Employer Rights with COVID-19 Coronavirus

Update, June 2: In a surprise regulation issued on May 29, 2020, retroactive to March 1, 2020 and until Ontario’s emergency order is no longer in place, all covid related temporary lay-offs will be deemed an infectious disease emergency leave. O. Reg. 228/20 appears to attempt to make life more predictable for employers. It prevents employees from complaining that they have been “constructively dismissed” to the Ministry of Labour. The new regulation also declares that workers who were laid off shall not be deemed to have been laid off, but instead are on “infectious diseases emergency leave.” The way it does this however, is quite confusing, as for instance employees who were told they were “laid off” will now be counted as being on leave, even though they did not request it.

Update March 27: In response to the economic impact COVID-19 is having on Canadian small – medium-sized employers, the Government of Canada announced a series of new temporary measures to help Canadian employers stay afloat and make payroll: New 75% Wage Subsidy; Canada Emergency Business Account Loan; and GST/HST Deferrals. Read more here.

Employers in Ontario facing economic hardship or mandatory closure have several options to manage employees, avoid risk and save expenses in the face of COVID-19 coronavirus.

This article will focus on the different mechanisms Ontario non-unionized employers have in their toolbox to send employees home with or without pay during hard times, especially because of business shutdowns and closures as a result of COVID-19 coronavirus.  

Employers should seek legal advice from an employment lawyer before following any of these methods, as there is always risk, and no court has determined one way or the other how the law is to react to this pandemic.

For any of the below leaves (not terminations), employers without rights in their contract to temporarily layoff employees or force them on a leave should consider getting their staff to agree to an ESA compliant leave or layoff in writing.

Update March 23: In response to the COVID-19 novel coronavirus, the Ontario Government will order the mandatory closure of all non-essential workplaces on Tuesday, March 24th at 11:59 p.m. This closure will be in effect for 14 days, with the distinct possibility of an extension as the circumstances change. Read about what this means for employers here.

Layoffs

01. Employers facing difficult financial circumstances can temporarily layoff employees. Some people believe a “layoff” is an expression for terminating an employee. However, a layoff is actually a legal term meaning a temporary stoppage of work that specifically does not trigger a termination as per the Employment Standards Act.

The Employment Standards Act temporary layoff scheme is enshrined in section 56(2) of that statute. It must be followed perfectly to make effect a lawful layoff.

It is only a temporary layoff if an employer gives less than half the amount of ordinary work in a workweek to an employee for less than 13 weeks in the last 20 weeks. In most circumstances, a temporary layoff becomes a termination once an employee hasn’t had a normal workweek in more than 13 weeks in the last 20 weeks.

Note however that in most employment contracts, layoffs are not explicitly permitted, and any pay less than a usual work week, even just once, could be considered a “constructive dismissal“. However, to be sure, in these uncertain times, there is a chance a perfectly executed layoff would not be considered a constructive dismissal.

How can employers avoid layoffs? There are two legislative options: the Work Sharing Program and the Supplementary Unemployment Benefit program.

Employees Volunteer for Reduced Entitlements

02. Although difficult for them, employees can assist their financially precarious employers by volunteering for certain deductions in entitlements, such as reduced pay and reduced hours.  

If an employee does volunteer to reduce his or her entitlements, the agreement should be in writing, and the employer should agree to provide some form of consideration in exchange for the relief, such as a bonus when things turn around. Without any fresh consideration, the agreement to reduce employee entitlements could be void.

Unilateral Reductions in Pay

03. Employers may be able to force a reduction in employee pay and hours by around no more than 20%. In this case, although there is still the risk of triggering a constructive dismissal, past case law indicates that 20% may just be an amount a court would not consider a breach of an explicit or implied employment agreement, especially in these difficult times. This is our opinion, not fact. Seek an employment lawyer to be sure.

Supplemental Unemployment Benefit

04. In light of the novel coronavirus, COVID-19, the Supplemental Unemployment Benefit is a long-standing program we would recommend to employers seeking to make their employees whole while they are laid off or on sick leave, quarantine or Infectious Disease Emergency Leave.

The Supplemental Unemployment Benefit (“SUB”) is a Government of Canada program made pursuant to Employment Insurance Regulation (SOR/96-332), section 37(1) in which an employer is allowed to “top up” an employee’s EI earnings when they are unemployed due to a temporary stoppage of work, illness or quarantine without affecting an employee’s employment insurance (“EI”) earnings.

Work Sharing

05. Work-Sharing is a federal government program designed to help employers and employees avoid layoffs when there is a temporary reduction in business activity that is beyond the control of the employer. Work sharing provides employment insurance to employees eligible for EI benefits who work a temporarily reduced workweek.

Work-Sharing is a three-party agreement involving employers, employees and Service Canada. Employees on a Work-Sharing agreement must agree to a reduced schedule of work and to share the available work over a specified period of time.

A work reduction must be between a minimum of 10% (one-half day) and a maximum of 50% (three days).

To be eligible for a Work-Sharing program, employers must:

• have been in year-round business in Canada for at least two years;
• demonstrate a recent decrease in business activity of approximately 10%;
• demonstrate that the work shortage is temporary and beyond their control, and is not acyclical; and
• submit and implement a recovery plan designed to return the Work-Sharing unit(s) to normal working hours by the end of the Work-Sharing agreement. There must be a reasonable expectation that recovery (i.e. a return to normal working hours for all participating employees) will be achieved by the end of the agreement.

Wage Subsidy

06. On March 27, the government of Canada announced an enhanced wage subsidy. The new wage subsidy is worth 75% per cent, enhancing the previously announced 10% wage subsidy for business, which the Prime Minister noted was too little.

A wage subsidy allows an employer to reduce remittances of federal, provincial, or territorial income tax that they usually have to send to the CRA by the amount of the subsidy.

https://duttonlaw.ca/canada-emergency-wage-subsidy-covid-19/

Termination

07. Employers are still free to terminate an employee without cause or with just cause like normal.

However, under the Human Rights Code, coronavirus illness or quarantine could likely be a “disability” and employers are forbidden from terminating employees because of disability. An employer must accommodate a “disabled” employee up to the point of “undue hardship”. “Accommodation” also means permitting parents to miss work to take care of children who are not in school and need supervision because of coronavirus. These caregiving responsibilities which relate to the Human Rights Code ground of “family status” could include other situations where another family member is ill or in self-isolation.

Moreover, new changes to the Employment Standards Act mean an employer cannot terminate an employee for taking a long sick leave resulting from coronavirus.

Any employee terminated in breach of the Human Rights Code or Employment Standards Act sick leave rules can be reinstated.

Even still, if there is an economic downturn, or office closures because of coronavirus, employees affected by mass terminations will be entitled to severance just like normal.

Note that, however, in past recessions, some judges (not all) awarded slightly more or slightly less severance to employees because of the economic conditions. This former theory relies on the core purpose of severance which is to support an employee in their transition to new employment. The latter theory of case law is based on the fact that in economic downturns, employers cannot afford their employees, and thus they likely cannot afford to pay normal severance.

Furthermore, when termination of employment is permanent, employers may have to pay other compensation, such as accrued vacation pay, statutory holiday pay, commissions, sick leave credits and bonuses.

Unpaid Sickness and Quarantine Leave

08. Employers should be encouraged to query their employees who are worried, have symptoms or are high risk for coronavirus to take Employment Standards Act unpaid sick leave (3 days) or Infectious Disease Emergency Leave (COVID-19) (indefinite). This way, the workplace mitigates the risk of the virus, and the employer does not have to pay employees on sick leave or Infectious Disease Emergency Leave (COVID-19). To be clear, it is likely in these circumstances, as part of its duty to maintain a safe and healthy workplace, after a reasonable investigation, an employer can ask employees to self-isolate or leave work because of reasonable worry, risk or symptoms and go on sick leave. Quarantine meets the definition of sick leave.

Employees on leave are entitled to job protection when they return and EI sickness benefits. Its sort of a win/win in these desperate times especially for small business.

Employers should encourage employees taking unpaid leave to use paid vacation days first. Vacation pay is worth 100% of the normal salary, but EI is only worth 55%.

Update, June 2, 2020: In a surprise regulation issued on May 29, 2020, retroactive to March 1, 2020 and until Ontario’s emergency order is no longer in place, all covid related temporary lay-offs will be deemed an infectious disease emergency leave.

Declared Emergency Leave

09. On March 17, 2020, the Ontario government declared a state of emergency. The following establishments have been ordered to be closed:

• facilities providing indoor recreational programs
• public libraries
• private schools as defined in the Education Act
• licensed child care centres
• bars and restaurants, except to the extent that such facilities provide takeout food and delivery
• theatres including those offering live performances of music, dance, and other art forms, as well as cinemas that show movies
• concert venues.

UPDATE: the Ontario Government ordered the mandatory closure of all non-essential workplaces as of Tuesday, March 24th at 11:59 p.m. This closure will be in effect for 14 days, with the distinct possibility of an extension as the circumstances change.

Employees of establishments closed by the government’s state of emergency order and mandatory closure order could take an unpaid job-protected Declared Emergency Leave as per section 50.1 of the Employment Standards Act.

Employers should encourage employees taking this unpaid leave to use paid vacation days first. Vacation pay is worth 100% of the normal salary, but EI is only worth 55%.

March 25 Update: In light of the COVID-19 pandemic, the Canadian government has proposed legislation to establish a new kind of income replacement benefit called the Canada Emergency Response Benefit (CERB). The CERB will temporarily replace all new applications for Employment Insurance once it is in place. Read more here.

Frustration of Contract

However, under both the Employment Standards Act and the common law, an Order from the government to shut down on the basis of a state of emergency could invoke the doctrine of “frustration” for both employee and employer, meaning the employment relationship would be terminated and no compensation would be owed to either party.

To that end, instead of invoking of the doctrine of frustration and terminating an employee without compensation for the Order to shut down, an employer could make an offer to amend the employment contract to permit a temporary layoff in exchange for not terminating the relationship immediately and promising to recall the employee after the emergency. This exchange could satisfy the required “fresh consideration” for adding new layoff terms to an employment contract.

Employers are encouraged to seek legal advice on this issue however because it is opinion, not fact.  

Infectious Disease Emergency Leave

10. On March 19, the Employment Standards Amendment Act (Infectious Disease Emergencies) came into effect. As a result of the new law coming into effect, employees with coronavirus illness, symptoms or quarantine may take as many job-protected Infectious Disease Emergency Leave days as they require.

Infectious Disease Emergency Leave provides job protection for employees unable to work for the following reasons:

• The employee is under medical investigation, supervision or treatment for COVID-19; or
• The employee is acting in accordance with an order under the Health Protection and Promotion Act; or
• The employee is in isolation or quarantine in accordance with public health information or direction; or
• The employer directs the employee not to work due to a concern that COVID-19 could be spread in the workplace; or
• The employee needs to provide care to a person for a reason related to COVID-19 such as a school or day-care closure; or
• The employee is prevented from returning to Ontario because of travel restrictions.

In addition, an employee can take Infectious Disease Emergency Leave to care for applicable loved ones (i.e. children or parents) even if they themselves are not sick.

Employers should encourage employees taking this unpaid leave to use paid vacation days first. Vacation pay is worth 100% of the normal salary, but EI is only worth 55%.

Can an employer force an employee to take an unpaid leave absence?

Under the Infectious Disease Emergency Leave, if an employer conducts a reasonable investigation, has a reasonable concern that an employee has coronavirus or is a high risk, and the most recent advice from the Public Health Agency of Canada is followed, perhaps, it may be able to force an employee to stay away from work, perhaps without triggering a layoff, constructive dismissal or termination if the employee agrees to go on this new unpaid leave. After all, employers have an active duty to maintain a safe and healthy workplace.

Generally, while an employer would have to pay an employee forced to stay home and not work if the employer just feared infection, perhaps it would not have to pay an employee if it forced an employee to stay home because they were actually sick from coronavirus. However, we don’t yet know if this new Infectious Disease Emergency Leave provision in the Employment Standards Act would permit employers not to pay employees directed by the employer not to work due to a concern that COVID-19 could be spread in the workplace. We will update this article when we find out.

There is a faint argument that employers are permitted to force employees to go home, unpaid if the following is met:

1. Employers are permitted to direct employees home if they have a genuine concern they may expose other individuals in the workplace to COVID-19.
2. As per the newly enacted Infection Disease Emergency Leave law, an employer must protect the job of affected employees sent home because of a genuine concern they may expose other individuals in the workplace to COVID-19. 
3. Employers may still be liable for constructive dismissal by directing employees home without pay who may expose other individuals in the workplace to  COVID-19.
4.  However,  a claim for constructive dismissal is perhaps made weaker by this new amendment if employers follow it properly. Constructive dismissal is less likely when there is a temporary forced leave of absence, particularly where it is of a finite duration to protect other workers, and there is a guarantee of eventual re-employment.

The above is not legal advice. We know nothing of how courts will interpret this new leave. Until we learn more, employers should call our firm for answers, or they should consider work from home arrangements first (unless the employee is ill or has to miss work for care duties) or continue paying employees directed to go home due to a concern that COVID-19 could be spread in the workplace. Paying for forced quarantines could avoid a wrongful dismissal lawsuit.

Even still, where applicable, employers should encourage employees sent home as per these Infectious Disease Emergency Leave circumstances to voluntarily declare they are taking this “Infectious Disease Emergency Leave”, fill out their ROE, and support them in applying for EI sickness benefits immediately if they choose not to pay them.

This is just an opinion, not fact. No case has interpreted this new law yet. We will update this article when we learn more. Call an employment lawyer at Dutton Employment Law for more.

Paid Leave

11. Employers can send an employee home with pay likely without triggering a constructive dismissal. Even if the employee is not asked to work, temporarily, I believe in the face of the coronavirus, a court would not consider the failure of the employee to provide work due to a global crisis a constructive dismissal. Employers should maintain contact and provide updates to the employee.

Work From Home

12. Employers can send an employee home with pay to work from home from without triggering a constructive dismissal in the fact of COVID-19. Even with such drastic changes to the employment relationship, because of coronavirus, temporarily, I believe a court would not consider the failure of the employee to maintain normal terms of employment a constructive dismissal. Employers should maintain contact and provide updates to the employee.

CERB

13. An employee can work and earn income while on the Canadian Emergency Response Benefit (CERB). Accordingly, an employer could reduce an employee’s work such that he or she could be eligible for the CERB and employment income.

In short, here is how workers could get the CERB and employer income in the same month:

As a routine part of the CERB program, a worker on the CERB will need to make an online declaration every four weeks about whether they are still not working nor receiving income.

A worker will then be eligible for another CERB payment where they can show that they did not work 14 days and did not receive pay for 14 days in the last four weeks.

Accordingly, once the 14-days no work, no pay requirements have been met within a four week period, workers may work and earn income on the remaining days within the four-week period and still receive the CERB.

Hypothetically, a worker could split up work with their employer like this:

• worker not working 14 days in a row in the month because of COVID-19 business slowdowns;
• worker then works 10 days after that 14-day break and gets employer pay for these 10 workdays.

However, the requirement that the employee does not work 14 days because of COVID-19 business disruptions would still need to be met. The employee’s 14-day break from work and pay must be connected to COVID-19.

Nevertheless, there are risks. For one, reducing employee hours, even with the CERB, could still, potentially, be a constructive dismissal.

New Measures Announced in Canada

14. In response to the economic impact COVID-19 is having on Canadian small – medium-sized employers, on March 27, 2020, the government of Canada announced a series of new temporary measures to help Canadian employers stay afloat and make payroll, including a Canada Emergency Business Account Loan; and GST/HST Deferrals. Read more here.

Summary

With the COVID-19 coronavirus, Employers have many options to send employees home as described above. Paid leaves will generally be the least risk for a wrongful dismissal lawsuit.

Employers are further reminded that they could be liable for failing to protect their employees from coronavirus. To that end, whether with pay or without pay, employers should follow public health guidelines and send sick or high-risk employees home to protect the workplace. It is my belief that the law of wrongful dismissal may evolve in the face of this pandemic, and perhaps a wrongful dismissal action could be defended in certain circumstances where an employee is sent home without pay, but health is the primary concern above all.

Employer Health and Safety FAQ (COVID-19)