WHERE WE WERE
It was March 16, 2020. News of COVID-19’s spread across Canada
began, and the measures to be taken were surely going to change my work environment. I woke up that morning with a slew of e-mails, mostly from employers asking me what to do about this situation.
The dental profession
mandated the temporary closure of all clinics, except for emergencies. Other disciplines were bound to follow suit. The calls came in with a mix of fear and uncertainty. “What do I tell my staff? Can I let them go without paying them? Will I get sued if I stop paying them?”
I did my best to navigate individual employment relationships. I reminded each client that things could change within the hour, which it did. For the most part, standard employment contracts couldn’t offer any guidance on crisis/pandemic management.
Since most employment agreements had no governing provisions, the employer had to tread carefully. “Temporary Lay-off”
became the topic of choice for that day. It is an option to postpone employment for a set time allowing the employer to avoid employee wages and regain financial stability. Employers saw it as a saviour, but it wasn’t clear how or when to use it.
Where the employment agreement doesn’t provide a contractual right to temporarily lay-off the employee, there may be a case for constructive dismissal. Since regular work hours and wages are paramount to the employment relationship, failure to deliver on those entitlements would render the contract void and allow the employee to seek damages.
Employers that did not have contractual authority for the temporary lay-off had to get approval from their employees. If the employee agreed to be on temporary lay-off, there would be no case for constructive dismissal.
WHERE WE ARE
Things have changed. Employers now have the potential to lean on government restrictions in deciding whether to lay off employees temporarily. The thin “essential worker”
definition puts several employers in a position where they can no longer justify paying wages. In comes the term “Frustration of Contract.” The Employment Standards Act
allows employers to be exempt from some of the usual obligations owed to employees. Notice is no longer necessary, and entitlements are next to nil. The ESA regulations exempt notice and severance obligations if:
An employee whose contract of employment has become impossible to perform or has been frustrated by a fortuitous or unforeseeable event or circumstance.
The Act describes the doctrine of “force majeure” or “act of god.” The Supreme Court of Canada defined it as “supervening, sometimes supernatural, event, beyond the control of either party, [which] makes performance impossible.” There are two main requirements (1) it must be beyond the control of either party; and (2) it must make performance impossible.
There is little argument that COVID-19 is beyond the control of employers and employees. It gets a bit murkier when trying to argue that the performance of the employment agreement is impossible. This is where employers may have acted too quickly in laying-off their employees.
WHERE WE WILL END UP
Some employers have used COVID-19 as an opportunity to get rid of high paid/seniority staff with minimal, if any, severance all while hiding behind a frustration of contract argument. With near certainty, these employers will face damage awards for wrongful termination. Previous decisions
paint an uphill battle for employers trying to argue frustration. Employers should prove that carrying on business with the employee was “impossible.” They would have to evidence that they explored the options available to them, and there were none. Options would include:
• Governmental Support for Business including wage subsidies and low-interest loans;
• Temporary lay-off allowing the employee to access E.I.;
• Use of employee’s accrued vacation; and
If, after these options were explored, the employment relationship remained impossible to continue, the employer may be successful in justifying the employee’s termination amidst COVID-19. This issue is going to be a significant debate for employees and employers alike and will come to light as COVID-19 restrictions start to decrease, and employers restart operations.