Managing through COVID-19: What to Think About When Considering Temporary Layoffs

COVID-19 continues to have an immense impact on Canadian workplaces resulting in uncertain consequences for the workplace. Given the economic challenges that continue to grow, either as a result of voluntary or forced operational shutdowns, many employers are implementing, or at least considering, temporary layoffs. Here are the key legal considerations when dealing with temporary layoffs.

What is a Temporary Layoff?

  • Generally, a layoff is a period when an employer ceases to provide work and (in most cases) compensation to an employee temporarily. Where permitted by relevant employment legislation, the parties treat the employment relationship as ongoing, despite this interruption of work and/or compensation, with the understanding that work and compensation may resume in the future. Notably, in British Columbia there are no provisions allowing a temporary layoff unless a layoff is: allowed under a collective agreement, expressly provided for in the employee’s written agreement, or agreed to by the employees.
  • The definition of layoff differs by jurisdiction. For example, in British Columbia, a week of layoff is a reduction of 50% or more of an employee’s regular weekly wages, averaged over the previous 8 weeks. In Ontario, a layoff week is a week where the employee earns less than one half of the amount that they would earn at their regular rate in a regular week or their average earnings for the period of 12 consecutive weeks prior to the layoff period. In Alberta, a temporary layoff may not exceed 60 days in a 120-day period. In Quebec, a layoff temporarily suspends the contract of employment between the employer and employee. A layoff is temporary if it is less than six (6) months. In this case, no written notice from the employer is required. The Canada Labour Code, which applies to federally regulated employers, allows a temporary layoff of 3 months or less, subject to certain exceptions listed below.
  • According to applicable employment standards legislation, employers may have the obligation to provide notice of the temporary layoff. We recommend consulting with our team to ensure notices of temporary layoff comply with applicable statutory requirements.

How Long can a Temporary Layoff Last?

  • Temporary layoffs are just that – temporary. If they exceed the statutory limit, then an employer will generally be deemed to have terminated an employee’s employment unless an exception applies. Key statutory time limits are as follows:
    • In BC, temporary layoffs cannot exceed 13 weeks in a consecutive 20 week period.
    • In Alberta, temporary layoffs cannot exceed 60 days in a 120 day period.
    • In Ontario, temporary layoffs cannot exceed (a) 13 weeks in any period of 20 consecutive weeks, or (b) more than 13 weeks in any period of 20 consecutive weeks but less than 35 weeks in any period of 52 weeks where:
      • the employee continues to receive substantial payments from the employer, or
      • the employer continues to make payments for benefits or a legitimate retirement or pension plan, or
      • the employee receives supplementary unemployment benefits, or
      • the employee would be entitled to supplementary unemployment benefits but isn’t receiving them because they are employed elsewhere, or
      • the employer recalls the employee within a time frame approved by the Director of Employment Standards or as set out in an agreement with an employee not represented by a trade union, or where the employee is represented, as set out in an agreement with the trade union.
    • In Quebec, a layoff is a temporary layoff if it is less than six (6) months.
    • Federally under the Canada Labour Code, a temporary layoff is:
      • a layoff of 3 months or less, or
      • a period of more than 3 months and:
        • the employer notifies its employees before the layoff that they will be recalled on a fixed date, which is not longer than 6 months, and the employees are recalled on that date;
        • the employee continues to receive payments during the term of the layoff from their employer in an amount agreed on by the employee and their employer;
        • the employer continues to make payments for the benefit of the employee to a pension plan that is registered under the Pension Benefits Standards Act, 1985, or under a group or employee insurance plan;
        • the employee receives supplementary unemployment benefits; or
        • the employee would be entitled to supplementary unemployment benefits but is disqualified from receiving them pursuant to the Employment Insurance Act.
      • Under the Canada Labour Code, any periods of re-employment that are less than two weeks in duration are not included in calculating the length of the layoff. Layoffs under a collective agreement where the employee retains a right of recall are also permissible layoffs.

Is Advanced Notice Required before a Temporary Layoff?

  • In BC, Ontario and Quebec there are no advance statutory notice requirements before an employee can be placed on a temporary layoff. In Alberta, written advance notice of 1-2 weeks (depending on years of service) must generally be provided. However, the requirement for advance notice is waived where unforeseeable circumstances prevent employers from providing advance notice, in which case written notice must be provided as soon as is practicable in the circumstances. The notice must be in writing, state that it is a temporary layoff notice, set out the date the layoff commences and include sections 62-64 of Alberta’s Employment Standards Code. While notice of a temporary layoff is not required under the Canada Labour Code, a temporary layoff may be more than 3 months if the employer notifies its employees before the layoff that they will be recalled on a fixed date, which is not longer than 6 months, and the employees are recalled on that date. 

Do Employers Pay Employees while on Temporary Layoff?

  • Subject to an employment agreement, policy or collective agreement that says otherwise, layoff periods are generally unpaid. However, employees may qualify for Employment Insurance under new eligibility criteria implemented by the Federal Government for COVID-19 situations. For more information on Employment Insurance click here.
  • Employees may also, on a voluntary basis, use their vacation time during a period of a temporary layoff to continue to receive pay.
  • We have discussed alternative ways to deal with these situations and to protect the workforce here.

Are Employers Required to Continue Benefit or Pension Contributions During a Layoff?

  • This depends on the terms of employment, including applicable employment contracts, collective agreements, employer policies and third-party plans. In most cases though, absent contractual terms to the contrary, employers are not required by statute to continue benefits or pension plan contributions during temporary layoffs.
  • In some jurisdictions (e.g. Ontario, Alberta and federally), the allotted time for a temporary layoff may be extended if the employer makes benefits and pension contributions to the laid-off employees. In Alberta and Ontario, the employee must agree to these payments in lieu of a firm limit on the length of the layoff.
  • Where an employment agreement, workplace policy or collective agreement provides for a greater right to benefit or pension continuance, those contractual terms will prevail.

Do Obligations Change Depending on How Many Employees are Temporarily Laid Off?

  • Where an employer lays off multiple employees in a short period of time, the employer should be aware of applicable statutory group/mass termination obligations which in many jurisdictions, also apply to temporary layoffs. Whether these obligations are triggered will be a jurisdiction-specific inquiry. For example, in British Columbia group termination entitlements apply when 50 or more employees’ employment is terminated within any two-month period, unless it meets one of the exceptions as set out in the British Columbia Employment Standards Act (section 65). In Alberta, if the employer intends to terminate the employment of more than 50 of its employees within a 4-week period, the employer must comply with the group termination provisions of the AB Code. In Ontario there are no mass or group termination considerations for temporary layoffs, however, should the layoffs extend beyond the allotted time mass termination entitlements may apply. In Quebec there are specific rules which apply for “collective dismissal” (ex. a layoff for a period of 6 months or more involving 10 employees and more of the same establishment in the course of 2 consecutive months). Federally, a group termination is the termination of employment of 50 or more employees at a single establishment within a 4-week period.
  • These obligations may include providing written notice of the layoffs to an applicable government authority and to the employees in accordance with applicable employment standards legislation. Further obligations may ensue if the layoffs are considered terminations.

What Else Should Employers Know?

  • These are unprecedented times but based on current projections, related layoffs should be temporary. If an employee is laid off for a period longer than the time permitted by statute for the temporary layoff, the employer may be considered to have terminated the employee’s employment and termination obligations, including full severance obligations, will apply.
  • Employers are encouraged to provide timely, transparent and ongoing communications to their employees in respect of any temporary layoffs, including with respect to any anticipated recall dates or extensions to the layoff period. To that end, employers will want to ensure that they have up to date contact information for each affected employee so that communications are effective.
  • A Record of Employment must be issued for each of the employees that are on a temporary layoff.
  • With the exception of Québec, despite permissive provisions in applicable employment standards legislations, a layoff, even if intended to be temporary, may result in the risk of constructive dismissal claims or grievances where temporary layoffs are not otherwise expressly permitted by contract or collective agreement. Similar risks apply in Québec, where the layoff must be based on legitimate reasons, otherwise it may be considered a constructive dismissal. To better understand and assess these risks, please contact any member of our team.

We recognize that change resulting from COVID-19 is happening in real-time. When making decisions to protect your people and your business, we strongly recommend seeking advice of counsel. Accordingly, our National Labour & Employment Group is available to assist clients on a 24/7 basis. If you need assistance, please reach out to any member of our team whenever you need to.

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