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Recalling employees back to office from remote work? Think constructive dismissal

Originally published in The Lawyer’s Daily

In a long-awaited employment law ruling, the Ontario Superior Court of Justice on April 27, 2021, held that employees temporarily laid off because of the COVID-19 pandemic can bring civil action for constructive dismissal.

In Coutinho v. Ocular Health Centre Ltd. [2021] O.J. No. 2237, Justice David Broad held that Ontario’s Infectious Disease Emergency Leave Regulation (IDEL) enacted under the Employment Standards Act, 2000 allowing employers to temporarily lay off their employees due to the pandemic does not take away a laid-off employee’s common law right to sue for constructive dismissal. The plaintiff, Coutinho, had been advised by her employer that the layoff was legal in accordance with Ontario’s new regulations enacted during the COVID-19 pandemic. Justice Broad disagreed — and found that the IDEL regulation does not affect Coutinho’s right to pursue a claim for constructive dismissal.

Likewise, employees who have been working remotely for the past year could arguably pursue a constructive dismissal claim, should they be recalled back to work if the employer did not explicitly reserve the right to recall the employee, through a valid Remote Work Policy.

In the Ontario decision of Hagholm v. Coreio Inc. 2018 ONCA 633, the plaintiff-employee was permitted to work from home three days per week as per the employment agreement. When the company was purchased, the new owners informed the employee that she had to return to the office. She refused and sued the employer. The courts eventually found that the recall effectively amounted to constructive dismissal, as the employer had unilaterally changed the terms of the employee’s employment.

A remote work policy is the only surefire way to protect an employee and employer from human rights claims related to fundamental changes to the employment relationship, which largely include recalling them from remote working arrangements.

At its core, constructive dismissal is a termination of employment by conduct rather than by words — the employer does not expressly state that the employee has been terminated, but its actions amount to a rejection of the existing terms of the employment contract.

A constructively dismissed employee is entitled to claim monetary damages — for notice, severance and moral and punitive damages arising from the manner of dismissal.

When an employer makes a substantial change to the terms of an employee’s contract or demonstrates it no longer intends to be bound by the terms of the contract, an employee may treat their employment as terminated (Potter v. New Brunswick Legal Aid Services Commission 2015 SCC 10). This change may be brought about by (1) a single, unilateral act of the employer that breaches the contract in a manner substantially altering the essential terms of the contract; or (2) ongoing conduct which demonstrates an intention to no longer be bound by the employment contract, from the perspective of a reasonable person.

Recalling your employees back to work from their remote roles without the appropriate authority to do so could be a constructive dismissal. For years, our law firm has touted the use of legal, enforceable and foolproof remote work policies for distributed teams in Canada. Since the onset of the COVID-19 pandemic, that requirement has become quintessential.

The benefits of a distributed team are plentiful — enormous costs savings on overhead and real estate, work-life balance and employee autonomy and access to wider and more diverse talent pools. When exercised, remote work flourishes — but it cannot be abused.

When implementing a remote workforce, it is critical that remote policies are drafted to reflect any new arrangements, and most importantly, a unilateral right to recall the employee.

The liabilities and obligations of employers and employees change drastically when an organization shifts from in-office to in-home. How can you ensure your legal documents are accurately drafted? If you have any doubts, contact a remote-employment specialist.

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