By Brian Langille and Saambavi Mano (University of Toronto, Faculty of Law)
Taylor v Hanley Hospitality Inc is the latest Ontario Superior Court of Justice decision dealing with the interaction between Ontario’s statutory Infectious Disease Emergency Leave (IDEL) regulation (issued under the Employment Standards Act) and the doctrine of common law constructive dismissal. The IDEL regulation, enacted in response to the COVID-19 pandemic, deems any temporary reductions or eliminations of employee work hours during the prescribed time period to be IDEL leaves and not layoffs. Only 6 weeks prior to Taylor, Justice Broad of the Superior Court found in Coutinho v Ocular Health Centre Ltd that the IDEL regulation does not affect employees’ rights to pursue common law claims for constructive dismissal against their employers. However, in Taylor, Justice Ferguson agreed with the employer’s assertion that the analysis in Coutinho was “wrong in law” and found that the legislature had intended for the IDEL regulation to displace the common law doctrine that unilateral layoffs, in the absence of a contractual power to do so, constitute constructive dismissals.
The discord between the two judgments is rooted in a category mistake in Taylor about the three regimes of the law of work in Canada. Where Coutinho draws the appropriate distinctions between the employment standards regime and the common law regime of the law of work, Taylor remains tied to the legal frame of the contract of employment and views statutes and regulations as modifying the common law, resulting in a uniform amalgam of employment rules and enforcement mechanisms. The latter approach is not how the law of work operates in Canada. On a proper view of the structure of the various components of our law of work, it is the reasoning in Taylor, and not Coutinho, that is “wrong in law.”
Coutinho v Ocular Health Centre Ltd
Coutinho involved an employment dispute between an ophthalmic clinic and Ms. Coutinho, a technician who was placed on a temporary layoff on May 29th 2020. Ms. Coutinho sued for constructive dismissal and the clinic brought a motion for summary judgment arguing that, pursuant to the IDEL regulation, Ms. Coutinho was deemed to be on emergency leave and the elimination of her work hours did not constitute a constructive dismissal.
Justice Broad denied the clinic’s motion for summary judgment, finding that the IDEL regulation did not affect Ms. Coutinho’s right to pursue a common law claim for constructive dismissal. In his judgment, Justice Broad noted that s. 8(1) of the ESA provides that employees’ civil remedies against employers are not affected by the Act. He also cited the Ontario Ministry of Labour’s Guide to the ESA, which specifies that the IDEL regulation “affect[s] only what constitutes a constructive dismissal under the ESA” and “do[es] not address what constitutes a constructive dismissal at common law.” Since the IDEL regulation was found to not affect employees’ common law rights, Justice Broad concluded that Ms. Coutinho was entitled to treat the unilateral layoff as a common law constructive dismissal.
Taylor v Hanley Hospitality Inc
The facts of Taylor are similar to the facts of Coutinho. Ms. Taylor, an employee at a Tim Hortons location, had her work hours temporarily eliminated on March 27th2020. However, unlike Ms. Coutinho, Ms. Taylor was recalled on September 3rd 2020 and she continued to be employed at the Tim Hortons location at the time of the decision. Nonetheless, Ms. Taylor brought a common law constructive dismissal claim against the employer.
Justice Ferguson found that the IDEL regulation deemed all temporary layoffs within the prescribed period to be IDELs and that “any argument regarding the common law on layoffs has become inapplicable and irrelevant.” Citing the employer’s submissions on the issue, Justice Ferguson agreed with the employer that s. 8(1) of the ESA was not meant to preserve the underlying common law of the contract of employment, but rather to signal that the ESA “does not set out an exclusive forum for addressing matters set out in the Act.” In support of this interpretation, the employer cited Elsegood v Cambridge Spring Service 2002 Ltd, an Ontario Court of Appeal case in which the court stated that “statutes enacted by the legislature displace the common law.” Justice Ferguson also agreed with the defendant that allowing an employee to be on an IDEL for ESA purposes and terminated for common law purposes would render the legislation “meaningless” and offend the rules of statutory interpretation.
Justice Ferguson’s reflections on the employer’s submissions provide crucial insight into the political considerations underlying her decision:
I agree with Tim Hortons that exceptional situations call for exceptional measures. The Ontario Government recognized the inherent unfairness in subjecting employers to wrongful dismissal claims as a result of the government imposing a state of emergency. If they did not take action, these claims would only serve to make the economic crisis from the pandemic even worse. It is just common sense.
As a result, Justice Ferguson found that Ms. Taylor was placed on an IDEL – and not laid off – for the purposes of both the ESA and the common law.
The Interaction between the ESA and the Common Law
Following Taylor, we are left with two Superior Court cases offering conflicting interpretations of the interaction between ESA regulations and the common law. There is no doubt that the conflict will have to be addressed by the appellate courts in the coming months. Here, we focus our analysis on what we see as a baseline category mistake being made in the reasoning in Taylor.
The law of work in Canada has long been understood to constitute three independent legal regimes. The first regime is the common law of the contract of employment, which remains of importance to non-unionized workers, but has been “re-regulated” by the second and third regimes. The second component is the collective bargaining regime, which governs unionized workers. This regime intervenes by adjusting the process of negotiation under the common law in an attempt to equalize bargaining power as between the employees and the employer. The third regime can be described broadly as substantive statutory intervention and it includes statutes like Employment Standards Acts and Human Rights Codes. Rather than intervening in the bargaining process, these statutes directly establish statutory minimum standards based upon public policy. These standards are enforced and administered by special administrative tribunals (Human Rights Tribunals, the Employment Standards Branch, and so on) which have the additional benefit of being “cost-free” alternatives to courts for the employee.
It is important to note that these three regimes operate independently of each other and do not collapse into a uniform regime of the law of work, as may be the case with the contract of employment elsewhere. For example, under the Canadian collective bargaining regime, unionized workers do not have a contract of employment at all and are instead governed by the collective agreement. This regime does not supersede or give way to the common law, but rather takes a particular type of employee outside of the common law regime altogether. Similarly, while the substantive statutes provide a floor for employee protections (and as a result, an “illegality” standard which binds judges when deciding cases under contracts of employment), they do not displace or affect protections or entitlements at common law. They are simply alternative (often lower) standards to those that exist at common law – combined with an employee-friendly enforcement mechanism. This is all very clear on the face of the ESA. Section 5(2) of the ESA states that where the contract of employment offers greater benefits or protections, the ESA standard gives way to the contract of employment. And s. 8(1) of the ESA, which was the subject of much discussion in both Coutinho and Taylor, provides that common law remedies are left untouched by the contents of the ESA. It is clear, then, that the three regimes may interact with, but do not collapse into, each other.
The reasoning in Taylor fails to differentiate between these regimes. Rather than acknowledging the independent standards and operating procedures of the regimes, Justice Ferguson appears to view the contract of employment as the foundation of the law of work, such that the other regimes operate to modify the common law. The conclusion that an employee cannot be on a leave of absence for ESA purposes while being constructively dismissed for common law purposes cannot be correct.
Such a view depends on an interpretation of the ESA as changing the common law, rather than operating alongside it. However, as evidenced by the text of the ESA and the Ministry’s own guidance on this issue, the ESA was never meant to modify or change the common law. It provides a baseline standard for certain terms in the contract of employment and a parallel set of remedies for employees. Employees have always had the choice to pursue common law remedies such as claims for constructive dismissal even where the ESA would not provide a remedy at all. It is this narrow point that the Ontario Court of Appeal emphasized in Elsegood v Cambridge Spring Services Ltd. Taken in its full context, the court’s observation that “statutes […] displace the common law” was not a broad pronouncement that the ESA supersedes the common law, but rather an endorsement of the view that the ESA provides certain minimum standards that cannot be circumvented by reference to the common law.
Taylor also seems to have overlooked the far-reaching consequences of such a conclusion. The proposition that the ESA modifies the common law cannot be restricted to the COVID-19 context or the specific regulation at hand. Justice Ferguson emphasizes the pandemic context throughout her judgment, qualifying her findings by reference to the “times of COVID-19” and “exceptional situations”. However, the reasoning that led to the conclusion that the ESA displaces the common law is one of statutory interpretation that purports to apply not only to the IDEL regulation, but to the ESA itself. If, as Justice Ferguson found, s. 8(1) of the ESA was never meant to prevent the statute from displacing the common law, the long-standing temporary layoff provision of the ESA should have precluded common law constructive dismissal claims. As we know, this is not our law.
If the ESA was meant to modify the common law in this manner, Ontario employment law would look very different today. Similarly, Justice Ferguson agreed with the employer that it would offend the rules of statutory interpretation to allow an employee to be on an IDEL for ESA purposes and terminated for common law purposes. But this is no more offensive than the idea that (to take a random hypothetical) an employee who is dismissed without notice is told that she is entitled to 8 weeks’ notice under the ESA and, at the same time, 12 months’ notice under the common law. The ESA and the common law lay out different sets of entitlements which, aside from the illegality standard set by the ESA, have no bearing on each other.
Of course, all of this does not challenge the idea that a statute can change the common law. The point is simply that this one does not.
One concluding observation. Lost in the discussion about inherent unfairness and exceptional measures in Taylor is the fact that Ms. Taylor was in fact “recalled” to her employment. The common law rule stating that a unilateral layoff amounts to a constructive dismissal turns on the layoff indeed being unilateral. Notably, there are no recall rights at common law and parties must negotiate for a recall process if they wish to do so. As a result, if Ms. Taylor and her employer did negotiate on the spot for a layoff period followed by a recall, the issue of the ESA/common law interaction may have been peripheral to the real issue: the nature of the bargain between the employer and the employee.
B. Langille & S. Mano, “Ontario’s Infectious Disease Emergency Leave and the Common Law” Canadian Law of Work Forum (July 5 2021): https://lawofwork.ca/emergencyleavecommonlaw/
Taylor v Hanley Hospitality Inc, 2021 ONSC 3135 [Taylor].
Infectious Disease Emergency Leave, O Reg 228/20, s. 6-7.
Coutinho v Ocular Health Centre Ltd, 2021 ONSC 3076 [Coutinho].
Taylor supra note 1 at paras 21-22.
Coutinho supra note 3 at paras 2, 12.
Ibid at paras 14-16.
Ibid at para 39.
Ibid at para 46.
Ibid at para 50 (Unilateral layoffs by an employer constitute a “substantial change in the employee’s employment, and would be a constructive dismissal.”)
Taylor supra note 1 at paras 5-6.
Ibid at para 19.
Ibid at para 21.
Ibid at para 22.
Brian A Langille, “If Labour Law is a Subset of Employment Law, What is Employment Law a Subset of?” (2020) 43:2 Dalhousie LJ 1 at 11-12, 14.
Ibid at 12.
Employment Standards Act, 2000, SO 2000, c 41, s. 5(2): If one or more provisions in an employment contract or in another Act that directly relate to the same subject matter as an employment standard provide a greater benefit to an employee than the employment standard, the provision or provisions in the contract or Act apply and the employment standard does not apply.
Ibid, s. 8(1): Subject to section 97, no civil remedy of an employee against his or her employer is affected by this Act.
Elsegood v Cambridge Spring Services Ltd, 2011 ONCA 831 at para 6 (“I do not accept the employer’s premise that an employee’s employment status survives a statutory termination by the ESA. Simply put, statutes enacted by the legislature displace the common law”).
Taylor supra note 1 at paras 12, 22.
SeeBarry Fisher, “Court Rules that IDEL Leave is NOT a Constructive Dismissal”, (2021), online: <http://barryfisher.ca/employmentlawblog/court-rules-that-idel-leave-is-not-a-constructive-dismissal/>.
Taylor supra note 1 at para 21.