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COVID-19 Constructive Dismissal Question Unanswered

Ontario employers must continue to wait for an answer to the question of whether an employee temporarily laid off for reasons related to COVID-19 can claim constructive dismissal as the Ontario Court of Appeal has declined to provide guidance on this, says a Norton Rose Fulbright ‘Legal Update.’ The uncertainty created by the COVID-19 pandemic caused many employers to take measures to address the unprecedented public health measures, including placing their employees on temporarily layoff.?At common law, a temporary layoff is presumptively considered a constructive dismissal and the common law presumption of constructive dismissal has historically been applied despite provisions in the?Employment Standards Act, 2000?defining layoffs of a certain length to be temporary layoffs and not a termination. Shortly after the onset of the pandemic, the government of Ontario introduced legislative amendments that appeared to introduce a new category of leave: infectious disease emergency leave. With Ontario employers waiting for common law despite this provision, many had hoped the issue would finally be resolved by in?Taylor v Hanley Hospitality Inc. There are two contradictory Ontario Superior Court of Justice decisions. In?Coutinho v Ocular Health Centre Ltd., the court found that the employer’s unilateral decision to lay off an employee off constituted a constructive dismissal and the regulation did not bar her from bringing a civil action pursuant to the common law.?However, in?Taylor v Hanley Hospitality Inc., it?held that by enacting the regulation, the legislature had clearly intended to displace the common law doctrine of constructive dismissal in the unique context of layoffs caused by the COVID-19 pandemic.?While it was hoped that the court of appeal’s decision in?Taylor?would provide much-needed clarity on the issue and guidance to employers and employees impacted by the COVID-19 pandemic, the court disposed of the matter without making any ruling on the impact that of the regulation had on the common law doctrine of constructive dismissal. Instead, it dismissed the appeal on the basis that the motion judge had erred by dismissing the action on a summary basis in circumstances where the material facts, including facts necessary to assess legislative intent, were either in dispute or not properly before the court. It leaves unanswered the question of whether an Ontario employee, temporarily laid off for reasons related to COVID-19, can claim constructive dismissal?at common law.

CRA Clarifying Tax Status Of Settlements

Clients who lost money in their RRSPs (registered retirement savings plans) and later received a settlement from a lawsuit related to those losses may get more clarity about whether that payment will be taxed. The Canada Revenue Agency (CRA) has clarified its position on settlements from class-action lawsuits in relation to losses incurred in registered plans in its updated?‘Income Tax Folio S3-F10-C3, Advantages – RRSPs, RESPs, RRIFs, RDSPs, and TFSAs.’ Settlement payments made directly to the associated registered plan “would not constitute a premium, gift, or contribution to the plan,” it says, and would not result in an income inclusion to the taxpayer controlling the plan. As well, a settlement payment to a plan’s controlling individual would not be taxable if the amount was returned to the plan. However, taxpayers may be taxed on settlement amounts if they receive the payment and don’t return the amount to the plan “within a reasonable time” ? generally defined as six months from when the payment was received or by the end of the tax year, whichever is later. If the plan associated with the settlement amount no longer exists or has matured, the payment could be made to another registered plan of the same type. In the case of an RRSP or RRIF (registered retirement income fund), a settlement payment amount would be included in the individual’s taxable income. However, with a TFSA (tax-free savings account), the individual would face no tax as TFSA distributions aren’t taxable. The changes are out for comment until June 24.

For details on these stories, visit www.bpmmagazine.com

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