If you are an Ontario employer who has implemented, or is considering implementing, temporary layoffs, wage reductions, or hours of work reductions, the Ontario Government’s recent changes will matter to you.

On May 29, 2020, the Ontario Government filed a new regulation changing the rules regarding employee eligibility for infectious disease emergency leave, temporary layoffs and constructive dismissals under the Employment Standards Act, 2000 (the “ESA”), with retroactive effect.

Below is a summary of the most important aspects of this new regulation and why the changes will matter to your workplace and employees.

How Long Do These Changes Last?

The regulation applies retroactively, dealing primarily with the time period beginning March 1, 2020 and ending six weeks after the declared emergency ends. The Government has called this the “COVID-19 Period”. The Government recently extended the current declared emergency until June 30, meaning the regulation will be operative until at least August 11, 2020. A further extension to the declared emergency is possible, and this would automatically extend the life of the new regulation.

Which Employees are Affected?

The regulation mainly affects non-union employees who have stopped working, worked less, or earned lower wages since March 1, 2020, due to COVID 19. However, union employees are subject to the expanded definition of “Infectious Disease Emergency Leave”, outlined below.

Expanded Definition of Infectious Disease Emergency Leave

On March 19, 2020, the Government of Ontario added a new “job-protected leave”, “Infectious Disease Emergency Leave” (“IDEL”) to the ESA. We reported on this development here.

In response to the pandemic, IDEL applies to employees who are not performing their duties for reasons relating to COVID-19. IDEL protects employees who were required, due to COVID-19, to be away from work. That included parents effected by school closures as well as those who were under medical investigation for potential exposure, among others.

With the introduction of the new regulation, the Government has now expanded IDEL, making an unpaid leave available to union employees, and making it mandatory for non-union employees, whose “hours of work are temporarily reduced or eliminated by the employer for reasons related to” COVID-19. This applies to employers who were forced to send employees home because the Government required the employer to cease operations.

The new regulation retroactively “deems” non-union employees who were not performing their duties, working reduced hours, or receiving reduced wages (at the employer’s behest) to be on the leave. In other words, this is not a leave that employees must elect to take.

Why it Matters:

This change extends employees’ entitlement to an unpaid statutory leave of absence (and the associated protections) to instances where, because of COVID-19, they have experienced a temporary unilateral reduction in their hours of work or pay.

As a reminder, an employee on IDEL (like most ESA leaves) is afforded the following protections:

  • Benefit continuation through the leave of absence except if benefits were discontinued before May 29, 2020;
  • Continued service accrual;
  • A limited right to reinstatement; and
  • Certain protections against reprisal for taking/being on the leave.

Effect on Temporary Layoffs

Employees who have been, and/or will be, on a temporary layoff (and not performing the duties of their position) for reasons relating to COVID-19 are now deemed to have been on IDEL and not on layoff under the ESA. The Government has limited the impact of deemed IDEL by not extending the right to benefits continuation to an employee on temporary layoff whose benefits were discontinued prior to May 29, 2020.

Why it matters:
  • Before this change, in Ontario, termination and severance entitlements were triggered under the ESA when a temporary layoff exceeded a specific duration under the ESA (up to 13 weeks within 20, or 35 weeks within 52 under certain circumstances). With this change, those employees will not be terminated or severed under the ESA, but will rather be deemed to be on a protected leave. Thus, termination and severance pay entitlements will not be triggered.
  • Employees who were laid off because of COVID-19 will now be entitled to IDEL protections. This could have a significant impact on plans that the employer might have had to make the layoff permanent.
  • Employers will have to consider how to communicate this change in status to employees, and perhaps re-evaluate the reasons for the original layoff, its characterization and whether a change is required.

Constructive Dismissal

Consistent with its other changes, the Government also made changes to ensure that a temporary reduction or elimination of an employee’s hours, or a reduction in wages, does not constitute a constructive dismissal for the purposes of the ESA.

Why it matters:
  • Before this change, an employee who experienced a unilateral and material change in terms and conditions of employment, including a reduction in earnings, could resign from employment and claim constructive dismissal under the ESA, entitling them to statutory termination and severance pay. The new regulation precludes employees from bringing such claims under the ESA during the COVID-19 Period, unless the employee was constructively dismissed and resigned before May 29, 2020.
  • This amendment compliments the other changes to the ESA so as to reduce the potential effects of termination of employment as employers struggle with the economic challenges due to COVID. It also aligns with the public policy pronouncements by the Federal and Provincial Governments, that employers and employees preserve the employment relationship through COVID. Interestingly, this particular amendment may inadvertently have broader implications for the future common law interpretation of constructive dismissal and potential claims by employees and their aggressive plaintiff lawyers.

Please contact your Baker McKenzie attorney for more information.

You can also access our Coronavirus Resource Center for information on the impact of this situation on your business and what you can do to manage these risks. It covers areas of immediate concerns such as employer obligations, contract issues, supply chain disruption, financing and force majeure, as well as more forward looking issues such as practical impact on transactions and IPO activity.