Dealing with the employment fallout from coronavirus shutdowns

By LegalMatters Staff • The COVID-19 pandemic has led to unprecedented change, uncertainty and questions requiring informed answers, says Toronto employment lawyer Jeffrey M. Andrew.

Andrew, co-managing partner with Cavalluzzo LLP, says the unparalleled fallout resulting from the coronavirus has left workers concerned for the future and now is not the time to be afraid to ask for advice.

“I have certainly dealt with mass layoffs or employment restructuring of large employers which affect a community. But this affects almost everyone employed in Canada. Nothing on this scale has occurred since the first half of the 20th century, in the lifetime of our parents, grandparents and great grandparents,” he tells LegalMattersCanada.ca. “I cannot stress enough – get your own individual legal advice before making any decisions about the actions of your employer that are of concern to you. Acting on your own or not acting at all could lead to consequences you later regret.

“Many law firms, including our own, give initial free consultations so that employees can make an assessment of their options as well as alternative fee arrangements if matters get more involved,” he adds.

Government programs

In an effort to assist people and businesses, Andrew says federal and provincial governments have responded with laws, programs and funds, including the Canada Emergency Relief Benefit (CERB), which temporarily replaces Employment Insurance for COVID-related work loss and the Canada Emergency Wage Subsidy (CEWS), which encourages companies that have lost revenue to  keep people employed. 

The Ontario government has also passed a regulation that ensures workers get leave without pay when forced to self-isolate or quarantine because of the pandemic. 

“It is quite likely that more extraordinary government steps will happen. The Ontario government and the Superior Court have suspended residential tenant evictions for now and some banks are apparently showing some leniency with mortgage payments,” he says. “But it is still a patchwork that won’t address every immediate need of working people at this extraordinarily stressful and rapidly changing time.”

Andrew says the legal system and principles that apply to employees “are probably sufficiently adaptable to respond to the crisis, but not necessarily as quickly and satisfactorily as people might hope.” 

Essential services

“For example, law offices such as ours are presently deemed one of the essential services in Ontario and are continuing to advise employees, albeit by remote means,” he says. “However, the courts, the labour boards and all other bodies that adjudicate employment matters are closed except for urgent matters that are dealt with by phone or video.

“It remains to be seen if cases involving job loss or layoffs will be viewed as meeting the urgency test. I expect the legal fallout from these things may last for quite some time.”

Andrew notes “tools are there to deal with many of the legal problems that arise.” 

“However, the scale is unprecedented and leads to problems that the law is not so good at addressing – the legal processes are not fast and may now be further burdened with cases in the future,” he says. “It is possible that governments in the federal and provincial sectors will step in to make substantive and procedural changes to address these issues. It is too soon to tell since they are rightly fixated on keeping the health care system and economy functioning.”

Doctrine of frustration

Andrew says common law, which governs individual employment contracts, includes a concept that is often implied as a term of the contract – the doctrine of frustration. 

Simply put, when an unforeseen event occurs that is out of the control of those involved but eliminates the ability of one or both to complete their bargain, the contract is considered frustrated, he explains.

“This brings their contractual obligations to each other to an end, including, conceivably, severance pay obligations,” Andrew says, adding that the Employment Standards Act, 2000 preserves rights to notice of termination and statutory severance for some workers.

He says some employers may try to argue that frustration relieves them of severance obligations if they do not recall laid-off workers.

“But this argument will have some challenges,” Andrew says. “Most employers who have implemented layoffs hope to resume and bring back their workforce. Unless the pandemic causes a substantial inability to continue all or a significant chunk of the business, frustration might not be available to relieve them of severance obligations for any workers who are not recalled.”

As well, given the availability of government programs to help many employers and their workers, Andrew says it might be difficult to characterize the pandemic as an argument to invoke the doctrine of frustration. 

‘Play out in the legal system’

“I expect this will play itself out in the legal system, perhaps in novel ways,” he says.

Andrew says the COVID-19 shutdown led to mass temporary layoffs and unilateral pay cuts being imposed in many workplaces.

For unionized workers, employer rights are regulated by the terms of the collective agreement, various employment-related statutes and arbitration law. 

For non-union workers, unless the written or oral contract of employment reserves the right to the employer to temporarily lay off or reduce pay – something rarely if ever seen – temporary layoffs or pay cuts can amount to “constructive dismissal” if the employee does not accept the change, he says. 

“The worker can take the position with their employer that their employment is terminated,” Andrew says. “In theory, the employee can treat it as a dismissal and seek damages for lost pay and other entitlements.”

‘Key risks’

However, he warns this approach “poses key risks and challenges.”

“For those who hope to return to their job in the future, telling their employer that they reject the change and treat it as a dismissal will likely eliminate that possibility,” says Andrew.

Some workers may stay silent and wait to see what unfolds before deciding how to respond to the layoff or pay cut.

“But the longer they wait before registering any objection or concern, they run the risk that their inaction may be seen as implicit acceptance of the changes,” Andrew says,

Those whose pay is cut may face another challenge, he says, noting that if they claim to have been constructively dismissed and quit, they still have a duty to mitigate their damages. This means looking for and accepting reasonable alternative employment to reduce their losses – something those who have been laid off and allege dismissal must also do.

However, by quitting their job when their pay was reduced their former employer will probably say they did not mitigate their damages. The employer will say that they should have continued to work at their job at lower pay while advancing their dismissal claim, instead of quitting, in order to reduce their wage losses.

“Failure to try to mitigate can lead to a worker being owed reduced or even no damages even if they are later found to be constructively dismissed,” Andrew says. 

Weigh all options

Workers should carefully weigh all their options. For example, a person who is laid off and decides to treat it as a dismissal to seek severance may find getting “other reasonable employment in the near future is very difficult given the current environment,” he says.

As well, remaining in the job after a pay cut and claiming damages from your employer “is hardly likely to make them happy with you,” Andrew says,

“There is also the risk that even if you do have a good claim, your employer may not have the capacity to pay it,” he says. “These are tough choices to make with many competing risks. That is why employees should promptly seek legal advice about their options before making any decisions.

“The law of constructive dismissal is filled with pitfalls and it is critical that employees get legal advice before making decisions. It is time well invested.”