Can employers lay off staff with impunity during pandemic?
Recent cases have answered the questions Canadian employers and employees have been waiting for. Is a layoff or cut in salary during COVID-19 a constructive dismissal or can employers argue force majeure, or frustration as a defence against such claims?
As readers of this column know, I have unequivocally stated from the outset of the pandemic that unless the layoff was a result of an employer’s government-ordered shutdown, every employee who was laid off or had their income significantly reduced as result of the pandemic had a good case for constructive dismissal. Any legal argument to the contrary is bunk.
The issue has also been argued in the context of “busted deal’ litigation, with companies arguing that the pandemic provided a legal excuse to not proceed with contracts, with employment being only one such contract.
Two recent cases, albeit in commercial contexts and with some factual distinctions, address the issue. durham Sports barn Inc. bankruptcy Proposal, which focused on dealing with relief from tenancies, and Fairstone Financial Holdings v duo bank, which dealt with relief from a contract, support the general principle that COVID-19 will not provide parties with a defence to a breach-of-contract claim.
Applied to employment, companies cannot claim immunity from claims for constructive dismissal as result of COVID-19’S impact on their businesses.
except if employers are ordered closed by government order. employees laid off for the duration of a government-ordered closing, say of a casino, will be unable to claim constructive dismissal as a result of layoffs for the duration of that compulsory closure. However, as soon as the government permits the business’ reopening, employees, who are not recalled on the original terms and conditions, will have claims for constructive dismissal.
Many have argued that the emergency leave and layoff provisions in various employment standards legislation permit employers to lay off their employees with impunity. Although confusing to many, most of those statutes, such as Ontario’s employment Standards Act, provide that those provisions do not affect the common law claims that employees have, such as the right to sue their employers for wrongful dismissal. In short, those statutes provide employers with no defence.
There have also been cases involving employees who chose to attend work rather than to self-isolate during the pandemic. Courts have taken a dim view of this action.
In one case, Namjot Shoker
worked for Garda Security Screening Inc. at Toronto Pearson Airport. She had a headache, which she attributed to a sinus issue, and saw a doctor who recommended a COVID-19 test. Feeling better, she returned to work following the test, which turned out to be positive.
Her employer had issued a bulletin, which she claimed to be unaware of, that required self-isolation while waiting the outcome of any COVID-19 test. The labour arbitrator, brian Keller, considered the griever’s conduct a breach of both the employer’s and public health guidelines and demonstrated her lack of concern for the health and safety of others, warranting her dismissal for cause.
A final employment issue concerning COVID-19 is the impact it will have on the number of months of severance pay which employees are awarded by the courts. Is it elongated by the additional difficulty in securing comparable employment?
Citing the Supreme Court of Canada’s case from three months ago in Matthews v Ocean Nutrition, in which I
acted for Matthews, the very recent Alberta decision in Hunsley v Canadian energy Services, noted that “the principle for assessment of damages is to compensate an employee for the amount they would have earned had they worked during the period of notice.”
It went on to note that “a depressed economy or sector tends to lengthen that notice” but that the amount of notice should be based on the circumstances at the time of dismissal, not those after.
This would suggest that being terminated during COVID-19 will beget greater severance but being terminated, even the day before COVID-19, will not despite the identical impact on reemployability.
This was followed by a decision, one month ago, of the Ontario Superior Court in yee v Hudson’s bay Co. which found that: “It seems clear terminations which occurred before the COVID pandemic and its effect on employment opportunities should not attract the same consideration as termination after the beginning of
the COVID pandemic and its negative effect on finding comparable employment.”
This was the first judicial recognition of the fact that employees laid off during COVID-19 have a claim for greater severance and answers the question of whether terminated employees will receive a “COVID boost” in arguing for more severance.
employers with no recourse to claim economic impossibility as a defence and limited ability to pay are increasingly finding themselves confronted with employees that are now legally armed with a right to greater severance.
It is a policy conundrum which the courts may be asked to increasingly grapple with.
Got a question about employment law during COVID-19? Write to Howard at levitt@levittllp.com. Howard Levitt is senior partner of LSCS Law, employment and labour lawyers. He practises employment law in eight provinces. He is the author of six books including the Law of Dismissal in Canada.