Government of Ontario Clarifies COVID-19 Leave Rules for Employers

On Friday, May 29, 2020, the Ontario government passed a new regulation (O. Reg. 228/20) under the Employment Standards Act, 2000 that made a fundamental change to the rules governing employees who had lost work or had wages reduced as a result of COVID-19.

As a result of declining business or because of government orders requiring businesses to close during COVID-19, many employers placed their employees on a temporary lay-off. A temporary lay-off is permissible only if expressly provided for in the employment contract. A temporary lay-off could only extend past 13 weeks under various conditions, and with week 13 coming up for many employers, many were exploring their options in extending the temporary lay-off period.

The new regulation clarified the legal landscape regarding a reduction or elimination of employee hours due to COVID-19.

The new regulation states that if “the employee’s hours of work are temporarily reduced or eliminated by the employer for reasons related to [COVID-19]”, then the employee is deemed to be on infectious disease emergency leave, rather than a temporary lay-off or a constructive dismissal. This provision has been backdated to March 1, 2020, and will apply for 6 weeks after the day that the COVID-19 declaration of emergency comes to an end.

The regulation also clarifies that an employee who has been constructively dismissed or an employee who has been laid off for a longer period than the temporary layoff period before May 29, 2020, is considered terminated and not on emergency leave.

The regulation also clarifies that a temporary reduction in hours or wages does not constitute a layoff or a constructive dismissal. To determine whether there has been a “reduction in hours”, the regulation considers the employee’s current hours worked compared to the week they worked before March 1, 2020. The same rule applies to determine whether there has been a “reduction in wages”.

The regulation also contemplates that employers who have had to reduce or eliminate employee hours will not be required to make contributions to an employee’s benefit plan who is on emergency leave on or after May 29, 2020. However, employers will likely be required to make contributions to the benefit plan of employees on emergency leave between March 1, 2020 and May 29, 2020.