Layoffs are never good: whether it’s the employer or employee, layoffs mean a cessation of earning for the employee, and the fact that times might be rough ahead for the employer. It also opens up the possibility of legal action initiated by the former employee, which can further exacerbate an already precarious situation. Which is why, as an employer, it is imperative that one understands the rules and regulations that govern layoffs to avoid any potential litigation. If, for any reason, an employer is forced (due to prevailing economic conditions or international events like pandemics etc) to go with layoffs or temporary layoffs, here is all they need to know about the Ontario temporary layoff laws.
Starting with the particulars of what actually constitutes a ‘temporary layoff’ and how is it any different from a regular layoff, this is everything that one needs to know about temporary layoffs and Ontario’s temporary layoff laws.
What is a Temporary Layoff?
In accordance with the guidelines and definitions laid down by the Employment Act in Ontario, a temporary layoff is the period during which no obligation for remuneration or severance pay may be processed by the employer, essentially translating to a state where the employee no longer works for the employer, but hasn’t actually terminated the contract of employment. According to the Ontario law, temporary layoff can be characterized by the following specifications,
A layoff can be classified as temporary if it is less than 13 weeks; with the total duration being any 20-week period.
A layoff can be claimed to be temporary if it is longer than 13 weeks during a 20-week period. However, certain caveats exist, including the stipulation that the said layoff period be less than 35 weeks in a 52-week cycle, with additional conditions applied.
The second specification contains several conditions, which will be discussed below,
If the employee continues to receive considerable sums of payment from the employer, the second condition shall be in effect.
Should the employer continue to make payments intended for the benefit of the employee, including health plans, insurance plans, retirement/ pension plans under both individual and group considerations.
Should the employee continue to receive supplementary unemployment benefits.
Should the employee be working two or more jobs, which would mean that they are receiving remuneration from another source, which would render them ineligible to receive supplementary unemployment benefits.
Should the employer ask or recall the employee back to normal work within the time period as laid out by the Director of Employment Standards.
Finally, if the employer asks the employee back to normal work, and said employee is not a member of any trade/ worker union with pre existing agreements already in effect.
Any time period over the stipulated time period will not be considered as temporary layoff, but will instead be considered permanent layoff, in case of which severance pay and other exit benefits may have to be paid out to the employee. Should the time period exceed the limit, under the law, it shall be deemed as a lawful termination of contract/ employment.
There are specific conditions that can allow an employer to exercise their right of temporary layoffs. Here is a quick explanation of these conditions.
Under Which Conditions Can an Employee be Temporarily Laid Off?
Certain conditions need to be fulfilled before an employee can be temporarily laid off, according to Ontario law.
The contract between an employee and employer must contain an explicit and clear mention of a clause that lays out the right to temporarily lay the employee off.
The temporary layoff itself must not exceed the maximum period of time allowed as per the regulation enforced by Ontario.
Should any of these conditions not be met by the employer, the temporary layoff will be considered a permanent termination of employment, which would subsequently entitle the employee to severance pay and any exit benefits as per the contract.
Other Particulars Around the Temporary Layoff Laws in Ontario
Temporary layoffs revolve around the word ‘temporary’, which obviously means that the employment relationship or contract is essentially paused and can be resumed once the employer calls the employee back to work within the stipulated period of time. During the time of the temporary layoff, the employee isn’t entitled to any pay or benefits; however, certain exemptions can be made to insurance benefits in specific cases.
Furthermore, if the employment contract between the employer and employee does not state the possibility of there being a temporary layoff, and there is neither a longstanding tradition of such practice in the company or in the industry, then the employees reserve the right to consider the temporary layoff as ‘constructive dismissal’. Constructive dismissal would make the employee eligible for severance pay and any other benefits related to their exit. And should the temporary layoff exceed the amount of stipulated time, they will be entitled to termination pay.
Navigating the Complex Landscape of Temporary Layoffs: Employers’ POV
Employers should chart their course carefully and with all considerations in mind when mulling over a decision to temporarily layoff part or all of their workforce, since this could potentially open them up for a slew of litigation. However, with the right legal advice and a considerably obvious understanding of the laws regarding temporary layoffs, these can be avoided.
For one, employers can and should include ‘well-drafted employment contracts that explicitly state the option that they reserve for temporary layoffs.’ This helps employers avoid liability for constructive dismissal and also keeps employees aware of the potential for a temporary layoff down the road should existing economic conditions merit them. If one hasn’t been included, then it is important that the employer seek the employee’s consent to being laid off temporarily. Failure to do so might open the employer up for litigation.
Dharsi Law: Making Temporary Layoff Law Easy, Approachable for Employers!
If you are an employer and want to know more about the temporary layoff law in Ontario, or simply need clarification or counsel/ advice on how to proceed with a specific case, you need a law firm that can help make sense of the legislation and guide you through the terrain. At Dharsi Law, we specialize in civil litigation, and have extensive experience with temporary layoff laws and its litigation process. Consult us and smoothly breeze through the process, saving your business and allowing us to guide you through the rocky but short period of time.
