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Temporary layoffs: What employers need to know

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Canada Publication July 26, 2022

Temporary layoffs can be a necessary element of operating a business in Canada. Employers faced with a shortage in available work may need to reduce staffing in the short term to control costs, with the goal of preserving jobs in the long term.

Temporary layoffs are common in some industries and rare in others. They may be driven by cyclical changes in business demand or extraordinary events like the COVID-19 pandemic. Whatever the reason, employers should be aware of applicable laws before taking this step. This legal update reviews the laws applicable to temporary layoffs, with particular attention to rules in Alberta, British Columbia, Ontario and the federal sector. 


What is a “temporary layoff”?

Employment standards statutes across Canada provide for “temporary layoffs.” These enable an employer to lay an employee off work for a limited period of time, typically without terminating the employment relationship. The employee generally is not entitled to pay during the layoff period. In effect, the employment relationship is paused.

The employer can recall the employee back to work at any time before the end of the statutory layoff period. If the employee is recalled within this time period, then the employment relationship generally continues and, in most jurisdictions, termination entitlements are not owed. Generally, if the employee is not recalled within this time period, the employment relationship is deemed to be terminated, and any termination entitlements (under statute, common law, or contract) may be owing.

Employers should be aware that statutory temporary layoff provisions can, in certain circumstances, be replaced by the terms of the employment contract or collective agreement. In particular, if the contract or agreement includes layoff terms that offer a “greater right or benefit” than the minimum requirements set out in the statutory layoff provisions, then that contract or agreement will prevail.

Why should employers consider temporary layoffs?

Temporary layoffs may suit the business needs of employers for a variety of reasons, including because they reduce payroll costs while, generally, preserving the employment relationship. A laid-off employee may be eligible to collect employment insurance (EI), meaning the employer’s workforce may be eligible to receive some replacement income while waiting to return to work.

What risks are associated with temporary layoffs?

Temporary layoffs are not without risk. In particular, even though layoffs are permitted under statute, they are generally considered a “constructive dismissal” at common law, meaning employees can treat a layoff as a termination of their employment. In that scenario an employee can claim statutory, contractual and/or common law termination entitlements. 

However, outside of Quebec, Canadian courts and adjudicators have held that employers and employees can expressly or impliedly agree to the employer’s right to implement layoffs in employment contracts, collective agreements, workplace policies or accepted industry practice. If that express or implied agreement exists, the employer can implement layoffs subject to statutory layoff rules without triggering a termination.

Employers should also be mindful of group termination laws in the provinces they operate in, as these may be triggered if a threshold number of employees are laid off within a defined timeframe (which varies by province).

What should an employer do before implementing temporary layoffs?

Before implementing temporary layoffs an employer should:

  • Ensure it has the contractual right to place employees on layoff.
  • Ensure planned layoffs will comply with relevant statutory rules.

The charts below set out some of the key statutory layoff rules applicable to provincially regulated employers in Ontario, Alberta, British Columbia and to federally regulated employers throughout Canada.

During the COVID-19 pandemic each of these jurisdictions adopted more flexible layoffs rules for layoffs that were pandemic related. Some jurisdictions have now repealed those COVID-19 layoff rules. Where they are still in place they are listed below.

Key considerations: layoffs in BC, Alberta, Ontario and federally

 

Jurisdiction When does a layoff begin? Is the employer required to provide notice? What is the maximum layoff period?
Ontario

There is no statutory requirement for notice of temporary layoff. Employees are deemed to be on layoff in any week where they earn less than half of what they would earn at their regular rate in a regular work week.

If employees do not have a “regular work week” their earnings over the 12 weeks prior to the beginning of the layoff period are averaged to determine what they would normally earn in a week.

Employees are not considered to be on layoff during weeks when they are not available to work, they are subject to disciplinary suspension or they are not provided with work due to a strike or lock-out.

Up to 13 weeks in any consecutive 20-week period

or

Up to 35 weeks in any consecutive 52-week period, if any one of a number of enumerated conditions are met. These conditions include (but are not limited to):

  • The employer continues to make substantial payments to the employee; or
  • The employer continues to pay into the employee’s benefits or pension plan for the duration of the layoff period; or
  • The employee receives supplementary unemployment benefits; or
  • For non-unionized employees, the employer calls the employee back to work within the time set out in an agreement between the employer and employee.

or

In the case of unionized employees, a period of more than 35 weeks in any 52-week period where the employer recalls the employee within the time set out in an agreement between the employer and union.

Between March 1, 2020, and July 30, 2022, any reduction or elimination of a non-unionized employee's hours of work for reasons related to COVID-19 are not considered a temporary layoff, and are instead treated as an indefinite “Declared Emergencies and Infectious Disease Emergencies Leave.”

Jurisdiction When does a layoff begin? Is the employer required to provide notice? What is the maximum layoff period?
British Columbia

There is no statutory requirement for notice of temporary layoff. Employees are deemed to be on layoff in any week where they earn less than half of what they would earn at their regular wage in a regular work week (averaged over the previous 8 weeks).

Up to 13 weeks in any period of 20 consecutive weeks, or, for an employee who has a right of recall under a collective agreement, within the specified period in the collective agreement under which the employee has a right to be recalled. 

Jurisdiction  When does a layoff begin? Is the employer required to provide notice? What is the maximum layoff period?
Alberta

To avoid a termination of employment an employer must provide an employee with written layoff notice that: 

  • States it is a temporary layoff notice;
  • States the date the layoff begins;
  • Includes a copy of sections 62, 63 and 64 of Alberta’s Employment Standards Code;
  • Includes any other information required by regulation. 

Generally, 90 days within a 120-day period

However, that period can be extended if:

  • The employer, with the employee’s agreement, (i) pays the employee wages or an amount instead of wages, or (ii) makes payments for the benefit of the laid-off employee in accordance with a pension or employee insurance plan or similar plan.
  • There is a collective agreement binding the employer and employee containing recall rights for employees.

If an employee is laid off for reasons related to COVID-19 the maximum layoff period is 90 days in a 180-day period. This extended layoff period will apply until repealed by the Alberta government.

Jurisdiction When does a layoff begin? Is the employer required to provide notice? What is the maximum layoff period?
Federal

Notice of a temporary layoff is not generally required.

However, notice to the employee is required for temporary layoffs exceeding three months, if the employer recalls the employee within six months from the first day of the layoff. In that case, the recall date must be included in the notice sent to employees.

Generally, three months or less.

However, the layoff may exceed three months if:

a) It is a result of a strike or lockout;

b) It is 12 months or less and mandatory under a minimum work guarantee in a collective agreement;

c) The employer gives the employee notice of layoff and a fixed period of layoff or a fixed date of recall within six months of the start of the layoff, and the employer in fact recalls the employee within that period.

d) The term of the layoff is more than three months and:

  • the employee continues to receive payments in an amount mutually agreed upon
  • the employer continues to make payments to a pension plan 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 under the Employment Insurance Act; or

e) It is more than three, but less than 12, months and the employee maintains recall rights pursuant to a collective agreement. 

Layoff laws are unique in each jurisdiction in Canada. There are other issues related to layoffs in addition to those listed above, including procedures for recalling employees to work. To ensure layoffs are conducted correctly employers should consult with legal counsel with expertise in employment and labour matters as well as the jurisdiction in which the layoffs are to be conducted.



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