In the wake of the COVID-19 crisis, businesses have been forced to consider lay-offs as a way to save money as demand for goods and services decreases. Lay-offs are a complex area of the law which is further complicated by the misconception that employers have an automatic right to lay people off.
Perhaps more pertinent to both employees and employers during the COVID-19 crisis is the concept of constructive dismissal. A constructive dismissal occurs when an employer makes unilateral changes to the terms of your employment. At common law, employers do not have a right to temporarily lay-off employees without effectively terminating that employee based on the common law principle of constructive dismissal. In essence, a temporary layoff is an employer choosing to unilaterally and substantially change the employee’s employment, thereby constituting a constructive dismissal.
To be clear, there are instances when constructive dismissals may not apply. For instance, if the nature of one’s employment is cyclical, being laid off during the COVID-19 pandemic may not entitle them to common law protections. Additionally, some employment contracts may explicitly state that the employee consents to temporary layoffs throughout the period of employment.
An employee is likely to succeed in a claim for constructive dismissal if their employment is fundamentally changed by the employer. In addition to being laid off, constructive dismissal situation could also occur when there has been a reduction in what an employee is paid or a notable change in the employee’s day-to-day activities. Given the novel circumstances of COVID-19 it is important to acknowledge that these may impact the way courts interpret decisions made by employers. It is foreseeable that employers may ask their employees to take on new roles during the pandemic. It is therefore crucial that employees make note of added responsibilities they are being asked to take on and clarify the duration of any alterations to their day-to-day functions as an employee.
Common Law Rights
All employees are entitled to common law notice of termination if they have been dismissed from their employment without cause and they have not explicitly contracted out of this notice entitlement in their employment contract. While there are no set rules regarding common law notice, an employee’s common law notice is often times equivalent to at least one month of notice for every year of employment. However, there are a number of factors that impact this calculation, including the nature of the occupation and the employees age, amongst others, and each case is decided on its own set of circumstances.
Employees who have been dismissed without cause may be entitled to bring a claim of wrongful dismissal against their employer. When an employee is dismissed, they are usually entitled to common law notice of termination unless they have explicitly contracted out of it in their employment contract. It is surprisingly difficult for employers to enforce written termination clauses that purport to eliminate the employee’s right to common law notice.
An important condition to wrongful dismissal claims is the employee’s duty to mitigate their losses. This means that upon their dismissal, employees are required to make reasonable efforts to seek similar employment to what they were doing before being dismissed. During the COVID-19 pandemic, the mitigation condition may be much harder to achieve, since the economic slowdown will lead to far less jobs being available. It is reasonable to assume that the courts will agree to extend notice periods for those who are having difficulties in finding alternate comparable employment.
Considerations for Employees
There is likely to be an influx of plaintiffs bringing wrongful dismissal and constructive dismissal claims when the pandemic eventually dies down. Employees who have been dismissed during the COVID-19 pandemic may have very little opportunity to mitigate their damages, and therefore, seek compensation from their employers for damages they incur.
If an employee is temporarily laid off during the pandemic, there is nothing to stop them from returning to work when recalled, while also claiming constructive dismissal for the period in which they were laid off.
Considerations for Employer
The decision to dismiss an employee is often a difficult decision at the best of times. The COVID-19 pandemic will surely increase the concern for employers having to pay out severance packages and notice pay during times with little to no revenues. There is definitely a misconception that employers have an automatic right to lay off employees. This is exacerbated by the media reports of massive lay offs.
During the COVID-19 pandemic, employers may be forced to consider temporary layoffs. As a result, employers may wish seek advice from experienced lawyers in the field of employment law, who can help ensure the employer properly follows the temporary lay-off requirements under the ESA. Although they may not be immune to a claim of constructive dismissal, this may assist in limiting the damages claimed by a dismissed employee.
Whether the employer follows the strict restrictions under the ESA or not, they may be exposed to a constructive dismissal claim from a dismissed employee. However, if the employee recalls an employee that has claimed or intended to claim constructive dismissal, the employee’s notice period is likely to be limited to the amount of time the employee was laid off.
If you or your business need advice on temporary lay-offs, terminations, or dismissals, please contact J.F. Lalonde, a highly qualified employment lawyer with over 15 years’ experience representing both employers and employees.
– J.F. Lalonde and Andrew Donaldson