June 30, 2021
by Israel Foulon LLP

Summary

In Fogelman v. IFG., 2021 ONSC 4042, the Court held that where an employee is placed on Infectious Disease Emergency Leave (“IDEL”) in accordance with Ont. Reg. 228/20 (“the Regulation”) under the Employment Standards Act, 2000 (“the ESA”), an employee can claim constructive dismissal at common law. This is a direct contradiction to the decision of Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135, which we previously discussed in our June 10, 2021 Information Bulletin.

This decision is the second from the Ontario Superior Court of Justice holding that the Canada Emergency Response Benefit (“CERB”) is not deductible from wrongful dismissal damage awards. The Court in Fogelman also made punitive damages award against the employer for its failure to comply with the employees’ entitlements under the ESA, and in response to the employer’s ‘hardball’ litigation tactics.

Fogelman v. IFG., 2021 ONSC 4042

Fogelman was initially hired as an Independent Contractor. After five years, Fogelman subsequently accepted a position of full-time employment in exchange for agreeing to the terms of a written employment agreement. On March 16, 2020, IFG placed Fogelman on a temporary lay-off citing a downturn in business due to the impact of the COVID-19 pandemic. In response, Fogelman filed a Statement of Claim alleging that he had been constructively dismissed at common law because the contract did not permit the employer to place him on a temporary layoff. As of the date of the layoff, Fogelman had ten (10) years and eight (8) months of service, was forty-eight (48) years old, earned an annual salary of $85,000.00 and held a middle management position.

The Court was asked to consider whether the IDEL Regulation removed Fogelman’s ability to assert constructive dismissal at common law, and whether CERB payments should offset the Employee’s award for damages. The Court ruled in favour of the employee awarding him fifteen (15) months of reasonable notice (without any deduction for payments received via CERB), unpaid vacation pay, and punitive damages in the amount of $25,000.00.

The Court’s Findings

First, it is important to note, that Fogelman was not pursuing his right to termination and severance pay under the ESA. Instead, he was relying on a civil remedy at common law to claim damages for constructive dismissal. In support of this position, the Court relied on section 8(1) of the ESA, which states that, “no civil remedy of an employee against his or her employer is affected by this Act.” The Court concluded that the ESA does not supersede an individual’s ability to assert a cause of action for constructive dismissal at common law.

Accordingly, the Court held that the scope of the regulation was limited to precluding an employee’s right to a pursue a remedy for constructive dismissal under the ESA. In support of this position, the Court relied on the guide produced by the Ministry of Labour which states, that “[the Regulation] do[es] not address what constitutes a constructive dismissal at common law.”

Second, the Court considered whether the CERB ought to be deducted from the employee’s damages for wrongful dismissal. On this point, the Court determined that CERB payments cannot be deducted from wrongful dismissal damages and should not be treated as income for the purposes of assessing an employee’s mitigation efforts.

Lastly, the Court awarded punitive damages in the amount of $25,000.00 arising from the employer’s conduct post termination and unreasonable litigation tactics. The Court concluded its decision with a staunch warning to employers, holding that,

…Failure to comply with the ESA is an independent wrong that is outrageous and reprehensible behaviour deserving of punitive sanction. The purpose of the ESA is to provide employees with minimum standards, including minimum notice and severance in the case of termination without cause. Employers cannot be permitted to ignore their obligations under the ESA while awaiting the outcome of a court proceeding where the termination was conceded to be without cause. It is critical that the courts protect the statutory rights of employees, especially in harsh economic times.

Take Away for Employers

At present it is still unclear as to whether placing an employee on IDEL amounts to constructive dismissal at common law according to the Ontario Superior Court of Justice.  There are contradictory decisions on this issue.  We expect that the Ontario Court of Appeal will provide further guidance in the near future.  

Employers should be mindful of their obligation under the ESA to provide employees with notice and severance pay, if applicable.  Although the correctness of awarding punitive damages in this context is questionable, this decision demonstrates that failure to comply with minimum ESA obligations may result in an award of punitive damages. If you have concerns as to whether you are in breach of your obligations, we recommend that you reach out to a member of our team for assistance.

Israel Foulon Wong’s Response to COVID-19

Israel Foulon Wong is assessing the situation as it evolves, and is taking all necessary precautions within its workplace. To slow the spread of COVID-19 and for the health of our team and clients, absent extraordinary circumstances we are working remotely until further notice whenever possible. However, please be aware that our offices remain open and are fully functioning. In the circumstances, we encourage our clients to contact us by phone and email to the extent possible. Voicemail messages left at our office phone numbers are immediately forwarded via email. All messages will be promptly responded to. We remain steadfast in our commitment to our clients and would be more than happy to assist you with concerns regarding COVID-19 or any other employment or labour matters.