Employment Law Post-Coronavirus

Employment law mediator Barry Fisher posed 10 questions about employment law and the post-coronavirus world to the Ontario employment law bar. I will try and answer each question in this article.

1. The longer these temporary layoffs continue the more employees will seriously look at the temporary layoff = termination argument.

Yes, I agree. Certainly, a layoff of any kind of could be a “termination” at common law. However, many people will want their job back and not claim a termination.

A layoff clause in an employment contract permitting a layoff without triggering a termination was a rare occurrence. That will change as employers realize they should now plan for the worst and use a layoff clause in their contracts.

A temporary layoff clause could say this:

Employee agrees that the Company can temporarily layoff Employee without triggering a termination at common law or a constructive dismissal or a breach of this contract provided that such layoff meets the Employment Standards Act and that the Employer recalls the Employee to its former position at the same salary and benefits after the temporary layoff.

Employers are reminded that if they want to change their contracts to add a layoff clause for existing employees, they need to provide fresh consideration.

2. After 13 weeks, many employers will not have recalled employees and either doesn’t have benefits they could continue or fail to do so, thereby triggering the deemed termination provisions of the ESA.

Yes, I agree. In Ontario, a lay-off can be no longer than 13 weeks. Under section 56(2) of the Employment Standards Act, if the lay-off is longer than 13 weeks, then the employee becomes terminated. In that case, the employee is likely entitled to statutory termination pay and severance (where applicable) even with coronavirus in the foreground.

However, in rare circumstances, a lay-off can be longer than 13 weeks. Read here for more.

3. Even if they are recalled and return to work, could the employee still sue for the lost wages on the basis that there was no express or implied term of employment regarding layoff?

Yes, if an employer recalls a laid-off employee who claimed or was going to claim constructive dismissal, then the good news for employers is that an employee may only be entitled to common law damages for the time the employee was laid off, not the entire reasonable notice period. Once an employer recalls a laid-off employee, the employee’s damages are “mitigated”. See Bevilacqua v Gracious Living Corporation, 2016 ONSC 4127 (CanLII) at paragraph 27.

4. Will the frustration defence apply to only those businesses that were forced to close due to Government edict?

There is a chance that these mandatory closure Orders may have “frustrated” an employment relationship, and therefore, perhaps, no party is owed damages. The common law doctrine of “frustration” is triggered when an employment contract becomes impossible to perform through no fault of either party (i.e. the employee or the employer). Whether an ordered mandatory business closure because of COVID-19 satisfies the common law doctrine of frustration is unsettled. But, we can speculate that perhaps, in light of the unprecedented global pandemic, coupled with forced, mass business closures, some employment contracts may be “frustrated”.

5. Would class actions apply for both termination cases and unpaid wages during layoff cases?

Yes, for Employment Standards Act minimum termination pay and unpaid wages claims, class actions are foreseeable.

Regarding common law termination pay (e.g. “reasonable notice”), coronavirus and class actions, it is murkier.  Section 5(1) of the Class Proceedings Act says that a class action shall be certified if, among other things, the claims of multiple people “raise common issues”.  

It may be difficult to argue that a class of workers suing for wrongful dismissal damages has “common issues” because generally, reasonable notice is an individualized examination. Calculating wrongful dismissal damages is an art, and no two cases are the same. Each class member will have different characteristics of their employment, length of service, age, experience, training and qualifications. 

6. Does a refusal to accept a recall bar the employee from still suing for the lost wages up until the time of the recall?

Because an unpaid layoff is permitted in the Employment Standards Act, and because “wages” are only owed per the Employment Standards Act if they are “earned”, a laid-off employee may be barred from claiming unpaid wages during the layoff period under the Employment Standards Act using the Ministry of Labour if they are recalled.

However, an employee is not precluded from suing for unpaid wages under her contract if she is recalled so long as the contract did not contain a temporary layoff clause.

7. If an employee accepted a recall but still sued for lost wages, could they be terminated for just cause?

An employee who commences a lawsuit against his employer during the course of employment may be found to have repudiated his employment contract, permitting the employer to treat the contract at an end. Whether repudiation occurs in this coronavirus pandemic will depend on the circumstances of the case, including whether there is evidence that the employee is no longer willing to work for the employer and that the filing of the lawsuit has resulted in the breakdown of the employment relationship such that continued performance is no longer tenable. I might imagine a judge would be more inclined to sympathize with well-meaning employers in this COVID-19 situation. (See: eText on Wrongful Dismissal and Employment Law, chapter 7.2.12: Conduct Incompatible with Continued Employment).

8. Is there any real duty to mitigate during the pandemic or do Plaintiffs get a mitigation holiday?

No. An employee’s efforts to mitigate will still be measured on the standard of “reasonableness”. To that effect, an employer could still lead evidence that an employee failed to make reasonable efforts to mitigate by even looking for a job despite the poor economy. However, an employee will be able to prove she mitigated by showing “reasonable” job search efforts, even if it is just a diary or log showing that she, on various days, checked but there were no jobs available in the usual job boards like Indeed.com

9. We all know that EI is not a deduction from wrongful dismissal damages ( because the employee ultimately has to repay their EI ), but what about the new Canadian Emergency Relief Benefit? Each worker could receive up to about $7,500. I have not looked at the CERB legislation, but assuming it has no offset provision like EI, could the employer in a wrongful dismissal case claim a setoff for the CERB amount?

No because employees are not entitled to the CERB during their severance period. If an employer terminates someone on April 6, 2020, with, for example, eight months severance they will not even be eligible for the CERB because the CERB ends in October 2020 and it requires that an employee receive no income each month, and severance is very likely “income” for eight months in this example.

10. Will notice periods go up because it will more difficult to find a job or will they go down because employers are seen to be truly suffering and need a break?

I believe it will depend on the judge. In past recessions, some judges 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 since, in economic downturns, employers cannot afford their employees, they likely cannot afford to pay normal severance that would be appropriate in an economic boom period.