Continuing Debate over Infectious Disease Emergency Leave and Constructive Dismissal Claims: Fogelman v. IFG

**Written by Adele Zhang, Summer Student at Lee Workplace Law

Are temporary layoffs that occur during the COVID-19 pandemic constructive dismissals at common law?

This has been a pressing question amongst the employment law community since the enactment of the Infectious Disease Emergency Leave ("IDEL") provisions in May 2020. These provisions deem that, with certain exceptions, temporary eliminations or reductions of an employee's wages or hours are an emergency leave of absence, and not a constructive dismissal of employment under the Employment Standards Act (the "ESA"). However, the IDEL provisions do not explicitly state that an employee who experiences such a reduction or elimination cannot pursue their entitlements for constructive dismissal at common law. This has generated significant uncertainty.

There have now been three decisions released on this issue and there remains no clear direction. In our earlier blog, we discussed the decisions in Taylor v. Hanley Hospitality Inc, 2021 ONSC 3135 and Coutinho v. Ocular Health Centre Ltd, 2021 ONSC 3076. In Coutinho, the Court held that the employee could pursue a common law claim for wrongful dismissal despite the IDEL provisions. In Taylor, the opposite conclusion was reached.

The most recent decision in this saga is Fogelman v. IFG, 2021 ONSC 4042.


Facts

In 2009, Mr. Fogelman began working for the International Financial Group Ltd (“IFG”) as a Managing Director of Recruiting. On March 16, 2020, he was placed on a temporary layoff as a result of COVID-19. Upon being laid off, Mr. Fogelman retained legal counsel who immediately notified IFG that they would treat Mr. Fogelman’s temporary layoff as a constructive dismissal.

IFG refused to make any payments and argued that it was entitled to layoff Mr. Fogelman pursuant to the temporary layoff provisions of the ESA.


Interpreting the IDEL

The court considered whether the IDEL provisions meant Mr. Fogelman could not claim his temporary layoff amounted to a constructive dismissal at common law.

Like in Coutinho, the court held that Mr. Fogelman could pursue his common law entitlements. In reaching this conclusion, the court cited section 8(1) of the ESA which provides that the ESA does not supersede civil remedies otherwise available to an employee at common law.

In the alternative, the court found that Mr. Fogelman fell within one of the exceptions to the IDEL provisions. This exception provides that the IDEL provisions do not apply where: (i) the employee resigned in response to a constructive dismissal within a reasonable period of time, and (ii) this occurred before May 29, 2020. In such a case, the employee will be considered to have been terminated.

Since Mr. Fogelman resigned within days of his constructive dismissal, and this occurred before May 29, 2020, the Court concluded the IDEL provisions would not apply to him in any event.


Calculating Damages

After finding Mr. Fogelman was constructively dismissed, the court went on to discuss damages. Notably, the court addressed two interesting issues: (i) whether the Canada Emergency Response Benefit (“CERB”) Act income should be deducted from the damages award and (ii) Mr. Fogelman's entitlement to punitive damages.


CERB Payments

In this case, the court refused to deduct CERB Act income payments received by Mr. Fogelman from the damages awarded. By upholding the decision rendered in Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998, the court reaffirmed that CERB income should not be treated as a mitigating factor in calculating damages.


Punitive Damages

Interestingly, the court awarded Mr. Fogelman punitive damages as a result of IFG's poor behaviour in dealing with Mr. Fogelman over the course of his termination.

In determining this award, the court considered the following facts:

  • IFG refused to provide Mr. Fogelman with any statutory entitlements under the ESA even after being notified that Mr. Fogelman considered the layoff to be a constructive dismissal;
  • IFG failed to advise Mr. Fogelman on the possibility of being recalled to work;
  • IFG deliberately made it difficult for Mr. Fogelman to serve the statement of claim; and
  • IFG behaved poorly in its dealing with Mr. Fogelman following the termination.

In its analysis, the court considered IFG’s behaviour as well as it’s economic losses during COVID-19 in determining an appropriate punitive damages award. The court emphasized the importance of proportionality between the damages award and the goals of retribution, deterrence, and denunciation of misconduct.

In this case, the court found that $25,000 was an appropriate and proportional award of punitive damages.


Takeaways

Thus far, the Ontario courts have given us three different decisions on how the IDEL will impact constructive dismissal claims during the COVID-19 period. In this latest case of Fogelman v IFG, it appears that if an employee was placed on temporary layoff and told their employer they were treating it as a constructive dismissal all before May 29, 2020, the employee could still claim constructive dismissal at common law, regardless of whether the IDEL provisions generally preclude such claims.

As we wait for a Court of Appeal decision on this issue, it is likely that the lower courts will continue to release varying decisions.

Nonetheless, Fogelman v. IFG serves as an important reminder for employers to continue to treat employees fairly and in good faith following the end of the employment relationship to minimize risk of being ordered to pay the terminated employee additional damages.

Given the complex and changing interpretation of the IDEL, the ESA, and constructive dismissal claims, employers and employees alike are encouraged to seek legal assistance in cases like these. Lee Workplace Law would be happy to help.