UPDATE June 1, 2020:
As seen below, we had previously discussed the legislative rules around layoffs in the province. In particular, we explained that under the Employment Standards Act (ESA), an employer is permitted to lay an employee off for up to 13 weeks without benefits, or for up to 35 weeks if benefits are continued. After that time period, an employer is required to either return the employee to work or terminate them, with severance pay.
However, in light of recent economic hardships many businesses are facing as a result of COVID-19, many employers expressed concerns over the number of employees currently on layoff, and employers’ inability to pay out severance to everyone given the economic downturn. In response to those concerns, the province has announced a new Regulation (O.Reg. 228/20). In the new Regulation, the province has exempted temporary layoffs due to COVID-19 from the mandatory termination clauses within the ESA. This means that a temporary layoff due to COVID-19 can extend beyond the time frames set out in the ESA.
Further, the regulation also amends the rules regarding constructive dismissal. Generally, a significant change to one’s working conditions (including a drastic reduction in hours or wages) would be considered tantamount to constructive dismissal, entitling the employee to damages for termination. However, reductions in wages or hours will not be deemed constructive dismissal during the period when the new Regulation applies.
The Regulation states that it is retroactive to March 1, 2020, and will be in force until six weeks after the period of emergency is lifted in Ontario. The current emergency period is set to expire on June 2, pending a further extension.
On April 8, 2020, Canada announced amendments to the wage subsidy program aimed at helping employers avoid lay-offs or recall workers who have already been let go due to COVID-19. The lost revenue requirement that employers must demonstrate in order to qualify has been reduced for the month of March to 15%, reduced from the prior test of 30%. The government has also stated employer CPP and EI premiums may be waived in emergency circumstances. Details are in the above link.
Canada has also stated its intent to provide small business loans of up to $40,000, 25% of which may be forgiven. Details will be released shortly. Even with these proposed plans in place, many Canadians are still facing potential lay-offs or have already been let go. Below, we will provide advice and information to those who may be dealing with job loss or worried they soon may face this issue themselves.
Many people on both sides of the employment relationship are concerned about the legal issues on this topic. It is a question that is regrettably complicated. Let’s start with the basics.
The province’s Employment Standards Act (ESA) seemingly provides any employer with the right to lay-off its employees. The ESA states that the company may effect a temporary lay-off of two durations, depending on whether benefits are continued for the lay-off period.
Without benefits, a company may lay-off employees for up to 13 weeks within a period of 20 weeks. Where benefits are continued, this time period is extended to 35 weeks within a 52-week range. One might expect that these terms define the employer’s rights. That, however, is wrong.
Lay-offs Reviewed by Ontario Courts
The interpretation of this term of the ESA in our courts has been that the employer does not have this right unless there is a contract that allows the employer this right. This may be proven by a written agreement or by an apparent visible practice that has been broadly accepted as an employment term of a particular workplace.
What Does This Mean for an Employee Who is Let Go?
Absent such a contract term or practice, an employee may treat a lay-off as a termination of employment. Keep in mind that Ontario law allows for two remedies on termination. The first is the statutory sums relating to notice (up to 8 weeks) and severance pay (up to 26 weeks). The second is a common law claim for wrongful dismissal notice for lost income, presuming no contract that sets out an agreed severance sum.
What About a Re-Call Back to Work?
Now we are getting complicated. The answer comes from a Supreme Court of Canada decision against an employer, which was ironically a union, usually an advocate of employee rights. In this case, the employee was fired without cause. Settlement discussions followed. As usual, the employee wanted more severance and the employer wanted to pay less. There was no deal made. The union then told the employee to come back to work to the same job at the same pay. He refused to do so.
The Court in this case ruled in favour of the union. The employee, it concluded, should have returned to work and dismissed his case. This should be the rule, it stated, where the company requested such a return to work, provided that there is no acrimony, no embarrassment, no loss of humility, no stigma and no loss of dignity. Basically, if the offer is made in good faith for the same job, with the same salary and no nasty allegations, the employee should return to work.
What Does This Mean to the Lay-off Issue?
Should an employer follow these rules and offer jobs back at the end of, or during the statutory lay-off period, employees should accept the return to work. Our courts have actually made this decision in exactly this situation. In the case linked above, the court did require the company to pay the employee’s salary from the date of the lay-off to the date of the offer of reinstatement.
What about the ESA Severance Pay?
Good question. The courts have not considered this issue. An excellent argument could be made and has not yet been, that the notice and severance sums are due on termination. The lay-off is legally a termination, so these sums should be due.
So What Do I Do?
Consider this: when laid off, yes, the employee may assert that this is tantamount to a termination. This position need not, however, be taken immediately. The employee is eligible for EI right away. Should the employee claim termination right away, all benefits will be over, apart from the mandatory 8 week (maximum) period. Disability insurance, if offered as a group benefit, is very important, particularly right now. Why risk it losing it?
If the employee waits for the lay-off period to expire and is not recalled, then the position may be advanced that the lay-off date is the termination date. All rights may then follow. The EI received to that date will likely not need to be repaid. If the employee is recalled, then consideration may be given to the context of the offer to do so.
What About the Employer?
Clearly this is a difficult time. The issues of lay-off must be reviewed with legal counsel to understand all of the above ramifications. Also, the question of job-protected coronavirus concerns must be considered to ensure that there is no bias against those who are ill, perceived to be ill, or needing to attend to child care or family issues.
Get Advice and Know Your Rights
These chaotic times present hard choices all of us. Get solid legal and practical insight, no matter whether you are employed or the employer. For advice on COVID-19 issues and all employment law matters, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins LLP. We regularly advise workplace parties on a wide range of legal workplace issues. Contact us online or by phone at 416 364 9599 to schedule a consultation.
Return to Blog →