June 2021 - Stacey R. Ball

Layoffs During The Covid-19 Period Can Be A Constructive Dismissal At Common Law

by Stacey R. Ball| June 10, 2021August 10, 2023 | General

In a recent decision of Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076, the Ontario Superior Court ruled that the Infectious Disease Emergency Leave Regulation (“IDEL Regulation”) made under the Employment Standards Act, 2000 (“ESA”) does not preclude an employee from claiming constructive dismissal at common law.

Facts

The Plaintiff Jessica Coutinho (“Ms. Coutinho”) worked at the Defendant’s (“Ocular”) eye clinic in Cambridge as an office manager. The principals of Ocular got into disputes with ophthalmologists at the Cambridge clinic over corporate and business issues. The disputes culminated in an incident where one of the Ocular principals changed the locks to the premise on April 30, 2020.

On May 1, 2020, Ms. Coutinho was denied entry when she attended for work. She was told to return to her home and that she would continue to get paid. On May 29, 2020, Ocular wrote to Ms. Coutinho, advising her that the Cambridge clinic would be closed and she was being placed on a temporary layoff. On June 1, 2020, Ms. Coutinho brought action against Ocular seeking damages for constructive dismissal.

Analysis

Ocular pleaded that pursuant to the section 7 of the IDEL regulation under the ESA, Ms. Coutinho was not constructively dismissed because the temporary elimination of her employment duties and work hours was due to the Covid-19 health crisis. However, Ms. Coutinho takes the position that the IDEL Regulation does not affect her common law right to pursue a civil claim against Ocular for constructive dismissal.

The Court sided with Ms. Coutinho. In the analysis, the Court noted that the scope of s.7 of the IDEL regulation is constrained by s. 8(1) of the ESA, which reads “no civil remedy of an employee against his or her employer is affected by this Act”. The Court also considered the online publication of the Ontario Ministry of Labour, Training and Skills Development, which stated that the rules under the IDEL regulation affect only what constitutes a constructive dismissal under the ESA, not at common law.

Decision

Therefore, the Court ruled that the written notice by Ocular to Ms. Coutinho on May 29, 2020 that she was being placed on a temporary layoff constituted a constructive dismissal and Ms. Coutinho was not barred by the IDEL Regulation from bringing a constructive dismissal action at common law. As Ms. Coutinho fully mitigated her common law damages by commencing employment with another eye clinic on July 22, 2020, the Court awarded her statutory termination entitlements under the ESA.

Takeaways

The Court ruled in this case that employees are entitled to treat employers’ unilateral imposition of the layoff as bring the contract of employment to an end at common law and thus have the right to sue for constructive dismissal. It is advisable for employers to seek legal opinions before putting their employees on a temporary layoff or reduce their working hours and/or pay. It also applies to employees, who should consult an employment lawyer about their legal rights once they are laid off

If you are experiencing any employment law issues in regard to your layoff, Top Toronto employment lawyer, Stacey Ball can help you determine your legal options. Please call us at 416-921-7997, extension 227.

Saving Provisions In Termination Clauses Do Not Always Save The Day

by Stacey R. Ball| June 9, 2021August 10, 2023 | General

Employers include termination clauses in the employment contracts to limit employees’ termination entitlements once they are dismissed from work. However, if a termination clause provides for less than statutory minimum under the Employment Standards Act (“ESA”), it is unenforceable. Employees are thus entitled to reasonable notice or pay in lieu of notice at common law, which is typically greater. As a result, employers often incorporate saving provisions in termination clauses to shield them from unenforceability. However, these saving provisions do not always save the day.

In the decision of Rossman v. Canadian Solar Inc., 2019 ONCA 992, the Ontario Court of Appeal (“ONCA”) ruled that if the employer has attempted to contract out of the minimum standards in the ESA through the inclusion of a termination clause, a saving provision cannot cure an otherwise unenforceable termination clause and make it enforceable.

Facts

Noah Rossman (“Mr. Rossman”) commenced his employment with Canadian Solar Inc. (“Canadian Solar”) in 2010. He first started as a regional sales manager and signed his first employment contract. In 2012, Mr. Rossman got promoted to a project management role and signed a new employment contract.

Each employment contract included the same termination clause with a saving provision, which reads, “In the event the minimum statutory requirements as at the date of termination provide for any greater right or benefit than that provided in this agreement, such statutory requirements will replace the notice or payments in lieu of notice contemplated under the agreement”. However, the termination clause also stipulated that Mr. Rossman’s “benefits shall cease 4 weeks from the written notice”. Mr. Rossman was terminated without cause on February 12, 2014 and commenced an action against Canadian Solar seeking for damages for wrongful dismissal.

Analysis

The motion judge ruled that the termination clause was void and unenforceable because it was either ambiguous or an attempt to contract of the minimum standards under the ESA by limiting benefits to four weeks regardless of the term of employment. The motion judge determined that Mr. Rossman was entitled to five months’ reasonable notice. Canadian Solar appealed the decision of the motion judge to the ONCA.

The ONCA agreed with the motion judge and ruled that the termination clause was either void at the outset or contained genuine ambiguity that made it void and unenforceable. The Court found that the termination clause was void at the outset, because the four-week benefits clause contravened the notice provisions of the ESA. The employment contract was for an indefinite period, and therefore the benefit period needed to run for a minimum of eight weeks to comply with the minimum statutory notice period: s. 57(h). In addition, the Court ruled that the termination clause is ambiguous and the ambiguity is not erased by the saving provision, since the four-week benefit clause is not future facing, nor does it express an intention to conform to the ESA. Therefore, the ONCA dismissed the appeal of Canadian Solar.

Takeaways

In this case, the ONCA noted that saving provisions in termination clauses cannot save employers who attempt to contract out of the ESA’s minimum standards.

For employers, it highlights the importance of having well-drafted termination clauses in their employees’ employment contracts. Employers should make sure that the termination clauses do not contract out of the ESA minimum standards. Therefore, it is advisable for employers to seek legal opinions when it comes to drafting employment contracts.

It is also strongly recommended that employees should consult an employment lawyer after termination so that they can know whether the termination clause in their employment contracts is enforceable and has limited their termination entitlements to statutory minimum under the ESA.

If you are experiencing any issues in regard to your employment contract, Top Toronto employment lawyer, Stacey Ball can help you determine your legal options. Please call us at 416-921-7997, extension 227.

Severability Clause Cannot Save An Invalid Termination Provision

by Stacey R. Ball| June 8, 2021August 10, 2023 | General

In the decision of North v. Metaswitch Networks Corporation, 2017 ONCA 790, the Ontario Court of Appeal (“ONCA”) reaffirmed the previous court decision that a termination clause is void if it attempts to contract out of any provisions of the Employment Standards Act (“ESA”). It also ruled that a severability clause cannot save an otherwise invalid termination clause in an employment contract.

Facts

Doug North’s (“North”) employment with Metaswitch Neworks Corporation (“Metaswitch”) was governed by an employment contract. A termination clause in the contract stipulated that Metaswitch could terminate North without cause upon providing him with notice in accordance with the provisions of the ESA. However, it also provided that any payments owing to North “shall be based on Base Salary, as defined in the Agreement”. North’s compensation consisted of base salary and commissions.

Analysis

The Appellant North took the position that the termination provision was void, because the part of the provision that provides payment to be based on base salary contravened the ESA by excluding his commissions. On the other hand, the Respondent argued that the severability clause in the employment agreement could save the balance of the termination provision and leave it in force. The Application judge sided with the Respondent and ruled that the severability clause of the employment contract could save the termination clause that contravened the ESA.

On appeal, the ONCA ruled that the application judge erred in her approach to the interpretation and application of the severability clause. The Court ruled that “where a termination clause contracts out of one employment standard, the Court is to find the entire termination clause to be void, in accordance with s.5(1) of the ESA. It is an error in law to merely void the offending portion and leave the rest of the termination clause to be enforced” (para.24). As a result, the application judge erred in law by severing only the offending portion that referred to using the base salary only as calculation of pay in lieu and leave the reminder of the termination clause in force. The Court noted that the correct approach is “to first assess the termination clause to see whether there is any contracting out of an employment standard. If there is, then the termination clause is void, and there is nothing to which the severability clause can be applied” (para. 41).

Takeaways

In this case, the ONCA noted that if the drafted termination clause is void because it attempts to contract out of any provision of the ESA, there is nothing on which the severability can act. The Court further noted that this conclusion does not make the severability clause void. It continues to have application to the rest of the agreement but just not the clauses that have been made void by statute.