What is a layoff?
A layoff occurs when an employer stops providing work or compensation to an employee temporarily. In those cases, despite the interruption of work, the employment relationship is considered to be ongoing on the understanding that work and compensation may resume in the future. For example, if an employee is directed to quarantine and is unable to work during that time period, the employer may be considered to have laid off the employee. Under the ESA, an employee is considered to have been laid off where they earn less than 50% of what they would ordinarily earn in a week.
What do I need to know when laying off an employee?
An employer can temporarily lay off an employee without pay if that right is expressly set out in the employment contract or policy, or if it is an implied term of the employment relationship. If the employer does not have a contractual right to lay off the employee, the ESA says that an employer can lay off an employee without pay if that layoff period does not exceed 13 weeks in any 20 consecutive weeks’ period. If it does exceed that time period, the layoff cannot exceed 35 weeks in any 52 consecutive weeks’ period and:
- the employer must continue to make substantial payments to the employee;
- the employer must continue to make payments to the employee’s insurance, retirement or pension plan;
- the employer must recall the employee within the time period set out in their agreement or within the time period approved by the Director of Employment Standards; or
- the employee receives supplementary unemployment benefits, or is employed elsewhere during the layoff period and is entitled to receive such benefits.
No advanced notice is required of the layoff, and the employer does not need to communicate the layoff to the employee in writing, although the latter is generally recommended
If the above-noted requirements aren’t followed, the layoff will be considered a termination under the ESA and the employee is entitled to receive their termination entitlements as set out in the Act.
To mitigate the risk of a constructive dismissal claim, employers should consider paying their employees during any layoff (though that might not be feasible for many employers). There could still be a risk of a constructive dismissal claim for non-contractually entitled layoffs, but it is anticipated that the circumstances will be taken into account and may mitigate against that risk. In the event of constructive dismissal, or if an employer decides to terminate the employee, the employee will be entitled to severance as outlined in their contract, the ESA and/or the common law. These are quite case-specific and what may apply to one employee, may not for others. If you need legal advice on your entitlements or obligations upon a layoff, constructive dismissal or termination, it would be best to contact your lawyer.
Employers should ensure that their decisions to lay off or terminate are not discriminatory and bona fide (to avoid a human rights complaint) and that it’s not in reprisal for the employee has exercised a right to take protected leave under the ESA (to avoid a reprisal complaint).
Other things to know
- If an employee is directly affected by the coronavirus (COVID-19) and is no longer working, you must issue a Record of Employment (ROE).
- When the employee is sick or quarantined, use code D (Illness or injury) as the reason for separation (block 16). Do not add comments.
- When the employee is no longer working due to a shortage of work because the business has closed or decreased operations due to coronavirus (COVID-19), use code A (Shortage of work). Do not add comments.
- When the employee refuses to come to work but is not sick or quarantined, use code E (Quit) or code N (Leave of absence), as appropriate. Avoid adding comments unless necessary.
TurnpenneyMilne LLP is a workplace law firm with offices in Toronto and Vancouver and was recently recognized as a top 10 employment and labour boutique by Canadian Lawyer Magazine in 2020. TurnpenneyMilne LLP represents employers, employees, and is frequently called on to conduct workplace investigations in high-profile matters.