are now deemed to be on a leave of absence that can be retroactive to March 1, 2020 and that can continue until up to six weeks after Ontario’s state of emergency ends (the “COVID-19 Period”).
This new rule recasts these employees’ status during the COVID-19 Period – i.e. from temporary layoff to leave of absence. Unlike other leaves under the ESA, this is not a leave requested by an employee, but rather, it is a leave that is automatically imposed when the above pre-conditions are met.
The New Regulation and Constructive Dismissal Claims
The New Regulation does not stop with the automatic transition of employees to this leave of absence. It also provides prohibits most complaints about the temporary reduction or elimination of hours or reduction of wages during the COVID-19 Period.
What this means is that, even if an employee was not temporarily laid off but their hours of work or wages were reduced, [i] and [ii] they cannot claim constructive dismissal under the provisions of the ESA. (Note: this only applies if there has not already been a resignation by the employee following a constructive dismissal before May 29, 2020.)
Whether this will also oust a common law claim for constructive dismissal is a separate question that is certain to be the subject of wrongful dismissal disputes before the courts in the months to come.
Further if an employee has already filed a constructive dismissal complaint with the Ministry of Labour relating to a reduction or elimination of hours or reduction of wages, the complaints are deemed not to have been filed so long as the change occurred during the COVID-19 Period for reasons related to COVID-19.
What if benefits have not been continued while employees have been laid off?
For those employers who are familiar with leaves of absence under the ESA and the requirement to continue benefits during a leave of absence, you may be asking whether it was a violation of the ESA to have suspended employees’ benefits during the temporary layoff. Technically, an employer can suspend benefits during a 13-week layoff under the ESA.
The government has contemplated that issue by stating that if an employer had not previously continued benefits between March 1, 2020 and May 29, 2020, there is no breach of the legislation. In my view this does not mean that an employer can now terminate benefits if they had previously continued benefits nor can an employer place an employee on a leave of absence after May 29, 2020 and refuse to continue benefits.
Further if employees willingly stopped participating in certain benefit plans as of May 29, 2020, the employee does not have to make a further election to not participate during the COVID-19 Period.
When is an employee NOT deemed to be on this leave?
If an employee’s employment ended after March 1, 2020 but prior to May 29,2020 as a result of:
a layoff resulting from the permanent discontinuance of all of the employer’s business at an establishment;
a resignation by the employee following a constructive dismissal before May 29, 2020; or
a deemed termination as a result of the lapsing of an applicable temporary layoff period before May 29, 2020
the cessation of their employment will stand and the New Regulation does not reverse that outcome. It is also important to note that if an employee is currently on working notice, the employer and employee can agree that the notice is withdrawn and that the employee can be deemed to be on a leave. However, without mutual agreement, the notice of termination would stand.
PH TIPS
While for the most part this regulation is good news for many employers there are several items that employers need to keep in mind:
There is an end – For the moment, employers can breathe a cautious sigh of relief. However, the leave of absence will eventually come to an end and employers will need to be prepared to recall employees back to work at the end of the leave. If they are unable to do so, employers will need to turn their minds to whether a temporary layoff can be instituted at that point in time with all of the associated limitations and risks. Legal advice should be sought at that time.
Ensure accurate employment records – Employers should amend their records to reflect that employees previously noted as on temporary layoff are now away from work on leaves of absence. Whether this also means the issuance of an amended ROE reflecting a leave rather than layoff will require some guidance from Service Canada.
Unionized Employees unaffected – Unionized employers must still comply with relevant collective bargaining agreement provisions regarding layoffs and other changes to employment.
Employees expecting to be recalled may be surprised by the extension – Employees who are away on 13-week layoffs will expect to be recalled to work imminently, and may have a right to a recall if a specific date was set out in writing. If employers are not recalling employees at that time, they should advise employees of (a) the change in status and (b) how long the anticipate absence will be. Given the open length of the leave of absence (which at this point is at least August 11, 2020), employers do not need to provide a fixed return to work date.
The leave is only applicable to “temporary”, pandemic-related cuts – It will be important for employers to confirm, if they have not done so already, that the pay or hour reductions implemented as a result of COVID-19 are temporary in nature. Permanent and unrelated cuts may still be raised to the Ministry of Labour.
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[i] hours of work are considered to be reduced of the following occurs:
where the employee has a regular workweek, the employee works fewer hours in the workweek than they worked in the last regular workweek before March 1, 2020 with certain exceptions; or
where an employee does not have a regular workweek, the employee works fewer hours in the workweek than the average number of hours they worked per week in the 12 consecutive workweeks proceeding March 1, 2020 with certain exceptions.
[ii] wages are considered to be reduced of the following occurs:
where the employee has a regular workweek, the employee earns less regular wages in the workweek than they worked in the last regular workweek before March 1, 2020, with certain exceptions; or
where the employee does not have a regular workweek, the employee earns less regular wages in the workweek than the average amount of regular wages they earned per workweek in the 12 consecutive workweeks proceeding March 1, 2020 with certain exceptions.
