With many businesses ordered to cease operations due to the COVID-19 pandemic, employers may be wondering what their options are if they are not able to continue paying their employees. Fortunately, provincial and federal governments have promised to support businesses and employees during this uncertain time. Employers that are not able to send staff to work from home or keep them on payroll while their businesses are closed might consider temporary layoffs instead of terminations where possible.
What is a temporary layoff?
A temporary layoff occurs when an employer reduces or stops an employee’s work without ending their employment and with the intention of recalling the employee to work in the near future. In Ontario, a work week is classified as a “week of layoff” when the employee earns less than half of their average weekly wage. An employer might temporarily lay off employees due to lack of work or, as with the coronavirus, due to a government order.
The goal of a temporary layoff is to respond to the fluctuating work force needs of a business without constantly terminating and recruiting employees. Temporary layoffs allow businesses to retain already trained and experienced staff without wasting time and money on training new workers.
How do temporary layoffs work?
In Ontario, temporary layoffs are governed by the Employment Standards Act, 2000 (ESA). A temporary layoff can last up to 13 weeks within a 20-week period or up to 35 weeks within a 52-week period only in certain circumstances, such as if the employee continues to receive substantial payments or benefits. If a layoff exceeds the maximum time permitted under the ESA, the layoff is deemed to be a termination of employment.
The ESA does not require employers to provide employees with written notice of a temporary layoff, nor are they required to provide a reason for the layoff. However, employment contracts and collective agreements may require notice and/or reasons.
Temporary Layoffs and the Law
Although the ESA sets out the basic rules for temporary layoffs, the ESA does not give employers the right to enact them. Employers may temporarily layoff employees only if this is allowed by the employment contract, if there is an established custom or practice in the employer’s industry, or if the employer has the employee’s consent — otherwise employees may elect to consider a temporary layoff to be a constructive dismissal. In this case, the employee will be entitled to termination pay and potentially other damages. An employee will likewise be entitled to termination pay if they are laid off for longer than the permitted temporary layoff period.
To avoid liability for constructive dismissal, employers should have well drafted employment contracts that explicitly permit temporary layoffs. If the employment contract does not permit this, the employer should seek the employee’s consent before laying them off. If the employee does not give consent and the employer has no other choice, the employer should be aware of the risks of doing so.
Do you need advice on how to manage employees during the COVID-19 pandemic?
Whether you need clarification on how to temporarily layoff employees in Ontario or need help implementing employment contracts with temporary layoff clauses, our HR advisors can help you. Speak to our experts today and get the latest legislation updates and HR advice for your business: 1 (833) 247-3652.