By: Mercy Liu
The COVID-19 pandemic has affected many groups of people in Canada. Changing economic conditions, consumer behaviour, and regulations are all factors that Canadian businesses have had to consider over the past year.
If you are an employer who has struggled with operations in the wake of COVID-19, you may have considered cutting worker hours to respond to lower demand without full temporary layoffs. However, this decision may have consequences. You should be careful not to breach employment law or the common law when making these decisions. Like with wrongful dismissals, employees who face constructive dismissal may be entitled to severance pay.
What is Constructive Dismissal?
Under Ontario common law, a worker is constructively dismissed if they resign because their employer breached the employment contract. This applies to both employees and independent contractors. This happens when an employer unilaterally makes a substantial change to an essential term in the employment relationship. An employer that does this has failed to meet its contractual obligation towards its worker. Some situations that can lead to a constructive dismissal claim include:
● Demotions
● Changing the reporting structure, job description, or working conditions
● Reducing an employee’s wages
● Changing an employee’s hours of work
● Relocating a workplace
● Changing worker status from employee to independent contractor
● Requiring the worker to work in a discriminatory environment
Whether changing hours of work is constructive dismissal depends on the degree and permanence of the change. Whether hours of work previously fluctuated, reductions have been accepted before, or if the changing hours of work will only last as long as the emergency period may all be considered.
Constructive dismissal is also dealt with under the Employment Standards Act (ESA). Under the ESA, an employee who resigns from employment within a reasonable period after being constructively dismissed is entitled to severance pay.
Changing Rules During COVID-19
In May 2020, the government made a new regulation under the ESA to respond to COVID-19. O. Reg 228/20, or Infectious Disease Emergency Leave regulates changes to an employee’s employment. The regulation’s rules apply to the “COVID-19 period” between March 1, 2020 to July 3, 2021. In the hospitality, tourism, and convention and trade show industries, protections have been extended until December 17, 2021. This provides greater flexibility in these industries when it comes to the usual ESA rules.
During this period, non-unionized employees whose hours of work are temporarily reduced or eliminated because of COVID-19:
- Are deemed to be on job-protected infectious disease emergency leave.
- Are not laid off.
- Are not constructively dismissed.
Therefore, this regulation prevents employee complaints with the Ministry of Labour to assert that a temporary reduction in hours of work due to COVID019 led to their constructive dismissal.
After July 4, 2021, these non-unionized employees:
- Are no longer deemed to be on job-protected infectious disease emergency leave.
- Regular rules on temporary layoffs resume.
- Regular rules on constructive dismissal resume.
This regulation has been controversial. In February 2021, the Ontario government clarified that this only affects constructive dismissal under the ESA and not the common law. Employers should not view this regulation as a shield when it comes to constructive dismissal claims.
What Should I Do If I Need to Cut Employee Hours?
Before deciding whether to reduce a worker’s hours of work, consider whether this is provided for in the employment contract. Under the ESA, reducing employee hours is illegal without worker consent (usually through their employment agreement). Entering into a period of consultation will allow you to speak to your workers and consider their thoughts. Through this discussion, both parties will better understand the other’s situation. If this consultation period leads to an agreement and your workers consent to reduced hours, you will be better protected from any constructive dismissal claims that might arise.
You may also want to speak to employment lawyers for legal advice. They can tailor their legal advice to your business and make sure you aren’t violating any employment laws.
How MyOpenCourt Can Help
It can be challenging for employers to navigate this changing employment law environment. Economic uncertainty and government changes to existing laws can make it difficult to tell if you’ll be liable for breach of employment contract.
Fortunately, MyOpenCourt has a suite of tools that you can use to determine if you need to pay a worker for layoffs, wage cuts, and other situations. By using our tools, you can better ensure that you are complying with the ESA.
To see all MyOpenCourt’s tools, please visit: https://tool.myopencourt.org/
Disclaimer: The information provided in this response is for general informational purposes only and is not intended to be legal advice. The content provided does not create a legal client relationship, and nothing in this response should be considered as a substitute for professional legal advice. The information is based on general principles of law and may not reflect the most current legal developments or interpretations in your jurisdiction. Laws and regulations vary by jurisdiction, and the application and impact of laws can vary widely based on the specific facts and circumstances involved. You should consult with a qualified legal professional for advice regarding your specific situation.