COVID-19 Employment Standards Regulation: Are Constructive Dismissal Claims Still Allowed?

On Friday, May 29, 2020 the Government quietly adopted Ontario Regulation 228/20: Infectious Disease Emergency Leave under the Employment Standards Act (ESA). Among other changes, O. Reg. 228/20 appears to restrict the availability of constructive dismissal claims.

The relevant section reads:

Reduction in hours, wages not a constructive dismissal

7. (1) The following does not constitute constructive dismissal if it occurred during the COVID-19 period:

1. A temporary reduction or elimination of an employee’s hours of work by the employer for reasons related to the designated infectious disease.

2. A temporary reduction in an employee’s wages by the employer for reasons related to the designated infectious disease.

(2) Subsection (1) does not apply to an employee whose employment was terminated under clause 56 (1) (b) of the Act or severed under clause 63 (1) (b) of the Act before May 29, 2020.

Constructive dismissal occurs when an employer fundamentally breaches the employment agreement, including by a significant reduction in an employee’s hours of work and/or wages. This allows an employee to treat the employer’s fundamental breach as a termination of employment, and to claim termination pay and severance where applicable either under the ESA or under the common law before the courts.

Does s. 7 of O. Reg. 228/20 now prohibit employees from claiming constructive dismissal where their hours of work or their wages are significantly reduced on or after May 29, 2020? Yes and no.   

Employers are likely to argue that O. Reg. 228/20 prohibits constructive dismissal claims under both the ESA and the common law. The ESA is a complete regulatory scheme that can modify the common law, and where the ESA and the common law conflict the ESA should apply.

However, in our view employees should still be able to bring common law constructive dismissal claims before the courts. The ESA is not intended to diminish any common law remedies that may be available to employees. The ESA legislation itself states at s. 8:

Civil proceedings not affected

8 (1) Subject to section 97, no civil remedy of an employee against his or her employer is affected by this Act.  2000, c. 41, s. 8 (1).

S. 8 of the ESA thus removes any apparent conflict between the ESA and the common law on the issue of constructive dismissal. Regardless of the broad wording of O. Reg. 228/20 that speaks to constructive dismissal generally, the Regulation should be read through the lens of s. 8, and in light of the ESA’s remedial purpose of protecting workers.

What does this mean for employees? It very likely means that constructive dismissal claims for a reduction in wages or in hours of work can only be advanced in civil proceedings in court and not under the ESA’s administrative mechanism such as an Employment Standards Complaint to the Ministry of Labour.  

Therefore, employees who have their hours or wages reduced on or after May 29, 2020 and who believe they have been constructively dismissed should initiate a claim in court rather than making a complaint under the ESA. Dealing with court claims can be costlier and more time consuming for both employees and employers. But O. Reg. 228/20 seems to have left employees with little choice with respect to constructive dismissal claims.

A Final Note: O. Reg. 228/20 deals with constructive dismissal claims arising out of a reduction in hours of work or a reduction in wages only. Constructive dismissal can also arise out of other considerations such as a fundamental change in the nature or location of the work, or if a toxic work environment is created including on account of bullying, harassment or discrimination. Such constructive dismissal claims remain unaffected by O. Reg. 228/20.

The above blog post provides general information only and should not be relied upon as legal or other professional advice. If you are dealing with a constructive dismissal or other employment law issue, it is best to seek advice from an employment lawyer about your specific circumstances. Contact us to schedule a consultation.