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Temporary Lay-Offs due to COVID. Employer & Employee Rights and Obligations

Where an employer changes a fundamental term of employment, this may constitute constructive dismissal. It is difficult to imagine a more fundamental term of employment than that the employee be paid his or her salary. Since COVID-19 has resulted in significant business closures, many employees have been temporarily laid-off and are no longer being paid their salary.

Typically, where no agreement (employment contract) exists that expressly indicates that the employer was entitled to layoff the employee for any period of time, the employer cannot simply place an employee’s employment status on hold without pay and without substantial benefits and expect that this will not constitute constructive dismissal. If the demotion of an employee or a reduction in pay and responsibilities of an employee constitute constructive dismissal, then surely indefinite suspension with no guarantee of recall, no salary and virtually no benefits must also qualify for the same treatment at law.

In its clear and plain wording, the Employment Standards Act (ESA) allows for temporary layoffs and an employee is not terminated (for the purpose of the statute) until and unless his or her temporary layoff exceeds the time frames allowed by s. 56(2), prior to which time he or she is not entitled to termination or severance pay pursuant to O.Reg 288/01. If the layoff does exceed the timelines, then the employee has been terminated.

That said, the temporary layoff provisions of the ESA operate separately from an employees common law rights. The ESA provisions are intended to provide protection to employees in situations where layoffs are otherwise permitted as an express term of the employment contract by limiting temporary layoffs to the maximum time periods stated in the ESA.

“Temporary layoff” is a defined term[8] in the ESA, as follows:

A layoff of more than 13 weeks in any period of 20 consecutive weeks, if the layoff is less than 35 weeks in any period of 52 consecutive weeks and,

                                       i.              the employee continues to receive substantial payments from the employer;

                                    ii.              the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan;

                                   iii.              the employee receives supplementary unemployment benefits; and

                                   iv.              the employee is employed elsewhere during the layoff and would be entitled to receive supplementary unemployment benefits if that were not so,

Section 56(4) allows an employer to layoff an employee without specifying a recall date without being considered to have terminated the employment unless the period of layoff exceeds that of a temporary layoff.

Section 56(1)(c) provides that an employer terminates the employment if it lays the employee off for a period longer than the period of a temporary layoff.

Section 54 provides that no employer shall terminate the employment of an employee who has been continuously employed for three months or more absent written notice of termination under the act or having made appropriate payment in lieu of such notice.Section 56(1) provides that an employer terminates the employment of an employee for purposes of s.54 if:

a)         the employer dismisses the employee or otherwise refuses or is unable to continue employing him or her;

b)        the employer constructively dismisses the employee and the employee resigns from his or her employment in response to that within a reasonable period; or

c)         the employer lays the employee off for a period longer than the period of a temporary layoff.

 s. 56(1) of the ESA operates to terminate an employee’s employment in law, so that the employee may claim for common law wrongful dismissal damages. The evident purpose of s. 54 is to prevent employers from avoiding the liabilities that flow from terminating the employment of employees under the guise of placing them on indefinite layoff. The legislature has provided that when a layoff reaches 35 weeks in 52, the employee is terminated.

At common law, an employer has no right to layoff an employee. Absent an agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employer’s employment, and would be a constructive dismissal.

More specifically, a proper reading of the ESA layoff provisions requires the conclusions that:

a.         it is not a termination of employment to temporarily lay off an employee so long as that temporary layoff does not exceed the definition of “temporary” – s.56(4);

b.         an employer may not contract below the Act and therefore may not contract for provisions that allow that temporary layoffs exceed the timeframe set out in s.56 of the Act;

c.         once a layoff exceeds the definition of temporary it is a termination of the employee’s employment pursuant to the Act and pursuant to the common-law, as the Act no longer protects the employer by displacing the common-law jurisprudence and the Act itself also deems a termination; and

d.        the common-law doctrine of constructive dismissal is suspended until such time as the layoff exceeds the definition of  “temporary” in the Act.

TAKEAWAYS

  • Always seek legal advice before deciding to temporarily layoff an employee.
  • Review any relevant contracts or documents pertaining to the employee you are considering laying off before doing so.
  • If there is no contractual right to temporarily layoff the employee, consider speaking with the employee beforehand and document in writing any agreements made.
  • If you are considering being temporarily laid off, or have been laid off by your employer, be aware of the maximum time period a lay off can last under the Employment Standards Act, and what obligations the employer has to you during the layoff itself.

Can an Employer Terminate My Employment Due to a Business Down-Turn Resulting from the Coronavirus (COVID-19)?

In Ontario, it is a well-established principle of employment law, that an employer can terminate an employee at any time without cause for any reason, so long as the reason is not discriminatory or a breach of a human right. Typically, where an employee is terminated without cause, they are not provided with any advanced notice of dismissal. With ongoing concerns associated with the COVID-19 pandemic, large contracts and business relationships have been terminated that will inevitable result in a paring down of the workforce without advanced notice.

At law, there is no difference between the right of an employer to provide working notice (i.e., advanced notice of termination) or payment in lieu of notice of termination (i.e., a lump sum severance payout). Accordingly, in many cases businesses will prefer to immediately terminate an employee without cause while providing pay in lieu of notice to avoid the potential morale drain, transfer of confidential information, solicitation of clients or colleagues, or other potential implications of providing working notice to a disgruntled employee.

If you have recently been terminated from your employment in Ontario, it is likely that you have received a termination letter from your employee which outlines the specific severance package. The employer does not need to provide any specific reason for the dismissal, though more recently many employers are terminated employees due to the business realities caused by the global COVID-19 pandemic.

An employer who terminates an employee without cause is required to make the employee whole during the period of reasonable notice. In other words, at common law, the employee is entitled to continue to receive all the compensation (including commissions, bonuses and stock options) and benefits that he or she would have enjoyed if still actively employed with the employer throughout the notice period.

If you have been terminated from your employment, contrary to what most employment lawyers will tell you, it is generally a very straightforward and simple process to negotiate an enhanced severance package, and where litigation is required – the substance is simple (i.e., it does not require a law degree, let alone a high school diploma to determine how much severance you may be entitled to) – it is merely the unfortunate procedure that lawyers have developed in order to protect their profession and demand unjust and punitive hourly rates that make the process challenging.

If you are contemplating hiring a lawyer, be very careful in understanding the retainer agreement. Under no circumstances, unless for senior executives with potentially 100’s of thousands of dollars of severance pay outstanding, you should not pay more than $2,000.00 as an up-front retainer to a lawyer. Again, these matters are very simple and straightforward. The work is typically done by template and the system is often designed to enrich the lawyer to your benefit. At Goldstein Law, we believe that we put the client first by acting transparently and only taking on cases where there is a real economic benefit to be realized by all parties involved. Thanks for reading.

Section 22 Notice of Injurious Affection Under the Expropriations Act

Section 22 of the Expropriations Act imposes a critical limitation period – Claimants who have suffered losses as a result of a partial taking of their property or whom have suffered injurious affection to their property or business where no land has been taken, must provide the statutory authority with written notice of injurious affection (“IA”) within one year after the damage was sustained or after it became known. If not, compensation claims for injurious affection are “forever barred.”

A plain reading of s. 22 outlines three key points: (1) notice must be given in writing; (2) notice must be given one year after the damage was sustained; and (3) if notice was not given within one year after the damage was sustained, notice may also be provided after damages became “known” to the person.

On what date does a Claimant know, or ought to have known, they have a claim for IA? The case law has been generous to Claimants who have
valid and unvexatious compensation claims for IA, and this is appropriate. In Willies Car & Van Wash Ltd. v. Simcoe (County) 2015, L.C.R. 39, OMB (upheld on appeal), the OMB noted that it is not reasonable to delay giving notice until after the full amount of the loss is calculated. Instead,
the Board found that s. 22 notice was due one year after the Claimant knew that a road closure was the alleged cause of its income losses – the Board held that notice was due, at the latest, 12 months after a road closure was
finalized and losses began to mount. The Board also noted that “the Claimant is also required to act diligently to inform itself of any loss giving rise to a claim.”

Where construction works are ongoing (i.e., with the Eglinton Crosstown) or other large scale infrastructure projects, injurious affection can theoretically be happening on a daily basis to the business or property; accordingly, a rolling limitation period applies, whereby damages can be claimed for one-year prior to the date the notice was issued. Where the injurious affection ceases, the section 22 notice has to be issued no more than one-year following that date.

If your property has been expropriated in Ontario or you have suffered an unreasonable interference from government construction works, it is important to protect all of your interest (i.e., the market value of the property expropriated, any damages for injurious affection, personal and business losses, and disturbance damages). These categories of damages are expressly stipulated in the Expropriations Act and have specific interpretations that have been applied by the Courts in Ontario. A qualified expropriation lawyer will assist the claimant in understanding the totality of their claims for damages under the Act.

Initial Steps in the Expropriation Process

Pre-Expropriation Procedures

Prior to commencing the expropriation process, the authorities may approach the owner directly in an attempt to negotiate a settlement without initiating potentially time-consuming expropriation proceedings. In which case, the authorities will approach the property owner with an appraisal report in an attempt to negotiate a settlement. If the property owner and authorities cannot reach an amicable resolution, the next step is for the expropriating authority to publish a notice of application for approval to expropriate lands.

Notice of Application for Approval to Expropriate Lands

Upon commencing an application for approval to expropriate lands to an approving authority (i.e., local municipal council), the town or region must publish the Notice of Application for Approval to Expropriate Lands in a public domain (i.e., a newspaper with general circulation in the relevant region where the expropriation will be undertaken).

Any owner which is given notice of the expropriation has the right to request a Hearing of Necessity with an inquiry officer to conduct an assessment into whether the expropriation is fair and necessary in light of the objectives of the public work.  The request for a Hearing of Necessity must be made to the authorities directly in writing within 30 days of receipt of the notice of approval to expropriate lands.

If no Hearing of Necessity is requested, the local approving authority will determine if the expropriation can proceed.  If approval fo the application is granted by the “approving authority” (as defined by the Expropriations Act), the authorities have 90 days to register a Plan of Expropriation on the title to the lands it requires. Once the Plan of Expropriation is registered on title, ownership vests in the authorities (although possession of the lands will often remain with the property owner).  There are a number of technical additional steps that occur following the registration of the expropriation plan, which steps are governed by the provisions of the Expropriations Act in Ontario.

Given the breadth of infrastructure upgrading and improvements across the Province of Ontario, various regions are initiating the expropriation process; as such, we have provided examples of the published notices of approval to expropriate lands from various authorities, as listed below:

Region of Waterloo

Town of Oakville

Town of Collingwood

City of Kingston

Dealing with a Pending Expropriation

If you are a property or business owner that has been served a notice of application for approval to expropriate lands, an experience expropriation lawyer will help you navigate the technical complexities and timelines as prescribed by the Expropriations Act.  For more information on expropriations, visit our main page here or give us a call at 647-838-6740.

Notice of Application for Approval to Exproriate Land

As has been discussed, expropriation is a taking of land without consent of the owner by an expropriating authority. An understanding of the expropriation process is essential for lawyers and appraisers to properly consult property owners and business owners that are subject to land acquisition by governmental authorities.

Time Requirements in Expropriations in Ontario 

The first step in the formal expropriation process is for the authority to serve a Notice of Application for Approval to Expropriate Land on the registered owner of the property.  A registered owner is an owner whose interest in land is registered or specified in an instrument in the Land Registry Office.  The authority is required to publish the Notice of Application for Approval to Expropriate Land for three consecutive weeks in a local newspaper where the lands are situated.

Once served with the document, the owner has 30 days to request a hearing of necessity, where the authority must demonstrate that the expropriation is fair, sound and reasonably necessary. Often, the hearing has reduced the scope of an acquisition from a fee simple taking to easement takings or to amend construction plans to minimize the impacts on the property.

Once the expropriation plan is approved, the authority must register the Plan of Expropriation within 3 months, at which time legal title to the expropriated lands vests with the expropriating authority. An owner can remain in possession of the land following registration of the expropriation plan, the owner is no longer the legal owner of the lands specified in the plan.

Other Time Requirements

After registering the Plan of Expropriation, the authority has 30 days to serve Notices of Expropriation and Election. The Notice of Expropriation notifies the owner that an expropriation has occurred and the legal title has vested with the authority. The Notice of Election provides the owner with a valuation date to select for the purposes of determining compensation. The valuation dates are either:

a. the date the notice of hearing for an inquiry was served;

b. the date of the registration of the Expropriation Plan; or

c. The date on which the owner was served the Notice of Expropriation.

In addition, the authorities will serve a Notice of Possession, indicating that the authorities will take possession of the lands at least 3 months after the date of service, before which, an offer of compensation pursuant to Section 25 of the Expropriations Act must be served on the property owner.

For more information about timelines and provisions of the Expropriations Act, it is imperative to consult with a lawyer and land appraiser early in the process in order to document the state of the property prior to the expropriation for comparison purposes in order to maximize the value of the property on the valuation date.

Reviewing Leases on Income Producing Properties

When acquiring an investment property, a thorough review of lease agreements is required to determine the appropriate valuation of the property.  The value of the investment property is directly linked to the amount of rental income, the term, the quality of the tenants, the enforceability of the lease, and any issues that may interfere with the landlord’s ability to collect rent.

Quality of the Tenant
Assessing the stability of the tenant is a critical consideration. In the commercial context, large shopping malls and plazas typically have a number of store-fronts with a diversified tenant base, where the rental income is split between a number of units. In such a case, where one tenant’s lease expires and does not renew, or where one business shuts down, the overall impact on the profitability and value of the property will ideally be negligible. However, where an Anchor Tenant occupies a large portion of the property square foot, the success or failure of this particular tenant has large implications on the value of the property. If the Anchor Tenant does not renew its lease at expiry or the business ultimately fails, large amounts of square footage can be left vacant and difficult to fill with new occupants. This is more common as e-commerce is reducing the square footage commanded by traditional bricks-and-mortar retailers.

Duration of Term
A purchaser of an investment property has to understand the terms of the leases and any options to extend or renew the lease terms. The lease terms are key considerations in determining the length and extent of the rental income stream. The terms of potential lease renewals should be considered and the rental basis (i.e., whether fair market rent at the time of renewal or inflation-adjusted escalators or other means of determining the rent at the renewal period).  If the intention is to develop the property, long lease terms (without demolition clauses) will have an impact on a purchaser’s ability to do so. Specific consideration must be given to demolition clauses to understand the basis this can be done and the notice or time frame required to be given to the tenant.

Use & Exclusivity
Commercial leases will specify the permitted uses of the premises.  Use provisions restrict the tenant’s flexibility in its operations and ensure that a landlord stays onside other leases which restrict what the landlord can and cannot permit at the property. This is particularly relevant in medical office properties where tenants request that direct competitors cannot operate in certain proximity around their practice. All restrictive covenants in the lease should be identified to ensure existing and prospective tenants are in compliance.

Tenant Inducements
For new tenants, landlords will often grant rent-free periods or grant allowances to improve the property for tenants permitted use.

Commercial Lease Renewals

Negotiating Commercial Lease Renewals

In a typical commercial lease, the landlord and tenant will agree to renew the lease on the same terms and conditions of the original lease; however, the base rent is typically subject to negotiation upon renewal.  Case law in Ontario suggests that a Court will enforce a renewal clause if it is sufficiently clear and unambiguous.

Ambiguous Renewal Clauses

Where the rent is simply to “be agreed” where there is no formula for determining the rent upon the renewal or extension period, the clause would be considered void due to uncertainty. Courts have found phrases such as “current market rents” or “fair market rent” to be enforceable, rather than those terms that indicate “rent is to be determined based on a mutually agreed upon” amount.

Use of the Premises

The type of ‘use’ of the premises ought to be considered as well in the formula for determining the rental rate at renewal.  The fair market rent based on the tenants existing limited use may be different than the fair market rent of the premises with a broader use, or at the highest and best use; as such, the type of use that will be applied to determine the market value of the rent should be stipulated in the renewal clause.

Tenant Improvements

Landlords should not assume that the value of tenants improvement are to be included in the “fair market rent” that is negotiated upon renewal or extension.  If the clause indicates that the renewal rent will be based on the “as is” condition of the property at the date of the original lease, then the current market rent will be based on the unimproved condition of the property (and as such, the tenant will not have to pay twice for its capital investment into the property).  With specific wording in the renewal clause, such as the “rental rate will be based on the current and finished condition of the property as of the date of renewal, and with reference to similar properties for a similar term,” the value of tenant improvement would be included in determining the fair market rate.

A number of issues are considered in determining the fair market rental value of a commercial lease renewal and extension and the language of the commercial lease agreement will guide the analysis. For a consultation with a commercial leasing lawyer, contact Goldstein Law and we will advise you to maximize the value of your commercial property.

Highway 401 Expropriations

As you may have heard, the Ministry of Transportation of Ontario (MTO) through its agents, is undertaking a widening of an 18-km stretch of Highway 401 through the GTA, with the addition of at least six (6) new traffic lanes, as reported here.  The Highway 401 Expansion Project extends from the western part of the GTA in Mississauga over to Milton.

In order to accommodate the road widening, the MTO needs to acquire (or expropriate) land.  The MTO is expropriating land from residential homeowners, commercial landlords, farmland, and otherwise.  A question we often receive from property owners is: how will I be compensated?

The expropriating authority must service an Offer of Compensation on the property owner. The offer must include the amount of compensation payable to the property owner immediately without prejudice to a further payout of compensation if future damages result.  As well, the authorities are required to produce an appraisal of the property.  As such, the owner can accept the initial offer of compensation and then negotiate with the authorities about the balance of funds owing at a later date.

If the owner disagrees with the authorities assessment of market value or has other damages, a claim for compensation can be brought under the Expropriations Act to the Local Planning Appeal Tribunal (LPAT) formerly the Ontario Municipal Board (OMB).  The property owner can pursue various claims for compensation in addition to the market value of the proposed land taken, including but not limited to:

-Business losses resulting from the expropriation;
-Relocation costs (i.e., costs to move the business or property, real estate commissions and legal fees) directly resulting from the expropriation;
-Loss of goodwill (i.e., where a business has to shut down and has been operating in the same location for a long period of time if it cannot be relocated);
-Injurious affection (i.e., where the Owner’s use and enjoyment of the land are disrupted or where a partial expropriation negatively impacts the value of the remainder of the property).

How much are Legal Fees?

The purpose of the Expropriations Act in Ontario is to make the property owner “whole.” If the property owner were paid for the fair market value of their land and any other damages attributable to the expropriation but had to pay expensive legal fees from any settlement, the owner would not be made “whole.” As such, the Act requires that the authorities pay all reasonable legal and professional (i.e., appraisal, valuators, planners, etc.) fees, which ensures that the property owner is not out-of-pocket.

If your property is being expropriated, it is imperative that you consult with a lawyer.  Call Goldstein Law – Expropriation Law Firm today. We often do not require any up-front retainers for expropriation-related matters.