The COVID-19 pandemic has caused disruptions and slowdowns in almost all industries. The situation is fluid and government, business and social response to COVID-19 have and must be dynamic.
This bulletin discusses the options available to employers to manage the unexpected downturns and, if necessary, to reduce their labour force. All of these options are subject to restrictions in any collective agreement in unionized workplaces, and employment agreement in non-unionized workplaces. All options should be considered carefully in light of potential risks discussed below.
1) Voluntary and Involuntary Temporary Layoffs
Provincial employment standards legislation has provisions dealing with situations of temporary lay-offs. Some have specific requirements. Others are more permissive. Ontario, for example, has provisions dealing with temporary leaves up to 35 weeks in a 52-week period (with a number of conditions) and up to 13 weeks in a 20-week period (with significantly fewer conditions). Temporary layoffs that adhere to the statutory provisions will not violate employment standards legislation. Generally, if a layoff lasts longer than permitted under employment standards legislation, termination of employment will be deemed to have occurred.
Collective agreements typically contain layoff provisions. These provisions will typically apply for unionized employee temporary layoffs and recalls. For non-union employees, an unpaid layoff may be considered to be a constructive dismissal unless the employer has a contractual right to layoff or that right is implied by past practice.
2) Other Voluntary Measures for Employees
Employers may be assisted by voluntary measures accepted by employees. These may include:
1. a voluntary agreement to reduce pay;
2. a voluntary agreement to reduce weekly hours, or implementation of rotating shifts (e.g., one week on, one week off, etc.);
3. a voluntary agreement to take an unpaid leave of absence (furlough); and
4. a voluntary work sharing agreement (see below for more information).
All of these voluntary measures should be reduced into written agreements. Employers should consider what, if anything, they may be able to provide employees in exchange for these agreements (e.g. compensation, etc.).
3) Other Involuntary Measures for Employees (Short of Termination)
In addition to a temporary layoff, employers may have the following measures at their disposal, without employee consent if the change is not substantial:
1. a reduction in pay; and
2. a reduction in hours.
Employers should seek specific legal advice before making any unilateral changes of this nature.
4) Work Sharing
The federal government has a work sharing program available for employers and employees. Under the program, if employers and a specific unit of employees agree, those employees may “share” the work being performed by reducing each employee’s work week by as much as 60%.
Under the program, if an agreement is in place between these employers and employees, accepted by Service Canada, Service Canada will provide employment insurance benefits to employees to make up some or all of their lost income.
Work sharing arrangements are subject to an employer application, agreement from employees, acceptance by Service Canada and other qualifying criteria. There are also reporting requirements. Work sharing agreements, once issued, are for up to 26 weeks with the potential for extension. Work sharing arrangements made as a result of COVID-19 impacts may be extended, up to a maximum duration of 76 weeks (subject to approval). Otherwise, work sharing arrangements are typically limited to an overall maximum of 38 weeks.
More information about the work sharing program for those impacted by COVID-19 is available online here.
5) Termination of Employment (Non-Unionized Employees)
Employers continue to have the right to terminate employees’ employment as a result of economic circumstances. Contractual or common law rights, equal to or in excess of employment standards rights, will apply.
For employees who are entitled to common law notice, the economic impact of COVID-19 may impact a common law notice period. If there is a scarcity of work, this may, in particular, act to lengthen a common law notice period - the theory being that it will take longer for the employee to find alternate work in a downturn.
In some cases, depending on how situations develop, there may be grounds to assert that frustration of employment has occurred, which could end the relationship between the employer and employee, and limit an employee’s entitlements. These situations are highly specific and fact-driven. Before asserting frustration of the employment relationship, employers should obtain specific legal advice.
6) Employment Insurance Benefits, ROEs and Top Ups
If an employee is put on a temporary layoff, is starting a Service Canada approved work sharing agreement, or has their employment terminated, a Record of Employment (ROE) is required. In many cases, employees may qualify for employment insurance benefits.
Employers may wish to provide employees top up payments while on layoff or during any period they are receiving employment insurance payments. To ensure these top-ups are not subject to employment insurance claw backs or other deductions, it is recommended that the employer review requirements for supplemental unemployment benefits (“SUB”) registration with Service Canada and apply to register their SUB here.
Employers have many options available to manage their workforce and plan for temporary or sustained economic down turns. The options set out in this bulletin may all create circumstances where an employee can, and may, allege constructive dismissal and claim termination entitlements, among other risks.
It is highly advisable for employers to obtain legal advice on their options, and an assessment of related risks before taking any steps. In all cases, it is advisable for employers to develop clear communications to employees, and to update those communications as situations change.
 For information on other employment issues arising from COVID-19, please see our other bulletins titled The Novel Coronavirus: Preparing Employers to Respond and Pandemic Planning For Employers: Responding to the Coronavirus Disease 2019 (COVID-19).