In the deluge of news surrounding the coronavirus, many of our clients have read recent media releases from employment lawyers advising that a layoff of employees gives rise to a constructive dismissal. Constructive dismissal is when an employer’s actions are treated at law as if it has outrightly terminated its employee. It is true: The action of laying off employees can trigger a constructive dismissal.
There are two areas of law that apply – statutory law (the Employment Standards Act (”ESA”) in this case) and common law.
The ESA is the law that allows employers to effect layoffs in a legal fashion. The common law is judge-made law and states that if an employer does not have a specific term in a contract with the employee that enables the employer to effect a layoff, there is no such thing as a lay off at common law and the layoff is, in fact, a constructive dismissal. An employee can sue the employer in the courts for constructive dismissal. The damages are the same as if the employer had simply terminated the employee, without notice.
Practically speaking, however, if an employer cannot continue to employ its employees because of financial reasons and/or lack of work, unless they want to terminate the employee and provide them with reasonable notice of the termination of their employment or payment in lieu of that notice, the employer should lay them off, issue a Record of Employment-based on the shortage of work due to COVID-19, and hope to recall them in the time frame set out under the ESA – 13 weeks in 20 if not continuing benefits or some type of payment) or 35 in 52 weeks if the employer is continuing benefits or some type of payment). If the employee chooses to treat the lay off as a dismissal and sues the employer for constructive dismissal (a form of wrongful dismissal), the matter can be dealt with at the time.
There are some defenses to constructive dismissal: that the employee condones the change in employment terms such as a layoff, that there is a contractual provision that allows it. There may even possibly be an argument that there is a frustration of employment contract since COVID19 is a highly new and extraordinary circumstance not yet tested in the courts. That is a topic for a different posting. But still, in the practical vein – employers should do what they can to keep employees informed and feeling like a team during these difficult times. Advise employees of their options to be paid. See how policies and procedures can be made flexible to address the scariness of no income coming in. If employees feel like everyone is pulling together, they will be less likely to sue for constructive dismissal.
No matter how big or small the matter, we are always accessible to all of our clients, placing their financial realities and long-term interests first and foremost. Lorrie Por, Mana Khami, and David Spence from our Employment and Labour Department are available to assist with any questions you may have about workplace matters relating to COVID-19.