COVID-19 life is unruly and presents many challenges. Each of us are faced with personal and professional problems none of us has ever dealt with before – or even imagined. More often than not, it’s difficult to appreciate the positive things that are also happening around us.
In my capacity as a lawyer, it is my privilege to be surrounded by incredibly resilient and dynamic salespersons, dealerships and business leaders. I have continually been inspired by the resilience and adaptability of the automotive community throughout Canada, but especially in Ontario. Change was thrust upon the industry without significant warning, and most dealers (and even OMVIC) successfully pivoted to online sales and other adaptations needed to survive.
For this article, and given the times we are living in, I thought I would take the opportunity to review some of the things that have come across my desk over the last few months, and share some thoughts and tidbits of information.
At the outset of the pandemic, I was regularly fielding calls from a variety of dealers asking for help with layoffs, reduction in work hours and salary reductions. Never easy topics, and emotionally tough for dealers, and their management teams, to implement. Fortunately, many dealers have seen their sales slowly increase month over month from June onwards, and as a result have been able to resume somewhat normal operations, and even hire some new staff.
One thing that set dealers apart from one another was the existence of enforceable employment agreements. While it is difficult for any agreement to capture every possibility and eventuality, most quality employment agreements serve to protect both the employer and the employee in the event of a variety of circumstances. In my experience, dealerships with solid employment agreements had a much easier time, overall, dealing with their employees during the initial business interruptions caused by COVID-19, and working through the difficult decisions and processes necessitated as a result.
Independent Contractors Are Better than Employees…. Or Are They
A lot of dealers believe they are immune from some employment law considerations because they engage much of their sales team on an independent contractor basis. By classifying workers as independent contractors, an employer can avoid paying certain benefits that would otherwise be owed to an employee under the Employment Standards Act (“ESA”), such as overtime, vacation and public holiday pay, as well as avoid making certain pay deductions and remittances to the government on an employee’s behalf.
That said, dealers should beware of the potential risks of having staff set-up as independent contractors given some recent class action cases that are in process. This is especially true if such sales staff are not truly independent – in my words, if someone looks like a duck, walks like a duck and quacks like a duck, they are usually a duck. Same thing for salespersons – if they look like an employee of your dealership, and only work for you, then there is a very good chance they may be deemed your employee.
The class actions on behalf of individuals hired as independent contractors are arguing that such individuals are in fact employees, and therefore entitled to the benefits provided under the ESA;which means, if true, a dealership could be on the hook to pay very large payments to existing and past salespersons improperly classified as independent contractors.
Government Response to the Pandemic
IDEL is the Ontario government’s Infection Disease Emergency Leave program, which was added to the ESA in March in response to the pandemic. IDEL is an unpaid job-protected leave of absence under the ESA, which means that employees cannot be terminated, penalized or reprised against for requesting, or taking, an IDEL.
IDEL continues to be available to all employees for certain prescribed reasons, including: (i) employees who need to stay home to care for children and/or other prescribed family members, (ii) employees who are under medical care and/or investigation for COVID-19, and (iii) employees who are under an obligation to quarantine or self-isolate.
On May 29, 2020 further relief measures were passed by the Ontario government in an effort to assist employers with the economic hardship caused by the pandemic. Ontario legislated that if an employer had to change an employee’s hours of work and/or wages in response to the pandemic, this would not constitute a constructive dismissal under the ESA. It also legislated that employees whose hours of work and/or wages were eliminated or reduced, or who were temporarily laid off, would be deemed an IDEL. This deemed IDEL was set to expire on July 24, 2020, but was subsequently extended to January 2, 2021.
On January 3, 2021 the regular rules and time limits under the ESA will resume with respect to constructive dismissal and temporary lay-offs.
As a refresher, under the ESA rules in normal times, a temporary layoff may not exceed 13 weeks in any period of 20 consecutive weeks, or 35 weeks in any period of 52 consecutive weeks, where certain conditions are met. Once the applicable periods expire, temporary layoffs become terminations of employment under the ESA, which gives rise to an employer’s obligation to provide the affected employee(s) with their termination entitlements. Under the ESA, a constructive dismissal may occur when an employer makes a significant change to a fundamental term or condition of an employee’s employment without the employee’s actual or implied consent.
In conclusion, the world remains uncertain and only time will tell how much longer the pandemic, and its lingering effects, will endure. In the meantime, there are many things that dealers and their management teams can do in an effort to bring certainty to at least some parts of their business. Reviewing employment agreements (or implementing them if need be) is a great place to start. I have also strongly encouraged my dealer clients to implement compliance officers, or teams in the case of larger dealers and dealer groups, to be responsible for ensuring compliance with the MVDA – especially in terms of advertising and sales process compliance.
It is also very important to maintain strong training, and have in place clear policies, so that everyone is aware of their respective roles and obligations. Now is not the time to cut corners or reduce vigilance in terms of meeting or exceeding your obligations under the MVDA. Cutting corners only leads to mistakes and bad practices, which more often than not can lead to OMVIC concerns.
I wish you the very best in the months ahead.
This article first appeared in the November 2020 Edition of the Ontario Dealer Magazine and has been republished with permission.