Ocean Pacific Hotels Ltd., the operator of the Pan Pacific Hotel in Vancouver, constructively dismissed its regular hourly employees by ceasing to schedule their shifts indefinitely in response to the COVID-19 pandemic, the Supreme Court of British Columbia has ruled.
The case revolves around actions taken by Ocean Pacific in March 2020, when the COVID-19 pandemic caused a dramatic downturn in the hotel industry, including at the Pan Pacific Hotel. Business plummeted overnight, and Ocean Pacific, like many in the industry, faced tough decisions about how to survive financially. As the largest controllable cost, employee expenses were cut first. Salaried employees were laid off, and hourly employees had their shifts cancelled.
Romuel Escobar, representing a certified class of regular hourly employees, argued that Ocean Pacific’s indefinite cessation of shifts without clear communication constituted a constructive dismissal. Escobar also claimed that the company misled employees about their prospects for continued employment, breaching its duty of good faith and honest performance under their employment contracts.
Constructive dismissal
The court found in favour of the employees on the issue of constructive dismissal. The court ruled that the indefinite cessation of work for the class members was a fundamental breach of their contracts. Ocean Pacific had argued that the employment contracts explicitly allowed for fluctuations in work hours based on business needs, but the court disagreed that this provision extended to an indefinite cessation of all work.
“The essence of a contract of employment is performing work in exchange for remuneration,” the court noted. “Ceasing providing hours to class members for an indefinite, lengthy period of time is a fundamental breach of the contract that is not permitted by the provision that assignment of hours is subject to business needs.”
Pandemic a mitigating factor
However, the ruling was not entirely in favour of the employees. On the question of whether the COVID-19 pandemic justifies an increased notice period for those constructively dismissed, the court acknowledged that the pandemic did negatively impact the labour market, particularly in the hospitality sector.
The court concluded that these effects should be considered when determining notice periods for those who establish constructive dismissal, except for employees whose contracts include binding clauses limiting notice to statutory minimums.
Despite these findings, the court dismissed the employees’ claims that Ocean Pacific intentionally misled them about their job prospects. The class members had argued that Ocean Pacific’s communications throughout 2020 were misleading, fostering a false sense of security about their employment. However, the court found that the company’s communications, while encouraging and supportive, did not imply that all employees would be retained or that their jobs were safe.
Unprecedented global crisis
The court highlighted that Ocean Pacific was navigating an unprecedented global crisis and that its decision to offer reduced or casual work contracts was consistent with the information it had about the business’s needs at the time. The court concluded that the company’s actions did not amount to a breach of the duty of good faith and honest performance.
“As a result of the pandemic, the hotel industry faced an uncertain and precarious future,” the court noted. “Ocean Pacific’s communications with its employees, while empathetic and supportive, did not create a false impression of guaranteed employment.”
No breach of good faith
With the court finding no misleading conduct by Ocean Pacific, the employees’ claims for damages related to the alleged breach of good faith and honest performance were also dismissed. Similarly, the court rejected the claim for punitive damages, concluding that Ocean Pacific’s conduct was not “high-handed, malicious, arbitrary, or reprehensible” as alleged.
In summary, while the court recognized that the indefinite cessation of work amounted to constructive dismissal, it did not find that Ocean Pacific acted in bad faith or with dishonesty towards its employees during the pandemic.
For more information, see Escobar v Ocean Pacific Hotels Ltd., 2024 BCSC 1575 (CanLII).
