CKL EMPLOYERS – SEP. 4 IS NIGH – WILL YOU SUFFER THE SLINGS AND ARROWS OF OUTRAGEOUS FORTUNE? THE LOOMING CHOICE OF LAY-OFF OR RECALL. WHAT YOU NEED TO KNOW.

In Ontario, temporary lay offs generally may be up to thirteen weeks, under the Employment Standards Act, 2000 (Ontario) (“ESA”). If the person is not recalled, the employer faces risk that the employee would be deemed terminated under the ESA, even if both the employer and the employee wish to continue the employment relationship.

During COVID’s special circumstances, the Government of Ontario issued Ontario Regulation 228/20 – Infectious Disease Emergency Leave (the “Regulation”), which provides that any non-unionized employee who:

1. had their hours of work temporarily reduced or eliminated by their employer for reasons related to COVID-19, and
2. is not performing the duties of his or her position as a result,

is deemed to be on Infectious Disease Emergency Leave during the “COVID-19 Period”, which is retroactive to March 1, 2020, and ends six weeks following the end of Ontario’s provincial declaration of emergency.

Ontario’s provincial declaration of emergency ended on July 24, 2020. This means that the “COVID-19 Period” is set to end on September 4, 2020.

So, as of September, absent further government intervention, many employees will return full circle – facing the risk of deemed terminations under the ESA. They need to decide whether to place employees on temporary layoff or to reduce hours of work or pay. This is especially so for those employers who are unable to bring back employees at the end of the COVID-19 Period..

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, 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
• 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
• 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

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:
  • 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.
  • 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 layoff

Is Advance Notice Required? 

• there are no advance statutory notice requirements before an employee can be placed on a temporary layoff in Ontario
• 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
• employees may also, on a voluntary basis, use their vacation time during a period of a temporary layoff to continue to receive pay

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
• the allotted time for a temporary layoff may be extended if the employer makes benefits and pension contributions to the laid-off employees
• 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

• whether these obligations are triggered will be a jurisdiction-specific inquiry. 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.

• 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?

• 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
• 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.