Last Impressions Matter Too
Leading Through Temporary Layoffs
In Ontario right now, many small and medium sized businesses had to close down and immediately layoff employees. Employees were told to go home and were advised by phone or via video later. Not the best way to handle these sensitive issues.
Sometimes these decisions were made because there was uncertainty in how long the business would be closed or whether there would be any government support.
It is important to have the best information possible before making decisions about reorganization and group/mass termination. The most difficult part of being a leader is having to make this difficult decision and also to give your people the news.
Treating people well, regardless of the circumstances is the key. We are here to help navigate the many situations you face when having to depart with your people.
This summary digs a little deeper into the use of temporary layoffs. Many businesses have held out as long as possible without having to layoff employees. The declared state of emergency in Ontario has now been extended well into May and while some companies were hoping they could reopen it looks like it may take longer.
If you do have to lay off, you can start with a temporary one rather than simply terminating your employees. It’s important to understand the impact of doing so and whether you are able to without compliance concerns. If you did not have a term in your employment contract allowing for temporary layoff, then you could be at risk for a claim from your employees that it was a termination and for damages.
Let’s look at some of the factors you need to know about before deciding what to do.
What is a layoff?
A layoff is a period when an employer ceases to provide work and, in most cases, compensation to an employee. Unlike permanent layoffs, temporary layoffs are intended for a short period of time. Despite this interruption of work and compensation, the parties treat the employment relationship as ongoing, with the understanding that work and compensation may resume in the future.
Temporary layoffs are permitted only if they are provided for in the employment contract
First, you need to understand that temporary layoffs are different in unionized and non-unionized workplaces. Since we support small and medium businesses who primarily do not have a collective agreement, we will focus on those environments.
An employer is able to put a temporary layoff clause in an employment contract unless it would contradict the Employment Standards Act (ESA). Although the ESA allows for temporary layoffs it does automatically allow for this right.
In non-unionized workplaces, there is case law that states that a temporary layoff is considered a constructive dismissal unless there is an express term in the employment contract permitting the layoff. If a layoff is held to be a constructive dismissal, the employee’s right to notice pay and potentially severance payments are triggered under the common law and statute.
How long is a temporary layoff in Ontario?
In Ontario, the maximum a temporary layoff can be is up to 13 weeks in a consecutive 20-week period and only if it is provided for in the employment agreement. If the layoff exceeds this 13-week period it will become a termination at which point the employee will be entitled to termination pay in lieu of notice with the first day of the layoff becoming the date of termination.
The Employment Standards Act (ESA) also provides that a temporary layoff may be extended to as long as 35 weeks if:
The employee continues to receive substantial payments from the employer,
The employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan,
The employee receives supplementary unemployment benefits,
The employee is employed elsewhere during the layoff and would be entitled to receive supplementary unemployment benefits if that were not so,
The employer recalls the employee within the time approved by the Director of Employment Standards Ontario, or
In the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee; or
If an employee quits before a layoff is over they are not owed severance or termination packages but may still be entitled to accrued benefits such as vacation pay.
It is so important to make sure you have clear contracts of employment with your employees and you can’t contract out of the minimum employment standards.
Don’t forget about your Independent Contractors or Consultants
We have seen the rise of the gig economy over the last several years and an increase in independent contractor and independent consultant contracts, so you need to make sure these relationships are handled as well.
It is important to keep in mind that for the purposes of employment law, Courts will consider the reality of the relationship and may find that workers classified as independent contractors or consultants are in fact employees entitled to ESA protections.
Temporary layoffs for workers with regular work weeks
How is a temporary layoff determined?
An employee who has a regular work week is laid off for a week if the employee earns less than half the amount they would earn normally. When you are counting the weeks of layoff you have to include “excluded weeks” as defined below.
An excluded week is a week during which, for one or more days, the employee is:
Not able to work.
Not available for work.
Subject to a disciplinary suspension.
Not provided with work because of a strike or lock-out occurring at their place of employment.
Temporary layoffs for workers without regular work weeks
For those employees who do not have a regular work week there are a number of factors to take into consideration. You generally look at the average of the wages earned and apply a calculation.
An employee who does not have a regular work week is laid off for a period longer than the period of a temporary layoff if:
For more than 13 weeks in any period of 20 consecutive weeks,
they earn less than half the average amount they earned per week in the period of 12 consecutive weeks that preceded the 20-week period.
An excluded week is not counted as part of the 13 or more weeks but is counted as part of the 20-week period. If the 12-week period contains an excluded week, the average amount earned is calculated based on the earnings in weeks that were not excluded weeks, and the number of weeks that were not excluded.
For 35 or more weeks in any period of 52 consecutive weeks,
they earn less than half the average amount they earned per week in the period of 12 consecutive weeks that preceded the 52-week period.
An excluded week is not counted as part of the 35 or more weeks but is counted as part of the 52-week period. If the 12-week period contains an excluded week, the average amount earned is calculated based on the earnings in weeks that were not excluded weeks, and the number of weeks that were not excluded.
Life Works Well has experience in the legal, HR and payroll implications of all of the various situations you may be facing, so reach out if you need some guidance. We are here to help.
Temporary layoffs and recall date
An employer who lays an employee off without indicating the recall date will not have terminated the employment of the employee unless the period of the layoff exceeds that of a temporary layoff (as discussed above).
If there is a right to recall under the employment contract, the employee can elect to be paid the termination pay right away, or retain the right to be recalled.
This is a reminder that having clear employment contracts is important as well.
Life Works Well is an HR consulting company that specializes in all aspects of the employee life cycle. First impressions and last impressions matter. Every touch point of the employment relationship provides an opportunity for you to get it right! If you need help navigating any aspect, please reach out for a free 1 hour consultation.