CANADA: COVID-19 and the Temporary Layoff of Employees

Updated: June 30, 2020

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 has officially entered the consciousness of Canadian employers, many have implemented temporary layoffs, or are considering the option. 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 (for example, federally, and in Ontario, Alberta and Manitoba), 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.

Federally and in most provinces, leaves of absence related to COVID-19 have been implemented. An employer’s ability to lay off an employee will generally be impeded if that employee is on a leave of absence, so employers must be cognizant of whether employees are on a leave or intend to take a leave of absence, and how that will impact the employer’s plans to commence a layoff. More information about COVID-19 related leaves can be found in our recent Insight.

Employees on layoff may be entitled to federal employment insurance benefits or the Canada Emergency Response Benefit allowance. This is a link to the Government of Canada’s webpage outlining Employment Insurance Benefits: https://www.canada.ca/en/services/benefits/ei/ei-regular-benefit.html. More information about the Canada Emergency Response Benefit can be found here.

Further, the federal government has announced the Canada Emergency Wage Subsidy, offering a 75% wage subsidy to eligible employers, in addition to other supports for individuals and businesses as part of its COVID-19 Economic Response Plan. More information about the Plan is available on the Government of Canada’s website. The availability of financial aid may impact an employer’s decision to temporarily lay off employees and some employers may choose to take advantage of the Canada Emergency Wages Subsidy instead of implementing layoffs.

Below, please find the legislative requirements and time periods regarding temporary layoffs in Canada:

Federal

The Government of Canada recently announced an extension to the temporary layoff time periods prescribed in the Canada Labour Standards Regulations, to help protect jobs and support employers managing economic hardship due to the pandemic.

Now, for employees laid off prior to March 31, 2020, temporary layoffs are extended by a period of 6 months, or to December 30, 2020, whichever occurs first.

For employees laid off between March 31, 2020 and September 30, 2020, the temporary layoff time period is extended until December 30, 2020, unless a later recall date is provided in a written notice at the time of layoff.

Once these timelines are met, the temporary layoff will be deemed a termination of employment.

Under normal circumstances, 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. These federal layoff periods only apply to a very small proportion of Canadian employers (approximately 10%) that are governed by federal jurisdiction (e.g., airlines, banks, interprovincial transportation companies, telecommunication companies, etc.).  Most employers are governed by provincial legislation in Canada, and those statutory layoff requirements are described below.

Ontario

On May 29, 2020, the Ontario Government released Ontario Regulation 228/20, which among other changes, creates exemptions from the temporary layoff requirements under the Ontario Employment Standards Act, 2000. Generally, under the new Regulation, employers that have temporarily reduced hours and/or wages of employees due to COVID-19 during the prescribed time period, are exempt from the temporary layoff provisions, except where the layoff is due to a permanent discontinuance of all the employer’s business at an establishment. Furthermore, these employees will not be considered constructively dismissed under the statute. 

Under normal circumstances, 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, 2000.

In Ontario, under the Employment Standards Act, 2000, 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.

British Columbia

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.

Normally in British Columbia, temporary layoffs cannot exceed 13 weeks in a 20-week period. However, in light of the COVID-19 pandemic, the Government of British Columbia recently approved an Order in Council amending the Employment Standards Regulation, B.C. Reg. 369/95. The temporary amendments extend the period of temporary layoff to up to 24 weeks in any period (ending on or before August 30, 2020), where the COVID-19 emergency is part of or all of the cause of the layoff. This extension does not apply to layoffs beginning on or after June 1, 2020.

Alberta

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.

The Alberta Government has suggested that COVID-19 is such an “unforeseeable circumstance” that would require employers to provide as much notice as possible given the circumstances.

While normally in Alberta temporary layoffs cannot exceed 60 days in a 120-day period, in light of COVID-19, this has been extended. Pursuant to the COVID-19 Pandemic Response Statutes Amendment Act, 2020, temporary layoffs for reasons related to COVID-19 cannot exceed 180 consecutive days. This extension is effective as of June 18, 2020 and applies to employees on layoff at the time of the coming into force of the amendment, and employees laid off on or after the coming into force of the amendment.

Quebec

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.”

Manitoba

Normally, 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).

However, Manitoba has instituted a temporary exception, extending the amount of time employers have to recall employees laid off due to COVID-19. The exception provides that any period of layoff commencing after March 1, 2020, will not be included in determining the period after which layoff would become a permanent termination. The Minister of Finance, Scott Fielding, noted that this change is specific to situations where employees will eventually be rehired once the COVID-19 crisis has subsided.

New Brunswick

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. The Government of New Brunswick has confirmed that COVID-19 falls within the exception as an “unforeseen reason” for lack of work, exempting employers from providing notice of layoff.

Newfoundland and Labrador

The Government of Newfoundland and Labrador recently announced a temporary amendment to the Labour Standards Act, extending the time period before an employee’s employment is deemed terminated following a temporary layoff. From March 18, 2020 to September 18, 2020, employers can extend the time in which an employee can be temporarily laid off up to 26 weeks over a period of 33 consecutive weeks. The extension can be applied to employees already on temporary layoff.

The amendment also extends the time period in which an employee can bring a complaint to the Director of Labour Standards, from 6 months to 12 months from the date of termination.

Under normal conditions, the Labour Standards Act prescribes that a temporary layoff is a period 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.

Nova Scotia

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.

Saskatchewan

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.

However, on May 13, 2020, the Province introduced Order in Council 225/2020, which exempts employers and employees from the provisions of The Saskatchewan Employment Act respecting temporary layoffs during the public emergency period. The public emergency period is the period in which there is a declaration of emergency under The Emergency Planning Act.

From the date on which the public emergency period is over, employers continue to be exempt from the layoff provisions of The Saskatchewan Employment Act for a further two weeks. After the expiry of the two-week period, employers must schedule any laid-off employees to work. If any employees are not scheduled to work, their employment is deemed to be terminated. These employees are entitled to pay in lieu of notice in accordance with the termination and layoff provisions of the legislation, calculated from the original date of layoff. Employees who have been scheduled to work, but do not return to work, will be deemed to have resigned from their employment.

Under normal, non-emergency circumstances, 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 would 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.

Where an employer lays off 10 or more employees in one community within a four-week period, and that layoff is longer than 26 weeks in duration, group termination provisions may apply. Group termination has much greater notice requirements.

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. The above is for information purposes only current as of the date published only and employers are well advised to seek the support of independent legal counsel in respect to specific circumstances.

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.