Some CLK businesses have been deemed non-essential and, therefore, cannot operate during the emergency.
Other essential businesses, despite being legally permitted to operate, have had to consider or undertake downsizing, restructuring, or otherwise cost-cutting.
Either way, as a result, local businesses have had to consider or have implemented temporary or permanent layoffs.
While temporary layoffs can be an effective means of cost-saving, they can also be risky if employers have not protected their right to temporarily lay off employees in their employment contracts.
The Ontario Employment Standards Act, 2000 (the “ESA”) allows employers to temporarily lay off employees, so long as the layoff lasts for no more than 13 weeks in any consecutive 20-week period.
However, if a layoff extends for more than 13 weeks in any consecutive 20-week period, but lasts less than 35 weeks in any consecutive 52-week period, the layoff will still be considered temporary in a few exceptional cases (i.e., if the employer has continued to pay the employees substantially and/or provides them with benefits, if the employees would be entitled to receive Employment Insurance or the CERB, or if the employees are subject to a timely recall).
The 20-week period is a “rolling window” - if an employee is laid off for even one day more than 13 weeks in any consecutive 20-week period, the layoff will not be temporary. The same is true of the 52-week window described above, which applies in limited circumstances. If the applicable threshold is exceeded, termination is triggered, and is deemed to have retroactively occurred on the first day of the layoff.
In addition, a temporary lay off may be extended for any period, if the employee consents. If so, an employer is allowed to continue the lay off to coincide with the length of the pandemic.
Despite an employer’s right to temporarily lay off an employee under the ESA, where an employment contract does not provide for the possibility of such a layoff, Ontario courts have often favoured employees who claim to have been constructively dismissed.
Accordingly, employers face risk if they lay off an employee for common law damages, even where they have complied with the temporary layoff provisions of the ESA.
However, there are cases in Ontario in which the Court has inferred a right to impose a temporary layoff in the absence of an express contractual right in limited circumstances.
- the employer has a history of temporary layoffs for various reasons, including a shortage of work;
- the employer is in an industry where temporary layoffs or breaks in service are common;
- the employer has a policy in place to warn employees that temporary layoffs are possible when there is a downturn in business or a shortage of work; and/or
- the employer continues to provide benefits to laid off employees during the layoff term
Despite this, employment contracts should incorporate a standard lay off clause protecting the employer’s right to temporarily lay off employees in accordance with the ESA and without further notice or compensation.