Having to let go of employees is a negative for all employers. Unfortunately, this can't be avoided, especially if there isn't enough work.
As an employer, you need to understand the correct process of laying off your employees.. You have a responsibility and duty to treat your employees with respect.
In this guide, we'll discuss what a temporary layoff is, how to recall staff after the temporary layoff, and, when a temporary layoff is deemed wrongful or constructive dismissal.
What is a Temporary Layoff?
A temporary layoff is when an employer ends the employee's working relationship, to bring them back at a later date.
The expectation of the employer and the employee is that the employer recall the employee back to work, in the same position and on the same salary.
Under the Canada Labour Code, and various provincial employment standards legislation, employees who have been laid off temporarily are still considered to be an employee of the company - even if they're not working at the time.
Why Should You Consider Temporary Layoffs?
If you're deciding whether or not to layoff an employee, you need to understand the benefits in doing so.
Payroll costs will be minimized as there is no legal requirement for an employer to continue paying the employee’s regular wages during a layoff.
However, the employee’s entitlements to vacation and leaves of absence are protected during this period. There is also no requirement for employers to pay into an employee's benefit or pension plan during a layoff period.
When Would You Choose to Temporarily Layoff an Employee?
Employers often choose to temporarily lay off employees when there is less demand for work or no work at all. Industries, where there's more seasonal demand, are often where you find a higher number of employees laid off, such as hospitality or retail.
Should You Provide Reasonable Notice for a Temporary Layoff?
When choosing to place an employee on temporary layoff, you need to be aware of any notice periods required by law. Make sure you're aware of the provincial legislation surrounding layoffs:
- Ontario: No notice required.
- British Columbia: No notice required.(employees must agree to a temporary layoff).
- Alberta: Notice is required.
- Manitoba: No notice required.
- Saskatchewan: At least one weeks’ notice is required depending on length of employment.
No notice is generally required for federal employees for a temporary layoff. However, notice must be provided if the layoff is longer than three months.
Although it's not required by law in some provinces and for federally to provide reasonable notice, it's best practice for an employer to provide as much notice to the employee as possible.
How Long Can an Employee be Temporarily Laid Off?
The length in which employees can be temporarily laid off differs across Canada. It's your duty to understand the length of time for the jurisdiction your business operates in:
The Ontario Employment Standards Act states that temporary layoffs can be up to 13 weeks in any consecutive 20-week period.
They can be up to 35 weeks in any consecutive 52-week period if the employee continues to receive substantial payments from the employer, as well as payments into the employee benefits or pension plan.
For non-unionized employees, the employer must recall the employee back to work within the time.
For unionized employees, the employer must recall them back to work within the time agreed by the employer and the union rep (BrightHR and Peninsula Canada don't advise on unionized staff).
The Ontario Government also extended the Infectious Disease Emergency Leave until late July 2022, allowing employers to temporarily lay staff for financial reasons during the lockdown.
Employees can be laid off for 13 weeks in a consecutive 20-week period, or if an employee has a recall date under a collective agreement. However for employees without a recall date, layoffs of up to 16 weeks are allowed.
It's important to remember that in British Columbia, if you choose to reduce an employee's hours, they're considered laid off if they earn 50% of their weekly wages.
In Alberta, layoffs shall not exceed 90days within a 120-day period. This lay off can be extended if the employer continues to pay the employee’s wages or makes payments towards the employee’s insurance plan.
Businesses in Manitoba are allowed to temporarily layoff staff for up to eight (8) weeks in a 16-week period.
In Saskatchewan, an employee is considered to be laid off when there's been an interruption of the services of an employee by the employer for a period longer than six (6) working days.
Federal Employees Throughout Canada
- For federally regulated employees, the Canada Labour Code states that certain types of layoff do not constitute a termination of employment, such as when: a layoff is a result of a strike or lockout.
- The duration of the layoff is three (3) months or less.
- The duration of the layoff is for more than three (3) months but not more than 12 months, and the employee has recall rights under a collective agreement.
Employers can recall any staff who are laid off back to work when required.
What does Recall Mean?
Recall is the process in which the employer brings an employee back to work after they've been laid off for a period of time.
This process is dictated by applicable employment standards legislation, company policies and, sometimes a collective bargaining agreement.
Recall rights are often part of an employment contract or collective bargaining agreement. It's important you understand these recall rights expire at the end of the layoff.
Recalling an Employee During Temporary Layoff
When you should recall employees back into work depends entirely on your business needs. Many companies tend to opt for a phased return rather than all at once.
The following are reasons for a recall:
- If there's a rise in demand for work during a busy period, such as the holidays.
- Changes made to the workplace after recommendations from safety standards.
In some provinces, it's mandatory to provide written recall notice to employees. This written notice should include the date the employee is expected back at work.
You need to give your staff enough time to make arrangements for coming back to work, for example arranging childcare.
When Does a Temporary Layoff Become Termination of Employment?
A layoff becomes a termination when the employer doesn't recall the employee back to work on or before the original date of recall, or exceeds the statutory limits.
It's important you understand the amount of termination notice required when the employment relationship ends.
Failure to provide proper notice of termination is a violation of the statutory requirements and can lead to wrongful dismissal lawsuits and potential fines.
If a layoff turns into termination, you need to be aware of when you need to provide employees with termination pay under the provincial employment standards legislation.
When to Pay Termination Pay
- Ontario: Termination pay is required if the employee has at least three months of service.
- British Columbia: Employees are entitled to termination pay if they have at least three months of service.
- Alberta: Termination pay is mandatory if the employee has at least 90 days of service.
- Manitoba: f the lay-off is longer than eight (8) weeks in a 16 week period, the lay-ff becomes termination and notice is required.
- Saskatchewan: There’s not additional requirement to provide notice or pay-in-lieu.
However employees should be informed if they’ll not be recalled. In additional to termination pay, some employees in Ontario are also entitled to severance pay following termination of employment.
Employees qualify for severance pay if they've been with the company for at least five years and the company has a global payroll of at least $2.5 million.
The employer must also provide severance pay if they terminate the employment of 50 or more employees in a six month span.
Can a Temporary Layoff be Seen as Constructive Dismissal?
Under Canadian common law, employers have no legal right to lay off an employee without both parties agreeing. Failure to do this can be seen as wrongful dismissal, leading the employee to file a constructive dismissal claim against the employer.
Should a Temporary Layoff Clause Be Included in an Employment Contract?
Canadian courts have stated that legally an employment contract, collective bargaining agreement, or workplace policies must clearly permit temporary layoffs under common law.
As an employer, you and the employee should both agree on a layoff clause before it takes place. This should be included in the employment contracts and signed by both parties.
It's vital you avoid liability by making changes to an employment contract that could lead to a significant change in the employment relationship. Doing this can lead to an employee feeling they've been constructively dismissed and been victims of wrongful dismissal.
Do Employees Receive Employment Insurance Benefits When Laid Off?
Employees who have been temporarily laid off can still receive federal government benefits if available. However they must meet all EI requirements, such as looking for work.
Temporary Layoffs and Group Terminations
As an employer, it's important you're aware of group termination provisions and temporary layoffs.
A group termination is when the employment of over 50 or more employee's employment comes to an end on the same day. Notice of termination for 50 or more employees doesn’t apply for temporary layoffs.
The Ontario Government states that if you're conducting a group termination, you must submit a notice of termination of employment to the Director of Employment Standards.
The affected employees' notice doesn't begin until the form has been received.
You must also provide each individual employee with an employment notice, in line with employment standards.
There's no set number of staff that you can temporarily layoff at one time. But as an employer, you need to understand that for every member of staff you temporarily lay off, the higher costs you'll incur if it leads to termination of employment.
Get Advice on Temporary Layoffs with BrightHR
It's important you understand the process of temporary layoffs and that the aim is to bring the employee back when there's an upturn in work. Failure to bring an employee back could be seen as constructive dismissal, and a potential legal battle.
If you need advice on temporary layoffs, BrightHR has a handy tool that will help if required.
Our BrightAdvice service allows you to receive expert employment law advice whenever required.