An Ontario Superior Court has awarded a long-term employee 16 months’ pay in lieu of notice after ruling his employer constructively dismissed him by imposing a temporary layoff without contractual authority during the COVID-19 pandemic.
The court found that Grenville Management Inc. had no right to unilaterally lay off R.T., who worked as an IT specialist for the digital print production company for 14.5 years before being placed on temporary layoff in March 2021.
Contract language key to ruling
The employment agreement between the parties stated: “It is agreed that the Company reserves the right to ask you … to accept a temporary layoff, during which time you may be eligible for Employment Insurance in accordance with the relevant statutes.”
However, when Grenville laid off R.T. on March 5, 2021, the layoff notice did not ask for his agreement. Instead, it notified him of the layoff and only sought his consent to extend the layoff period from 13 weeks to 35 weeks within a 52-week period.
The court ruled this distinction was crucial. “The layoff notice given to (him) notified him of the layoff instead of asking him for his agreement to a layoff,” the judgment stated. “It only asked him to agree to an extension of the layoff the employer had no right to impose.”
The court rejected the employer’s argument that R.T.’s signature on the layoff extension constituted agreement to the layoff itself. “Asking for the extension of a layoff presented as a take-it-or-leave-it event is not the same as asking for consent to a layoff,” the judgment noted.
COVID regulation doesn’t override common law
Grenville argued that Ontario Regulation 228/20, enacted during the provincial COVID-19 state of emergency, protected it from constructive dismissal claims. The regulation stated that temporary reductions in hours or wages “for reasons related to the designated infectious disease” did not constitute constructive dismissal during the COVID period.
The court disagreed, finding the regulation could not override section 8(1) of the Employment Standards Act, which states: “Subject to section 97, no civil remedy of an employee against his or her employer is affected by this Act.”
The court concluded the regulation only applied to constructive dismissal claims under the ESA itself, not common law claims. “No subordinate regulation could suspend or curtail the common-law causes of action, if the statute expressly declined to affect them,” the judgment stated.
This ruling aligns with similar decisions in Coutinho v. Ocular Health Centre Ltd. and other cases, rejecting the contrary finding in Taylor v. Hanley Hospitality Inc.
Frustration defence fails
The employer also argued the employment contract was frustrated by R.T.’s subsequent disability, which included spinal stenosis, lymphedema requiring surgery, and a pulmonary embolism that occurred after his layoff.
The court rejected this defence, finding insufficient evidence that R.T. was permanently unable to work as of the layoff date. A doctor’s note stating R.T. suffered disability “Since March 5, 2021” was deemed “both counterfactual and ambiguous” since March 5 was the layoff date, not when his health issues began.
“Frustration requires cogent and contextually sound evidence of the employee’s permanent inability to perform or continue to perform the duties of the job, at the time of termination,” the court ruled.
Notice period calculation
Using the traditional Bardal factors — nature of employment, length of service, age, and availability of similar employment — the court established a base notice period of 10 months for R.T.’s position as an IT specialist.
However, the court added six months due to pandemic-related employment challenges. “Because of the specific nature of Mr. Turcotte’s job, adding a month to a conventional notice range is likely insufficient,” the judgment stated, noting that R.T.’s role servicing office equipment was more severely impacted by pandemic restrictions than other types of work.
The court found R.T.’s failure to seek alternative employment during the layoff period was reasonable given he believed he was on a legitimate temporary layoff and expected to be recalled.
No punitive damages awarded
Despite criticizing the employer’s conduct, particularly a recall notice sent after learning R.T. was unable to return to work, the court declined to award punitive or moral damages.
The court found a “substantial disconnect between the misconduct and the effect on (him),” noting that R.T.’s silence about his health issues during the layoff period made it difficult to connect the employer’s conduct to his situation.
“Recalling him to work shortly after it learned at his examination for discovery that he felt unable to return to work was, by any measure, an act of bad faith to the point of being cynical,” the court stated, but found this insufficient grounds for additional damages.
ESA compliance issues
The court also examined whether Grenville complied with ESA requirements for temporary layoffs. The employer argued a $500 annual health expense account qualified as an “employee insurance plan” under the statute.
The court disagreed, finding the account did not constitute insurance since there was no evidence of employer contributions resembling premiums or insurance features. “Nothing about the account bore the features of insurance, in the sense of a fund to which the employer contributed anything resembling a premium,” the judgment stated.
The decision reinforces that employers cannot unilaterally impose layoffs without clear contractual authority, even during extraordinary circumstances like a pandemic. It also clarifies that emergency COVID regulations did not suspend common law constructive dismissal rights.
For more information, see Richard Turcotte v. Grenville Management Inc., 2025 ONSC 3087 (CanLII).
