Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
Note: In light of the rapidly evolving COVID-19 crisis, it is possible that the layoff laws in Canada may be amended. Employers should consult with counsel for the latest developments and updated guidance on this topic.
As the unprecedented and devastating financial impact of the COVID-19 crisis enters the consciousness of Canadian employers, many are implementing temporary layoffs or thinking about it. We set out below the principal legal issues for federally and provincially regulated employers to consider in a temporary layoff scenario.
The parameters of a temporary layoff, and circumstances in which temporary layoffs are permitted, vary from province to province. Generally, a temporary layoff is a temporary period in which the employer ceases to provide work (and usually pay) to employees. It is not a termination of employment, but depending on the legislation applicable, may be deemed a termination where the layoff extends beyond a prescribed temporary period of time prescribed by the legislation. In such a case, termination obligations will apply.
It is important that employers note that, despite the provisions regarding temporary layoff in provincial and federal legislation, where temporary layoff is not expressly permitted in a contract of employment, collective agreement, or in some cases a workplace policy, layoff runs the risk of eliciting a constructive dismissal claim.
In circumstances where the layoff exceeds the prescribed temporary periods of layoff in the legislation (see details below) or alternatively, where the action is deemed a constructive dismissal, an employee in Canada may be able to claim their notice/pay in lieu of notice/severance pay under applicable employment standards legislation plus, unless they have an enforceable employment agreement stating otherwise, damages for failure to provide reasonable notice of termination at common law.
Layoffs are usually unpaid, however, subject to some of the provisions extending layoffs under certain conditions (and only federally and in Ontario and Alberta), some payments or benefits may need to be paid during the layoff period. Some payment may also be required under certain collective agreements, employment contracts, employer policies or other applicable plans.
Employees on layoff may be entitled to federal employment insurance benefits in Canada. This is a link to the Government of Canada’s website page outlining Employment Insurance Benefits: https://www.canada.ca/en/services/benefits/ei/ei-regular-benefit.html.
Further, the federal government has announced a planned $82 billion dollar aid package to assist businesses and Canadians through the COVID-19 crisis. Aid is expected to be delivered through existing programs, such as employment insurance and the Canada Child Benefit. The availability of further financial aid may impact an employer’s decision to temporarily lay off employees.
Below, please find the legislative requirements and time periods regarding temporary layoffs in Canada:
A layoff is considered a termination when the employer has no intention of recalling the employee to work. The Canada Labour Code provides for temporary layoffs of:
- A duration of 3 months or less;
- A duration of 3 to 6 months with a fixed date of recall; or
- A period of more than 3 months where:
- The employee continues to receive payments during the term of the layoff from their employer in an amount agreed upon by the employee and the 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.
Furthermore, periods of re-employment less than two weeks in duration are not included in determining the term of layoff. Layoffs may also be directed by the provisions of a collective agreement. If employees retain a right of recall, such layoffs are permissible.
A temporary layoff without the express or implied consent of the employee is a constructive dismissal. By way of exception, a temporary layoff is not a constructive dismissal if there is an enforceable employment agreement and/or company policy that specifically allows for a temporary layoff in accordance with layoff rules under the Ontario Employment Standards Act.
In Ontario, under the Employment Standards Act a temporary layoff is a period of not more than 13 weeks in any period of 20 consecutive weeks. A “week of layoff” is a week in which an employee earned less than half of what he, she or they would normally earn (or earn on average) in a week. Employers are not required to provide written notice, or reasons for layoff (though this may be required under a collective agreement or employment contract).
A temporary layoff can be extended to a period of less than 35 weeks in any period of 52 consecutive weeks where:
- The employee continues to receive substantial payments from the employer;
- The employer continues to make payments for the benefit of the employee under a legitimate retirement plan, pension plan, or group or employee insurance plan;
- The employee receives supplementary unemployment benefits;
- The employee is employed elsewhere during the layoff and would be entitled to receive supplementary unemployment benefits if they were not employed elsewhere;
- The employer recalls the employee within a time limit approved by the Director of Employment Standards; or in the non-unionized context, the employer recalls the employee within the time set out in an agreement between the employer and the employee; or
- In the unionized context, a layoff longer than 35 weeks in any consecutive 52-week period where the employer recalls the employee within the time set out in an agreement between the employer and the trade union.
In Ontario, one of the most common ways to extend the period of temporary layoff is to continue the employee’s group benefit coverage throughout the entire period of time of the layoff.
In British Columbia, a “week of layoff” is defined under the BC Employment Standards Act as a week in which an employee earns less than 50% of their regular weekly wages, averaged over the previous 8 weeks.
Employers may only temporarily lay off an employee if the right to temporary layoff exists within the employment relationship, either by a term in the employment agreement, with the consent of the employee, or by a well-known industry-wide practice. In the absence of any of these factors, a reduction in hours may be considered a substantial alteration of employment, which may be found to constitute a termination of employment.
In British Columbia, temporary layoffs cannot exceed 13 weeks in a 20-week period.
In Alberta, the Alberta Employment Standards Code permits temporary layoff where employers provide employees with a written layoff notice. Unless a collective agreement provides otherwise, a layoff notice must be provided in accordance with an employee’s length of service:
- 1 week prior to the date the layoff is to commence for employees with less than two years of service;
- 2 weeks’ notice for employees with 2 or more years of service; or
- if unforeseeable circumstances prevent an employer from providing notice, notice should be provided as soon as practicable in the circumstances.
Temporary layoffs cannot exceed 60 days in a 120-day period, unless, during the layoff and by agreement with the employee, the employer pays the employee wages or an amount instead of wages; makes payments for the benefit of the laid-off employee in accordance with a pension or employee insurance or similar plan; or there is an active collective agreement containing recall rights for employees following a layoff.
Under Quebec’s Act Respecting Labour Standards, a temporary layoff must not exceed a duration of 6 months. Layoffs for a period exceeding 6 months will be deemed a termination, in which case the laid off employee may be entitled to termination pay.
Unionized workplaces may have a collective agreement in place allowing for a longer period of layoff, with a right of recall. In this case, a layoff may be deemed a termination, and termination pay would be payable at the earlier of either (i) the expiry of recall rights, or (ii) one year after the temporary layoff commenced.
There is an exception to the requirement to pay termination pay where the termination or layoff was as a result of a “superior force.” The same exception exists in the case of a collective dismissal. “Superior force” is defined as an “unforeseeable and irresistible event, including external causes with the same characteristics.” Case law in Quebec has previously recognized the ice storm and the H1N1 virus as events that met the requirements of a “superior force.”
Under the Manitoba Employment Standards Code’s Employment Standards Regulation, layoff will be deemed a termination where an employee is laid off for 1 or more periods which, in sum, exceed 8 weeks within a 16-week period (except where a different period is specified by the employment standards director upon application by the employer).
The layoff will not be deemed terminated where employees are subjected to regular and recurring lay-offs, and the employee was told about layoffs at the time of hire; or if during the layoff the employer and employee agree that (a) the employer will continue to pay wages, or payments in the place of wages, to the employee, or (b) the employer will continue to make payments for the benefit of the employees to a group pension plan, group or employee insurance plan, or both if the employee has a pension plan and group or employee insurance plan.
Layoff may alternatively be guided by the provisions of a collective agreement.
Under the New Brunswick Employment Standards Act, layoff is defined as a temporary interruption of the employment relationship at the direction of the employer because of lack of work.
Employers are required to provide employees with the following notice of layoff in writing (or pay in lieu):
- 2 weeks’ notice for employees with 6 months to less than 5 years of continuous service; and
- 4 weeks’ notice for employees with more than 5 years of continuous service.
This notice is not required where there is a lack of work due to any reason unforeseen by the employer at the time notice would otherwise have been given, or for any reason for a period of up to 6 days.
Newfoundland and Labrador
Under the Newfoundland and Labrador Labour Standards Act, temporary layoff means a layoff of not more than 13 weeks in a period of 20 consecutive weeks. A day during the period of 20 consecutive weeks in which an employee receives pay (including public holiday pay), is not counted in the calculation of the 12-week layoff period. Where a layoff exceeds this period, it will be deemed a termination.
A period of notice for a temporary layoff may also be outlined in a contract of service or a collective agreement. Under the Labour Standards Act, the period of notice (or equivalent payment in lieu) required is the same as the notice period required for a termination:
- 1 week for employees with continuous service of 3 months but less than 1 year;
- 2 weeks for employees with 2 to 5 years of continuous service;
- 3 weeks for employees with 5 to 10 years of continuous service;
- 4 weeks for employees with 10 to 15 years of continuous service; and
- 6 weeks for employees with more than 15 years of continuous service.
Notice is not required where the employee is laid off for no more than 1 week, where an employee has less than 1 month of service, or where an employer is required to terminate a contract of service as a result of climatic or economic conditions that are beyond the foreseeable control of the employer, and necessitate a declaration of redundancy.
Under the Nova Scotia Labour Standards Code, layoff is defined as a temporary or indefinite termination of employment because of a lack of work and includes a temporary, indefinite or permanent termination of employment because of the elimination of a position.
Layoff is subject to the same notice provisions as a discharge or suspension. Notice periods are relational to years of service:
- 1 week for employees with less than 2 years of continuous service;
- 2 weeks for employees with 2 to 5 years of continuous service;
- 4 weeks for employees with 5 to 10 years of continuous service; and
- 8 weeks for employees with more than 10 years of service.
Where an employer lays off 10 or more employees within any period of 4 weeks or less, these notice requirements increase. However, these notice provisions do not apply where the layoff is for a period not exceeding 6 consecutive days, or where a person is laid off for reasons beyond the control of the employer, including the actions of governmental authority.
The period of continuous employment will not be considered broken where there is a layoff of less than 12 months.
Prince Edward Island
Under the Prince Edward Island Employment Standards Act, a layoff is defined as a temporary interruption of the employment relationship at the direction of the employer because of a lack of work. Layoffs are prohibited where an employee has been granted a leave of absence. Relevant statutory leaves include Family Leave, Sick Leave, Leave for Care of a Critically Ill Child.
Layoff is subject to the same notice provisions as a termination of employment. No notice is required for employees with less than 6 months of continuous service. The following notice requirements apply:
- 2 weeks for employees with more than 6 months of continuous service but less than 5 years;
- 4 weeks for employees with 5 to 10 years of continuous service;
- 6 weeks’ notice for employees with 10 to 15 years of continuous service; and
- 8 weeks’ notice for employees with 15 or more years of continuous service.
There are exceptions to these notice requirements. Notice is not required for layoffs that do not exceed 6 days, or where layoff is due to circumstances beyond the control of the employer, or where the layoff is due to the actions of any governmental authority that directly affect the operations of the employer.
Under the Saskatchewan Employment Act’s Employment Standards Regulations, layoff is a temporary interruption by the employer of the services of an employee for a period exceeding 6 consecutive work days.
Employers must provide written notice or pay in lieu to employees in the case of a layoff; notice periods are associated with length of service. The following notice requirements apply:
- 1 week for employees with more than 13 consecutive weeks but less than 1 year of service;
- 2 weeks for employees with 1 to 3 years of employment;
- 4 weeks for employees with 3 to 5 years of employment;
- 6 weeks for employees with 5 to 10 years of employment; and
- 8 weeks for employees with more than 10 years of employment.
When 10 or more employees in one community are terminated within a 4-week period, the notice period requirements are greater. This includes a layoff that has no recall date, or that is longer than 26 weeks. Notice must also be provided to the Minister of Labour Relations and Workplace Safety.
Notice of group layoff is not required if the employees being laid off are unable to work due to an unpredictable event or circumstance, or where the layoff is for a period of less than 26 weeks.
Bottom Line for Employers
As employers consider the possibility of temporarily laying off their employees due to a significant decrease in business arising out of the COVID-19 crisis, they should ensure that they do so in accordance with the laws of the jurisdiction(s) in which their businesses operate. To ensure this, it would be wise to seek the support of legal counsel.