On May 29, 2020, employment law in Ontario changed quietly but significantly. The Ontario Government just published a new regulation (Ontario Regulation 228/20) that establishes new rules to give greater flexibility to employers who reduced or eliminated their employees’ hours or pay as a result of the COVID-19 crisis (or who may need to do so in the future), and greater flexibility to extend the length of employment changes imposed by the pandemic.
Pre-Covid Background
Before this new regulation was introduced, employers were facing the prospect of being deemed to have terminated their laid-off employees if they were not brought back in 13 weeks. If the layoff lasted longer than 13 weeks, and the employer did not continue employment benefits or provide the employee with “substantial” payments, the layoff would automatically turn into a termination of employment. While some employers are in a position to satisfy the requirements to extend the layoff beyond the 13 weeks, many others are not, and time was running out. The new regulation addresses this concern.
Updated Regulation
The new regulations introduce 3 main changes:
1. Changes to the Infectious Disease Emergency Leave
2. Changing COVID layoffs to unpaid leaves of absence
3. Deeming certain actions of an employer not to be a constructive dismissal
1) Changes to Infectious Disease Emergency Leave
The first part of the changes are those to the infectious disease emergency leave provisions of the ESA. The key change for employers of non-union employees is that the regulations create a new category of the infectious disease emergency leave, which takes place where an employee’s hours of work are temporarily reduced or eliminated by the employer for reasons related to COVID-19. As well, where an employee does not perform their duties because their hours have been temporarily reduced or eliminated because of COVID-19, the employee is deemed to be on the unpaid job-protected leave of absence for the time the employee is not working (during the emergency period and up to 6 weeks after). If you are an employer who was forced to close part of all of the operation during the pandemic, you were also forced to either reduce or eliminate the hours of work of certain employees. At the time, you considered that to be a lay-off. It is now considered a temporary leave of absence under the ESA, along the same lines of parental leave or family medical leave. For this new Infectious disease leave, the period in which you can continue to change the employee’s work is retroactive to March 1, 2020 and ends 6 weeks after the end of the state of emergency in Ontario.
Since this is a job-protected leave of absence, the same rules apply as the other job-protected leaves of absence.
• If an employee had stopped participating in a benefit plan (as of May 29, 2020), the employee does not have a right to continue participating in the benefit plan during the COVID-19 Period.
• If an employer had stopped its contributions to a benefit plan as of May 29, 2020, the employer is not required to make contributions to that benefit plan during the COVID-19 Period. Employers who had temporarily laid off employees but did not continue employee benefits during the layoff fall into this category. If an employee is laid off, an employer may have had to continue benefits during the layoff period. But since the time off is considered a job-protected leave of absence, employers do not have to provide benefits continuation to those employees on this new leave of absence. But, if an employer did continue benefits plans for an employee off work, they should be continued. Page 3 There are two exceptions under this new leave of absence: • If, at anytime on or after March 1, 2020, the employer terminates the employment relationship (either by a written letter, verbal notice, closing a business without notice), the law specifically states that the employer and employee can agree to rescind that notice of termination, in which case the employee would be put on the leave of absence.
• If, before May 29, 2020, the employee had already been (i) deemed terminated under the ESA as a result of a previous layoff, or (ii) constructively dismissed and had resigned within a reasonable time-frame. In all other cases, employers who reduced or eliminated hours/wages for non-union employees as a result of COVID-19 have actually placed those employees on an unpaid job-protected leave of absence for 6 weeks after the emergency is declared over.
2) Certain Employees Not on Layoff Anymore
The next part of the regulations relates to non-union employees whose hours of work have been reduced or eliminated, or whose wages have been reduced, for reasons related to COVID-19. For these employees, the new regulations specifically state that the ESA’s rules on termination pay and severance pay (related to layoffs) do not apply, and those employees are actually deemed not to be on layoff during the COVID-19 period (being the emergency period and the 6 weeks after the emergency is declared over).
There are some exceptions to the above:
• If an employee was or is laid off as part of a complete closure of a business, they will be treated as having been terminated as under the normal rules.
• The rule does not apply if the employee’s had already been deemed terminated under the ESA as a result of an earlier layoff before May 29, 2020.
3) Certain Employer Actions Are Not Constructive Dismissal
The last part of the new changes to the law calls certain actions of an employer (made in response to COVID-19) not to be a constructive dismissal if they occur during the COVID-19 period (being between March 1, 2020 and up to 6 weeks after the state of emergency is ended).
This includes any of the following unilateral changes to an employee’s employment:
• a temporary reduction or elimination of an employee’s hours of work, or
• a temporary reduction in an employee’s wages.
The main exception to the above is that this rule does not apply if the employee had already been constructively dismissed and had resigned within a reasonable time before May 29, 2020. As an aside, the new rules provide guidance to employers on exactly how to determine if an employee’s hours of work or wages have been reduced and how certain Ministry of Labour complaints are affected.
Impact for Employers
The impact of these new rules are significant for any employer who, since March 1, 2020, laid off a non-union employee or reduced the hours / wages of a non-union employee. For most of those employees, they are now legally on an unpaid job-protected leave of absence and not a layoff, o matter how the employer framed the stoppage of work. As well, the law is clear that any reduction to hours or wages is not a constructive dismissal only for the purposes of the Employment Standards Act.
Importantly, this may mean that a unilateral reduction in hours or wages could still be considered a constructive dismissal for the purposes of an employee’s complete common law (judge-made law) entitlements. As the regulations have not been tested in court, employers are cautioned to continue to proceed with caution and obtain legal advice for managing their teams.
As noted above, there are specific and additional exceptions to the rules that may impact specific workers. Legal advice should be obtained for dealing with special cases. As well, these changes have a definitive timeline: the leave of absence or non-constructive dismissal ends no later than 6 weeks after the end of the declared infectious disease emergency in Ontario. As of the writing of this article, the emergency period is to be extended until June 30, 2020, meaning employers have until the at least the middle of August (or perhaps longer, should the emergency be extended) to return their employees to their pre-pandemic employment situations.
Employers should be prepared for the end of this period and managing their business needs appropriately and with legal advice. Don’t hesitate to contact our Employment Law Department for more information about these new rules and any other employment law matters.
Pre-Covid Background
Before this new regulation was introduced, employers were facing the prospect of being deemed to have terminated their laid-off employees if they were not brought back in 13 weeks. If the layoff lasted longer than 13 weeks, and the employer did not continue employment benefits or provide the employee with “substantial” payments, the layoff would automatically turn into a termination of employment. While some employers are in a position to satisfy the requirements to extend the layoff beyond the 13 weeks, many others are not, and time was running out. The new regulation addresses this concern.
Updated Regulation
The new regulations introduce 3 main changes:
1. Changes to the Infectious Disease Emergency Leave
2. Changing COVID layoffs to unpaid leaves of absence
3. Deeming certain actions of an employer not to be a constructive dismissal
1) Changes to Infectious Disease Emergency Leave
The first part of the changes are those to the infectious disease emergency leave provisions of the ESA. The key change for employers of non-union employees is that the regulations create a new category of the infectious disease emergency leave, which takes place where an employee’s hours of work are temporarily reduced or eliminated by the employer for reasons related to COVID-19. As well, where an employee does not perform their duties because their hours have been temporarily reduced or eliminated because of COVID-19, the employee is deemed to be on the unpaid job-protected leave of absence for the time the employee is not working (during the emergency period and up to 6 weeks after). If you are an employer who was forced to close part of all of the operation during the pandemic, you were also forced to either reduce or eliminate the hours of work of certain employees. At the time, you considered that to be a lay-off. It is now considered a temporary leave of absence under the ESA, along the same lines of parental leave or family medical leave. For this new Infectious disease leave, the period in which you can continue to change the employee’s work is retroactive to March 1, 2020 and ends 6 weeks after the end of the state of emergency in Ontario.
Since this is a job-protected leave of absence, the same rules apply as the other job-protected leaves of absence.
• If an employee had stopped participating in a benefit plan (as of May 29, 2020), the employee does not have a right to continue participating in the benefit plan during the COVID-19 Period.
• If an employer had stopped its contributions to a benefit plan as of May 29, 2020, the employer is not required to make contributions to that benefit plan during the COVID-19 Period. Employers who had temporarily laid off employees but did not continue employee benefits during the layoff fall into this category. If an employee is laid off, an employer may have had to continue benefits during the layoff period. But since the time off is considered a job-protected leave of absence, employers do not have to provide benefits continuation to those employees on this new leave of absence. But, if an employer did continue benefits plans for an employee off work, they should be continued. Page 3 There are two exceptions under this new leave of absence: • If, at anytime on or after March 1, 2020, the employer terminates the employment relationship (either by a written letter, verbal notice, closing a business without notice), the law specifically states that the employer and employee can agree to rescind that notice of termination, in which case the employee would be put on the leave of absence.
• If, before May 29, 2020, the employee had already been (i) deemed terminated under the ESA as a result of a previous layoff, or (ii) constructively dismissed and had resigned within a reasonable time-frame. In all other cases, employers who reduced or eliminated hours/wages for non-union employees as a result of COVID-19 have actually placed those employees on an unpaid job-protected leave of absence for 6 weeks after the emergency is declared over.
2) Certain Employees Not on Layoff Anymore
The next part of the regulations relates to non-union employees whose hours of work have been reduced or eliminated, or whose wages have been reduced, for reasons related to COVID-19. For these employees, the new regulations specifically state that the ESA’s rules on termination pay and severance pay (related to layoffs) do not apply, and those employees are actually deemed not to be on layoff during the COVID-19 period (being the emergency period and the 6 weeks after the emergency is declared over).
There are some exceptions to the above:
• If an employee was or is laid off as part of a complete closure of a business, they will be treated as having been terminated as under the normal rules.
• The rule does not apply if the employee’s had already been deemed terminated under the ESA as a result of an earlier layoff before May 29, 2020.
3) Certain Employer Actions Are Not Constructive Dismissal
The last part of the new changes to the law calls certain actions of an employer (made in response to COVID-19) not to be a constructive dismissal if they occur during the COVID-19 period (being between March 1, 2020 and up to 6 weeks after the state of emergency is ended).
This includes any of the following unilateral changes to an employee’s employment:
• a temporary reduction or elimination of an employee’s hours of work, or
• a temporary reduction in an employee’s wages.
The main exception to the above is that this rule does not apply if the employee had already been constructively dismissed and had resigned within a reasonable time before May 29, 2020. As an aside, the new rules provide guidance to employers on exactly how to determine if an employee’s hours of work or wages have been reduced and how certain Ministry of Labour complaints are affected.
Impact for Employers
The impact of these new rules are significant for any employer who, since March 1, 2020, laid off a non-union employee or reduced the hours / wages of a non-union employee. For most of those employees, they are now legally on an unpaid job-protected leave of absence and not a layoff, o matter how the employer framed the stoppage of work. As well, the law is clear that any reduction to hours or wages is not a constructive dismissal only for the purposes of the Employment Standards Act.
Importantly, this may mean that a unilateral reduction in hours or wages could still be considered a constructive dismissal for the purposes of an employee’s complete common law (judge-made law) entitlements. As the regulations have not been tested in court, employers are cautioned to continue to proceed with caution and obtain legal advice for managing their teams.
As noted above, there are specific and additional exceptions to the rules that may impact specific workers. Legal advice should be obtained for dealing with special cases. As well, these changes have a definitive timeline: the leave of absence or non-constructive dismissal ends no later than 6 weeks after the end of the declared infectious disease emergency in Ontario. As of the writing of this article, the emergency period is to be extended until June 30, 2020, meaning employers have until the at least the middle of August (or perhaps longer, should the emergency be extended) to return their employees to their pre-pandemic employment situations.
Employers should be prepared for the end of this period and managing their business needs appropriately and with legal advice. Don’t hesitate to contact our Employment Law Department for more information about these new rules and any other employment law matters.
This article is provided for general information purposes and should not be considered a legal opinion. Clients are advised to obtain legal advice based on their specific situations.
