TRIAL WIN: Ontario court overturns ruling on COVID-19 IDEL layoff

Taylor v. Hanley Hospitality Inc.

The Ontario government’s response to the Covid-19 Pandemic and the imposition of unilateral Covid layoffs was the subject of a recent decision by the Ontario Court of Appeal in Taylor v. Hanley Hospitality Inc.

The Court ruled that the employer had chosen the wrong means to have the lawsuit resolved and overturned the lower court’s decision dismissing Ms. Taylor’s action. Taylor was successfully represented by employment lawyers Lior Samfiru and Lluc Cerda at Samfiru Tumarkin LLP.

Facts

Here are the background facts of the case:

• Taylor was employed for 16 years as an assistant manager at the Tim Hortons franchise operated by the defendant, Hayley Hospitality.
• In March 2020, she was laid off from work.
• In May 2020, the Government of Ontario introduced a regulation extending the period of layoffs past the limit then in place of 13 weeks (or 35 weeks if benefits were continued).
• Taylor sued Hanley Hospitality in July 2020 claiming that her layoff was a constructive dismissal.
• Hanley Hospitality defended the action and claimed that the government’s regulation had transformed Taylor’s layoff into an Infectious Disease Emergency Leave (IDEL), thereby rendering her constructive dismissal case moot.
• After delivering its statement of defence, Hayley Hospitality brought a special motion (a Rule 21 motion) before the Ontario Superior Court to determine whether the IDEL had changed Taylor’s common law right to claim constructive dismissal.
• In June 2021, the Superior Court agreed with Hanley Hospitality and dismissed Taylor’s action. Taylor appealed to the Ontario Court of Appeal.

Court of Appeal’s analysis and decision

Before deciding whether the government’s IDEL affected Taylor’s ability to claim constructive dismissal as a result of her layoff, it had to determine whether the motion judge had all the evidence needed to make a decision on the case. It found that she did not.

A Rule 21 motion is to be used to determine a question of law before a trial. Generally, no evidence is allowed in such motions. Because no evidence is allowed, such motions are not appropriate to determine questions of fact, questions of mixed fact and law, and unsettled questions of law.

The Court of Appeal relied on well established precedent to rule that Taylor’s action should not have been dismissed by way of a Rule 21 motion for several reasons:

• The motion judge failed to assume that Taylor’s allegations in her statement of claim were true, as is required under a Rule 21 motion, including her claim that she was not impacted by the Government’s IDEL regulation in the first place.
• She erred in finding that Taylor had admitted the facts pled by Hanley Hospitality by not objecting to them in a reply.
• She failed to appreciate that the determination of whether IDEL affected Taylor’s right to claim constructive dismissal would require a review of much more than the IDEL regulation itself and would require the review of the legislative response to the Covid-19 Pandemic as a whole.

The court concluded that there was not enough evidence before the motion court to determine whether Taylor was even really on an IDEL. Further proceedings would be required to determine this. As such, the Rule 21 motion was ill-advised.

Taylor’s appeal was granted and ordered Hanley Hospitality to pay her $20,000 in costs for the appeal as well as further costs for the Rule 21 motion.

The Court of Appeal also held that it too did not have enough evidence to determine whether the Government’s IDEL regulation impacted Taylor’s right to claim constructive dismissal as a result of her layoff, though the concept has been thoroughly determined in Coutinho and Fogelman (Ontario’s IDEL does not impact a person’s ability to claim constructive dismissal in a temporary layoff situation).

Lessons for employees

• Don’t accept an unwanted temporary layoff: Agreeing to a temporary layoff may permit your employer to place you on additional ones in the future without seeking your approval. You may also lose your opportunity to obtain a severance package through a constructive dismissal claim with help from an employment lawyer at Samfiru Tumarkin LLP.
• IDEL has been simplified: By overturning the motion decision, the Court of Appeal has greatly simplified the law of whether the IDEL impacts the right of employees to claim a constructive dismissal as a result of a Covid layoff. The motion decision was an outlier with two other reported decisions holding that the law on constructive dismissal had not changed as a result of Covid, and that a temporary layoff under IDEL can still be treated as a termination by an affected employee.

Lessons for employers

• The pandemic does not give you cover to lay off employees: A layoff will likely be viewed as a constructive dismissal by the courts if it is not authorized by a contractual term or past practice. The obligation to provide an employee with fair notice of termination or severance pay has not changed as a result of the pandemic, especially where the employer has maintained some operations.
• Litigation is costly: Trying to cut corners to speed up the resolution of a lawsuit can in fact add delay and expense, as was the case here. There are several means of disposing of an action summarily but they can only be used when appropriate. If a matter is not suitable for summary disposition, the moving party will lose on procedural grounds, no matter the merits of the underlying action. An experienced employment lawyer at Samfiru Tumarkin LLP can help resolve claims quickly and efficiently through a negotiated and confidential resolution