A constructive dismissal is unlike a formal dismissal because the employer does not explicitly state that the employee is being dismissed. Instead, the employer demonstrates an intention to no longer be bound by the employment contract by some kind of action. This action has the effect of breaching a fundamental term of an employment contract. To determine if a constructive dismissal has occurred, the question of whether the conduct of the employer has evidenced an intention not to be bound by the employment contact should be considered. If an employer's actions show disregard to the terms of the contract, then the contract itself is not being upheld which means the employment relationship has ended by virtue of action rather than explicit decision or statement by the employer.

That being said, if an employee's employment contract does not permit a temporary layoff and an employer lays off the employee then it can be considered unilaterally changing a fundamental term of the employment contract. If a contract has been made on the basis that the employee will work for the employer continuously, then a temporary layoff changes this term by breaking up the continuous employment. Let's be clear, there is nothing inherently wrong or out of bounds for an employer to use a temporary layoff in the right circumstances, but unless it is expressly provided for in the contract, then it cannot be used by the employer without risking a constructive dismissal claim. In these kinds of circumstances, if an employer uses a temporary layoff for an employee who has signed a contract that allows for the use of a temporary layoff, then this option is well and good. However, if an employer uses a temporary layoff, even with the intention of bringing the employee back to work on a future fixed date, but there is no layoff provision in the employment contract, then the employer has opened themselves up to effectively changing the terms of such contract and constructively dismissing their employee.

The danger with a constructive dismissal is the more than likely legal claim that will arise from this type of sometimes unintentional dismissal. If an employee feels they have been constructively dismissed by the actions of their employer by using a temporary layoff without the provision for such in the contract, then they have a basis to bring a claim that can be extremely costly for employers. If a court does find that an employee has been constructively dismissed, then common law notice and damages are typically awarded.

When the COVID-19 pandemic swept our nation, provincially regulated employers in Ontario were hit hard and many were left with few options to keep their businesses running. One of these options seemed reasonable and straightforward- the temporary layoff. This would seemingly allow employers to retain good employees to bring back when the pandemic ended and provide some financial breathing room for companies feeling the effects of lockdowns and a weakened economy. However, whether maliciously intended or not, it was unclear as to whether this option would put employees in a position of being constructively dismissed. Please note that provisions regarding COVID-19 and layoffs have been evolving throughout the pandemic. That being said, the Infectious Disease Emergency Leave Regulation (IDEL) of the Employment Standards Act indicates that a temporary layoff due to COVID-19 is not automatically considered a constructive dismissal.

Coutinho v Ocular Health Centre Ltd 2021 ONSC 3076 provides an illustration for us. The Superior Court of Justice recently confirmed that despite the Infectious Disease Emergency Leave Regulation (IDEL) of the Employment Standards Act, a claim of constructive dismissal can still be made by employees who have faced temporary layoff because of COVID- 19 if a layoff was not expressly provided for in the employment contract. In this case, an employee was locked out of the ophthalmic clinic she worked at due to a power struggle between some doctors. She was told she would continue to be paid but was instructed to no longer show up to work for the time being. COVID-19 then furthered the issues being faced within the organization and the employee was told she was being laid off indefinitely due to the pandemic. She brought a claim for constructive dismissal. The court found that despite the regulations under the Employment Standards Act in regards to “an elimination of an employee's hours of work by the employer for reasons related to the designated infectious disease” an employee can still claim constructive dismissal under the common law. This illustrates that the overall purpose of the Employment Standards Act, which is to provide protections for workers though minimum standards, takes precedent over regulations under the Act.

The right to claim for constructive dismissal has not been waived because of COVID-19 which provides comfort to employee's facing changes during this pandemic. Employers need to ensure that regardless of some changes in our current circumstances, employment contracts still need to be followed. The new regulations are helpful and can be used to release some pressure on organizations during this time, but we need to be mindful of employee's rights as well. The takeaway is simply put: COVID-19 or not, an employer can only impose a temporary layoff if it is specifically agreed upon within the employment contract.

Before considering temporary layoff, talk to an employment lawyer to assess your legal position to avoid costly consequences. At SDLaw, we are available to assist you.