12 key developments in Canadian labour and employment law in 2021

Leading employment lawyers detail the biggest changes of the past 12 months

BY Rhonda B. Levy 17 Jan. 2022

Part one of two in HRD’s employment law roundup.

In 2021, Canada saw significant statutory and case law developments in labour and employment law, some of which related to COVID-19. This Insight provides an overview of key 2021 developments, with links to more detailed articles and commentary.

On January 1, 2021, Bill C-65, An Act to amend the Canada Labour Code and other legislation (Bill C-65) and the Work Place Harassment and Violence Regulations (Regulations) came into force. Bill C-65 and the Regulations set out the requirements that federally regulated employers must meet in order to satisfy their obligations under the Canada Labour Code to investigate, record, report, prevent and provide training with respect to workplace harassment and violence, including sexual harassment and sexual violence.
In McGuinty v. 1845035 Ontario Inc., 2020 ONCA 816, the Court of Appeal for Ontario (OCA) upheld the lower court’s decision to award an employee one of the highest damage awards ever granted in Canada for constructive dismissal ($1,270,000), the amount the employee would have earned for the balance of the term of his contract. In doing so, the OCA did not interfere with the trial judge’s finding that the employee, “did not return to work, could not return to work, and did not condone the [employer’s] actions.” In concluding that the employee had not condoned his constructive dismissal, the OCA considered the employee’s unique personal circumstances and noted that he did not return to work due to depression and anxiety caused by the employer’s conduct in constructively dismissing him.
In C.M. Callow Inc. v. Zollinger, 2020 SCC 45, the Supreme Court of Canada (SCC) expanded the duty of honest performance, which applies to parties to all contracts including employment contracts, by holding that they cannot knowingly deceive one another about matters directly linked to performance of the contract. This prevents a party to the contract from remaining silent upon becoming aware that a counterparty has developed a false impression caused by the party’s misleading conduct. Callow has significant implications for employers in relation to their employment agreements and other contracts. For example, once a termination decision is made but not yet carried out, an employer should not deliberately mislead the employee through “active communications” that reassure the employee that their future employment is secure.
In Caplan v. Atas, 2021 ONSC 670, the Ontario Court of Justice recognized a new common law tort of internet harassment, which may provide recourse and remedies for employers (and others) who are harassed, bullied and/or stalked online.
The decision of the SCC in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 (Wastech) clarified the duty to exercise contractual discretion in good faith. Wastech, which applies to all contracts entered into in which a party has discretionary power, including such contracts entered into by employers, provides that the duty to exercise contractual discretion in good faith is obligatory in all contracts even when the discretion is unfettered; cannot be contracted out of; operates irrespective of the intention of the parties; and requires the parties to exercise their discretion reasonably and not capriciously or arbitrarily. Determining whether a breach has occurred involves contractual interpretation and when the duty is violated the contract is breached.
The Ontario Court of Appeal’s decision in Abbasbayli v. Fiera Foods Company, 2021 ONCA 95 reminds corporate directors that: (a) an employee may be able to make a claim against them in a wrongful dismissal action for unpaid wages under s. 131 of the Ontario Business Corporations Act (OBCA), including in circumstances when such a claim is unavailable under s. 81 of the Employment Standards Act, 2000 (ESA); and (b) in certain circumstances, a non-shareholder employee may have standing as a “claimant” to claim “oppression” under OBCA s. 248 in an to attempt to hold directors personally liable.
In Nahum v. Honeycomb Hospitality Inc., 2021 ONSC 1455, the Ontario Superior Court determined that if an employee is pregnant at the date of dismissal, her pregnancy is a factor that a court may consider when determining her reasonable notice period, provided the pregnancy is reasonably likely to negatively impact the employee’s ability to find alternative employment. The court observed that in most cases, pregnancy is likely to increase the amount of time it will take a person to find new employment because an employer seeking to fill a position is likely to have a bona fide immediate need for someone in the role and many employers would not be interested in a new employee who would soon be absent because they would require a lengthy leave. The court awarded the 28-year-old employee five months’ reasonable notice after she worked for the employer for only four and a half months. On November 15, 2021, in Nahum v. Honeycomb Hospitality Inc., 2021 ONSC 7546, the Ontario Superior Court of Justice (Divisional Court) dismissed the employer’s appeal.
Ontario Regulation 228/20 (IDEL Regulation) under the Employment Standards Act, 2000 (ESA) provides that an employee in a non-unionized workplace who, any time during the “COVID-19 period” does not perform the duties of their position because their work hours are temporarily reduced or eliminated by their employer for reasons related to COVID-19, is deemed to be on Infectious Disease Emergency Leave (Deemed IDEL). The Regulation amends layoff and constructive dismissal rules under the ESA, and in most cases, eliminates temporary layoffs and the risk of a constructive dismissal claim under the statute for the defined “COVID-19 period.” The end date of the COVID-19 period has been extended several times (most recently to July 30, 2022). In Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 (Ocular Health), Ontario’s Superior Court of Justice (SCJ) decided that the IDEL Regulation did not remove an employee’s common law right to claim constructive dismissal arising from a layoff during the COVID-19 pandemic. However, just six weeks after Ocular Health was decided the SCJ came to the opposite conclusion. In Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135, the SCJ decided that the IDEL Regulation precludes an employee who was laid off during the pandemic from claiming constructive dismissal at common law. At this time, we await the result of appeals of both decisions. In the meantime, these contradictory decisions leave the law in an ambiguous state.
In United Nurses of Alberta v. Alberta Health Services, 2021 ABCA 194, the Alberta Court of Appeal confirmed that the applicable test for establishing a prima facie case of family status discrimination in Alberta is the three-part test established by the Supreme Court of Canada in Moore v. British Columbia (Education), 2012 SCC 61.
On June 3, 2021, the federal government’s Bill C-5, amending Canada Labour Code and other legislation received Royal Assent. This bill provides for annual observance by the federal government and federally regulated workplaces of a new statutory holiday on September 30, the National Day for Truth and Reconciliation.
In O’Reilly v. ClearMRI Solutions Ltd., 2021 ONCA 385, the OCA held that the common employer doctrine imposes liability on companies within a corporate group only if each can be said to have entered into a contract of employment with the employee.
In Eynon v. Simplicity Air Ltd., 2021 ONCA 409, the OCA refused to overturn a jury’s $150,000 punitive damage award in favour of an employee who sued the employer for injuries suffered in a workplace accident. The trial judge’s instructions to the jury on punitive damages focused on the hour between the accident and the employee’s arrival at hospital. During this time the employee’s supervisor indicated that he had little regard for the safety of the employee, laughed when the employee screamed in pain, refused to look at the employee’s injury or call an ambulance as the employee asked, dropped the employee at a hospital entrance, told him to say the injury occurred at home, and did not accompany him inside. In dismissing the appeal, the OCA stated the conduct of the supervisor occurred in the course of his employment, his conduct was the conduct of the employer, and it occurred within “a culture within the company whereby employees failed to place adequate importance on best safety practices.”