COVID Layoff Still Constructive Dismissal? – Ristanovic Case

By: Joel Fairbrother

Published: 17 May 2021

Employer Not Allowed to Play Dumb on Resignation

Ristanovic v Corma Inc., 2021 ONSC 3351 is an important new Ontario case where the court found that two layoffs which occurred at the beginning of the COVID outbreak amounted to constructive dismissal.

This case is important because there have been many thousands of layoffs like this across Canada, and there are very few cases so far dealing with whether a COVID layoff is a constructive dismissal.

A Little History

Lay-offs appear to be permitted by the minimum employment standards legislation in each province, including under Alberta’s Employment Standards Code.  However, several cases in Alberta and elsewhere have held that if an employee is laid off, that employee can sue for “constructive dismissal”, which is where the employee sues for severance as if his or her employment were outright terminated by the employer.

The reason for this is that a lay-off cuts deep into the most basic parts of an employment relationship: continuous work for continuous pay.

This matter is not without controversy, and there are valid arguments in favor of lay-offs not being considered constructive dismissal.  However, the case law on the subject so far has weighed in favor of employees.

Since the onset of COVID, many provinces have made changes to their employment standards legislation to permit longer lay-offs, sometimes without notice.  Alberta is no exception.  From the time of those changes to the present, employers have been increasingly gearing-up to have this lay-off / constructive dismissal battle once again, based on the argument that the legislative changes, coupled with the extreme economic circumstances of COVID, should permit lay-offs without triggering constructive dismissals.

Ristanovic found that two COVID lay-offs were in fact a constructive dismissals in Ontario.

Facts In Ristanovic

The outbreak of COVID in China in late 2019 and early 2020 had a devastating impact on this employer who had key suppliers there.  Its business declined by 40%.  The relevant employees were laid off in early 2020 and advised that it was because of business decline.  At the time of lay-off they were advised that it was to be shorter than 35 weeks, but they were never actually recalled.

The plaintiffs sued for constructive dismissal.

The employer argued that there was an implied term in the contracts of employment allowing the employer to lay off an employee in the extraordinary circumstance of a global pandemic.

The court rejected the employer’s argument in the particular circumstances of this case, and was very critical of the notion that a decline in business (even a substantial one) could imply a right to lay-off without it being considered a constructive dismissal.  The court did however leave undecided the question of whether this argument could potentially work in some other case.  Here is the court’s reasoning:

[18]      In effect, the defendant is asking me to imply into a contract of employment a form of force majeure clause. I am mindful of the need to decide only those matters that require a decision in this or any other case. On the facts of this case, I don’t think that the question of an implied “global pandemic” exception to the well-settled law prohibiting non-consensual lay-offs properly arises. I reach this conclusion for two reasons.

[19]      First, the lay-offs in this case arose significantly before the facts had evolved to the point of a global pandemic impacting our entire Province or country. […]  There were no lock-down orders in effect in Ontario at the time the plaintiffs were laid off. The plaintiff was not prohibited from operating and the plaintiffs were not forbidden from coming to work.

[20]      Without employing hindsight, there is little to distinguish the situation as regards [the Employer] in late January/early February 2020 from any other adverse situation that might commonly affect a business, even to the extent of causing 40% of its revenues to dry up.  A retailer may find business impacted by a big-box store opening a block away; a manufacturer may find the market flooded with imports as a result of a change in tariffs or a free-trade agreement.  Insolvency, recessions or the evolution of the competitive marketplace have never justified unilateral lay-offs under our law. [underline added]


[22]      Second, even if it were reasonable to imply a “global pandemic” term into the employment agreement – and I express no opinion on the matter in light of my conclusion that the question does not arise in this case – no such implied term can override the express provisions of s. 56 of the ESA which deems a lay-off longer than 35 weeks to be a termination of employment.  It is not open to the parties to contract out of the minimum standards of the ESA whether by an express term of their agreement or by an implied term.

My Take

The issue of whether a COVID layoff is a constructive dismissal is not decided by this case, but this one is persuasive authority in favor of employees on the subject.

Bow River Law

Bow River Law is a brand-new firm, but our lawyers are knowledgeable, skilled and experienced in employment law, human rights, and labour law in Alberta. 

If you are an employee who has been laid-off for any reason, let us help you choose the best course of action to protect your legal interests.

If you are an employer who is considering a lay-off of one or more employees, let us help you understand your legal rights and obligations and protect your legal interests.

The Ristanovic case can be found at the following link on CanLii: