Temporary Layoffs: Blockades, Seasonal Work or Business Wind Ups – What You Need to Know
When work is disrupted, by the seasons, economic downtown or political unrest, employees are at more risk of being temporarily laid off from work. For example, the current rail blockades have been a challenge to everyone involved, and while both sides hope for swift and peaceful resolution, the blockades have already made real changes in Canada’s three biggest ports delaying shipments nationwide as they have halted about one-quarter of CN’s eastern operation.
When cargo piles up, paycheques shrink and employers look to reduce costs. What’s more, it’s the first time in Via Rail’s 42-year history that the carrier has had to interrupt most of its passenger service across the country. Even once service resumes, it will take real time for the rail lines to get back to their full capacity. This is why temporarily laying employees off becomes attractive: for the impacted employers, layoffs become a pragmatic means to balance out the sudden short term decline in business and lack of hard dollars, without having to spend the money to terminate staff who would otherwise be owed employment entitlements like notice and/or severance costs.
But when someone is told they have been laid off, real questions abound: Is this different than termination? How long can it last? Who can do this? Let’s take a look at each of these and help you stay informed.
Does being laid off really mean fired? No.
A “layoff” is not a termination, but can become one. Simply put, a temporary layoff affords the employer the opportunity to take an employee off of payroll for a defined period of time without owing termination entitlements such as pay in lieu of notice or severance. These temporary cut backs are done with the understanding that the employee will be recalled. Temporary laying off an employee in Ontario does not usually involve railways, and most often occur in the context of seasonal businesses that require a reduced headcount during the industry’s off season. This can also be commonly seen in businesses that are in general decline.
Importantly, the anticipated timeline of the temporary lay off needs to be specified, and should the layoff exceed the set maximum length under the applicable employment standards legislation, it becomes a termination and the employee will then be entitled to applicable employment entitlements.
What comes as a surprise to many is that employers are not required to provide notice of an upcoming layoff to employees prior to the layoff actually occurring. That said, should the layoff exceed the time allowed under the applicable employment standards legislation, generally the first day of the temporary layoff is considered the date of termination.
How long can a layoff last? 13 weeks, but as much as 35 weeks possible.
Under section 56 of Employment Standards Act in Ontario, employers are permitted to temporarily layoff an employee for a period of up to 13 weeks in a consecutive 20-week period. These 13 weeks can include either time not worked by the employee or time where the employee is earning significantly less income (i.e. 50% or less) as compared to their normal earnings. Importantly, that 13 weeks can be extended under certain conditions. For example, extensions can be granted provided that the employer provides substantial payments to the employee, continues the employee’s benefits, and if the employee receives supplementary unemployment benefits. However, in Ontario, this extension cannot exceed 35 weeks in a consecutive 52-week period. To assist with the shortfall, employees should be made aware of their entitlement to collect Employment Insurance benefits during the layoff period
So this can happen in any job? No, this has to be set out in a contract.
Employers do not have the unilateral right to temporarily lay off an employee without a contractual right allowing them to do so. This means employers do not have a free-standing right to temporarily lay off any employee at will. There must be a provision in a contract signed by the employee giving an employer this right.
If an employer tries to use temporary lay offs without the contractual right to do so, the employees impacted may be able to bring a lawsuit claiming for constructive dismissal and/or wrongful dismissal.
Must employees come back? No, but there is consequence.
If employees decide to look for other work and refuse to return when recalled, they need to know this could impact their legal entitlements, even where the layoff is illegal. Employees who could contest a layoff would be arguing they had been wrongfully or constructively dismissed, and as such, they would have a duty to mitigate their damages, which can include accepting an offer of re-employment. Failing to do so may constitute a failure to mitigate damages and dramatically impact their legal position.
- Employers, get good counsel: Employers who wish to preserve their ability to impose temporary layoffs should make sure they get an enforceable employment contract ready well before they need to consider layoffs. This is done ideally at the time of hire, but can be brought in at any point, so long as those new employment contracts are implemented appropriately. This is not something employers should undertake alone – we strongly recommend legal advice before altering any terms of your team’s employment to avoid common pitfalls, unnecessary conflict, and ensure the enforceability of the document. Further, always seek legal advice before deciding to temporarily layoff an employee when business needs change. It may be possible to come to a mutually beneficial outcome without resorting to layoffs and all your options should be considered before laying off any member of your valued team.
- Employees, stay informed: If you are being faced with a layoff, always seek legal advice, be aware of the maximum time period a lay off can last under the legislation, and review your contract. If you decide you do not want to go back when you are recalled, make sure you get good advice and are aware of your potential obligations to that employer and the impact of your choices on any claim you may want to commence.