Taylor v. Hanley - An Update

Back in June, I wrote about a summary dismissal from Ontario, Taylor v. Hanley Hospitality, where Ontario's Infectious Disease Emergency Leave provisions were interpreted as displacing the common law of constructive dismissal: An employee put on a temporary layoff from March to September 2020 (then recalled, and she in fact went back to work) sued in constructive dismissal, and the court found that the effect of Ontario's IDEL regulation was that she was deemed on a 'leave', not a layoff that would breach her contract.

This decision was exactly the opposite of what another Ontario Superior Court judge in an earlier decision, Coutinho.

This has attracted a lot of attention. In addition to my earlier post, Sean Bawden wrote about it and argued that it was wrong on its face; Brian Langille and Saambavi Mano argued that Justice Ferguson misapprehended the interplay between the common law of contracts and the statutory regime; and Stuart Rudner said that the conflicting decisions create a "complete state of uncertainty".

The Taylor appeal is going to be heard by the Ontario Court of Appeal next month. In advance of the hearing, I thought I'd take this opportunity to lay out a few things to watch for.

The Best, Cleanest, and Simplest Road: A Clear Statement on s.8(1)

Section 8(1) of Ontario's Employment Standards Act states that civil remedies of employees aren't affected by the statute. This is a sweeping interpretive provision, with narrow specified exceptions, that has historically led to a fairly straightforward proposition of law:

If you're reading employment standards legislation as giving employers permission to do something (that they couldn't otherwise do), you're reading it wrong.

Coupled with s.5, which provides that you can't contract out of minimum standards, but that you can contract to greater-than-minimum entitlements, and you're left with a pretty straightforward structure of what employment standards do: They create a baseline of minimum entitlements for employees, but they in no way create a limit or ceiling on the rights or entitlements to which the employee might agree. The point of the statute is to protect employees, not employers.

(Importantly, these two propositions exist generally within employment standards regimes across the country. Some Provinces structure them a bit differently, but sections 3 and 4 of Alberta's Employment Standards Code are extremely similar. So while the impact of the specific IDEL regulation in Ontario may be an Ontario-specific question, an ONCA decision interpreting s.8(1) might be persuasive in Alberta.)

There's a lot of complexity around the edges of how the IDEL works, what it does, and what it's supposed to do, but I simply don't see an analytical path around s.8(1) for the employer that doesn't ignore or materially misapprehend that provision.

While Justice Ferguson believed that s.8(1) was merely about clarifying that the ES administrative adjudication process is non-exclusive, the reality - and well-established case law - is otherwise.

In Machtinger, the Supreme Court of Canada referred to this language (s.6 of Ontario's ESA at the time) as preserving common law rights arising outside the operation of the Act:

It is also clear from ss. 4 and 6 of the Act that the minimum notice periods set out in the Act do not operate to displace the presumption at common law of reasonable notice.  Section 6 of the Act states that the Act does not affect the right of an employee to seek a civil remedy from his or her employer.

In light of that, I would respectfully suggest that Justice Ferguson's interpretation of s.8(1) cannot stand.

But it runs deeper than just one line in Machtinger. The ONCA has previously looked at this language (or its predecessors) on several occasions: Addison v. M. Loeb; Rasanen v. Rosemount; Scapilatti v. Potvin; and more. Other appellate courts have their own list of cases considering similar language.

In part because of the underlying complexity of this matter, a strong and clear statement from the Ontario Court of Appeal that s.8(1) is a full answer to the employer's position would be useful and valuable across the country: Even in a pandemic, and even in a case where the statute expressly doesn't treat the layoff as a termination event, an employee can still rely on terms implied into the contract at common law.

More importantly, the alternative would be very messy: If the ONCA doesn't give effect to s.8(1) in this way, then it will undermine decades of more-or-less one-sided jurisprudence, and raise all sorts of questions as to what other terms in the employment contract might be impacted by employment standards.

The employer will likely advance an argument that clear specific statutory language that does affect civil remedies will override a general proposition that civil remedies aren't affected. However, s.8(1) is an interpretive guidepost for the rest of the statute - a direction to not interpret other language in the Act as affecting civil remedies. Hence: If you're reading the statute as permissive upon employers, you're reading it wrong.

If the legislature really wanted to create an exception to s.8(1), they'd have to do so expressly, either putting it into the provision itself - "Notwithstanding section 8(1), an employee has no civil remedy arising from x", or creating a further exclusion within s.8(1) itself.

Regulatory Language versus Statutory Language

One of the issues sometimes arising in the discussion - and flagged in the Coutinho case - is that the IDEL language relied upon by the employer is from a regulation. I noted in my previous entry that the regulation seems to pervert and conflict with the actual statutory language, so I think there's room for some discussion as to the extent to which a regulation can conflict with and/or modify the meaning of the statutory language.

That said, I would be disappointed if this were decided on a narrow issue arising from the impact of regulatory language, when a broader affirmation of the general application of s.8(1) is available.

'Deemed' Leave

The language at the heart of the issue 'deems' an employee on a statutory leave if they're on a COVID-related layoff under certain circumstances. I'm not sure this language is effective at all (in light of the 'regulatory language' issue, but suppose for a moment that it is: What's the impact?

My suspicion is that, for purposes of the statute, you can't characterize an IDEL as a dismissal or constructive dismissal under s.56. This means that the notice and severance provisions of the statute would not be triggered, and a claim for statutory notice/severance would fail.

However, section 56 of the ESA is not a comprehensive list of the circumstances that can end a contract at law. While any event that constitutes a termination event under s.56 has the effect of terminating the underlying contract (see Elsegood), it does not follow that contracts can only be terminated through the mechanisms set out in the ESA. Justice Ferguson isn't the first to misinterpret Elsegood in that way, but it is indeed a misinterpretation - both logically and legally.

Extraordinary Circumstances and Legislative Intent

The strongest employer argument - and certainly the one that drove Justice Ferguson's decision - is that the IDEL provisions were designed to insulate employers from liability for the labour reductions necessitated by the pandemic; if you don't interpret them as displacing an employee's contractual right to not be put on a temporary layoff, they won't be generally effective in accomplishing that objective.

Allow me to begin by questioning the premise here: If the point was to provide employers with some type of immunity to liability, why didn't the legislature say so? I would suggest a more nuanced intent: To give employers a break from legislatively-derived minimums. It's perfectly coherent to think of the Legislature as simply washing its hands of employment-related liabilities in circumstances where employers had to impose layoffs simply to comply with Provincial mandates.

Thinking that the Legislature was re-writing the terms of employment contracts, or conferring immunity upon employers for breach of employment contracts, is a much taller order. For illustration purposes, let's imagine a situation where employees expressly inserted a 'no layoffs' clause, or a clause that provided employers with a limited layoff right provided that a certain portion of wages and benefits were continued through the layoff period. The reason why an employee might insist on such protection is obvious: Most employees lack the financial stability to go weeks or months without a paycheque, and so an employer right to impose a complete temporary layoff without notice is an intolerable compromise to job security for many employees.

Imagine, further, that the layoff protection provision was an amendment to the contract for which the employee made other substantive concessions - perhaps reduced wages or vacation time, or agreement to a restrictive covenant.

To imagine that the IDEL has the effect suggested by Justice Ferguson would require one to conclude that the Legislature is using the employment standards framework to deprive the employee of the full benefit of a negotiated contractual right. This is both broadly out of line with the scheme of employment standards, and is an extraordinary legislative action that would require very express language.

Sure, the pandemic created hardship for employers, but it also created hardship for employees: An interpretation that the legislature intended to give relief to employers by removing contractual rights of employees...is tenuous.

In terms of the overall equities, it's also worth noting that Provincial and Federal governments created a range of other supports and subsidies for both groups, as well. It's very likely that this business qualified for certain subsidies, and also that the employee would have qualified for CERB. The case law is leaning toward making CERB benefits deductible from her constructive dismissal damages, which may have a pronounced substantive impact on the quantum of Taylor's entitlements, though I continue to have my doubts about the correctness of that. But what CERB can't reasonably do is affect the interpretation of IDEL - given that CERB was a Federal program, and IDEL is a Provincial initiative that doesn't really align with CERB. (So you can't argue that they're part of a unified scheme where IDEL deliberately removed substantive contractual rights from employees but CERB was created to offset those losses.)

There is a better way for courts to reconcile extraordinary hardship of COVID restrictions with incompatible employment relationships: I've suggested before that frustration of contract needs a post-COVID re-write, but it's not going to happen in the context of a summary judgment motion.

Summary

This is a big case, and Ontario employment lawyers should pay attention: Because of the temporary suspension of limitations periods, we're still about six months away from the limitations bar for Ontario causes of action that arose in March 2020 - which means that lots of employees who WERE put on a layoff for that period are going to have to make a choice as to whether to sue their employers for their losses.

For employees still employed there, they may be inclined to take the loss in exchange for not poisoning the relationship (not that that buys you any job security), but given that we're two years out, there are probably lots of employees who have moved on for possibly-unrelated reasons, sitting there wondering as to whether they might have a claim for multiple months of wages from their former employers.

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Dennis Buchanan is a lawyer practicing labour and employment law and civil litigation in Edmonton, Alberta.

This post does not contain legal advice, but only general legal information.  It does not create a solicitor-client relationship with any readers.  If you have a legal issue or potential issue, please consult a lawyer.