As we outlined in our workforce planning bulletin last week, one of the options available to employers in this time of crisis, particularly in light of the recent announcements by many Premiers of the shut-down of non-essential services, is to temporarily lay off employees. By temporarily laying off employees, employers maintain the employment relationship, allowing employees to return to work when business circumstances permit. However, in order to maintain the temporary nature of a layoff, employers must follow strict rules that apply to their workplace.
For unionized employees, the rules in the applicable collective agreement will typically govern the temporary layoff and recall process.
For non-unionized employees, employment standards legislation in their jurisdiction sets the temporary layoff rules. Another caveat for non-unionized employees is that an unpaid temporary layoff has historically been considered to be a constructive dismissal at common law unless the employer has a contractual right to layoff or that right is implied by past practice. Given the unique circumstances caused by COVID-19, we urge you to seek legal advice if you are concerned about constructive dismissal risks.
What Constitutes a Temporary Layoff?
Temporary layoffs are treated in different ways.
In Alberta, BC, Manitoba, Newfoundland, Saskatchewan (when there is a public emergency), Ontario and Quebec where an employer temporarily lays off employees for a limited time, the employer does not have to provide notice of the layoff or pay in lieu of notice. Instead, the employer only has to provide pay in lieu of notice when the layoff exceeds the temporary layoff period. The same applies to federally regulated employers. That temporary layoff period varies by jurisdiction and ranges from 12 to 35 weeks.
In addition to providing pay in lieu of notice when a layoff exceeds the period in which it is considered temporary, employers in Ontario must provide employees who have more than five years of service with statutory severance pay when the layoff exceeds 35 weeks in a 52 week period. Similarly, federally regulated employers are required to pay statutory severance pay when a layoff exceeds certain timeframes.
In New Brunswick, Nova Scotia and PEI, when layoffs exceed six or seven days, employers must provide employees with their entitlement to statutory notice or pay in lieu of notice.
In every province except for PEI, the notice/pay in lieu of notice to which employees are entitled increases significantly when a layoff is considered a mass layoff. Layoffs are considered to be mass layoffs when:
more than 10 employees are impacted within certain periods of time in New Brunswick, Newfoundland and Labrador, Nova Scotia and Saskatchewan; and
more than 50 employees are impacted within certain periods of time in Alberta, BC, Manitoba and Ontario.
In addition, employers in many provinces must provide notice, sometimes in a specific form, to the government. The same applies for federally regulated employers.
Many provinces have exceptions to the requirement to provide notice/pay in lieu of notice and, in the case of Ontario, severance pay. Those exceptions include events such as:
• when the employment contract is impossible to perform due to:
• unforeseeable or unpreventable causes beyond the employee's control; or
• a fortuitous or unforeseeable event or circumstance;
• the temporary or indefinite termination of employment because of lack of work; or
• the actions of any government authority that directly affects the operations of the employer.
Because the exceptions vary by province, it is important to consult the applicable legislation. However, in many cases these exceptions may cover layoffs caused by COVID-19.
As outlined above, unionized employers subject to collective agreements should be sure to consult the applicable collective agreement, most of which will include significantly different rules from the above.
Finally, when employees are temporarily laid off, employers should issue Records of Employment. Thereafter, the employees may become entitled to Employment Insurance (EI) benefits.
Takeaways for Employers
Employers affected by a slowdown or business disruption arising from the COVID-19 situation may wish to consider layoffs. Properly implemented and managed temporary layoffs are a powerful workforce planning tool. They may help stabilize a business through these turbulent times and allow the employer to recall a trained workforce as business improves. Because the rules vary from province to province and between unionized and non-unionized employees, employers considering this option should obtain specific legal advice.