As the effects of the Coronavirus (COVID-19) pandemic reverberate throughout the world, Ontario employers and businesses (and by extension, employees) are facing some significant financial challenges.
A state of emergency has been declared by the Ontario government forcing the shutdown of numerous businesses including bars and restaurants (except those with takeout and delivery capabilities), public libraries, public daycares, movie theatres, and concert venues until March 31, 2020.
As revenues dwindle rapidly and government-mandated shut down continues, businesses are considering temporarily laying off employees as a cost-cutting measure and need to know how to do so legally.
Is an employer legally allowed to temporarily layoff employees?
Yes. Under the Ontario Employment Standards Act, 2000 (the “ESA”), provincially regulated employers may temporarily lay off employees due to a suspension of business operations.
Written temporary layoff notices should be issued to staff. Note that there is no requirement to specify an exact recall date.
During the current pandemic, to encourage companies to keep employees on payroll, the federal government has announced that small businesses will receive a temporary subsidy equivalent to 10 percent of employee salaries over a period of 3 months.
Can an employee collect employment insurance during the temporary layoff period?
If employees are temporarily laid off, employers are required to issue a record of employment (ROE) for employment insurance (EI) purposes. The ROE should be coded “A”. If the employee has accrued enough insurable hours, they can collect employment insurance benefits for the temporary layoff period.
How long can a temporary layoff last?
Under the ESA, a temporary layoff may last for a period of up to 13 weeks in any period of 20 consecutive weeks.
The temporary layoff period may be extended for up to a maximum period of 35 weeks (in a 52-week period), only if the employer continues employee health benefits, continues contributing into the employee’s pension and retirement plans, provides supplemental EI benefits, or continues to provide substantial payments to its employees. While ‘substantial payments’ is not defined in the ESA, the Ministry of Labour has interpreted the phrase to mean multiple and continuous payments to the employee during the entire temporary layoff.
For unionized workers, the maximum length of the temporary layoff period is likely to be set out in the collective agreement.
Is an employee entitled to a severance package if they are temporarily laid off?
Employees are generally not entitled to a severance package if they are temporary laid off in accordance with the ESA.
In some cases, the courts have held that a temporary layoff triggers a constructive dismissal, automatically entitling an employee to a severance package. That said, the general principles governing a constructive dismissal may not apply in this unprecedented context.
When is a layoff considered permanent and is the employee entitled to a severance package due to a permanent layoff?
If the layoff lasts beyond 13 weeks (or 35 weeks as applicable), and the employer has not recalled the employee back to work, then the employee is deemed to be permanently laid off and is automatically entitled to a severance package. The employee’s severance entitlement will depend on a variety of factors, including his/her length of service and contract of employment.
Employees who have been permanently laid off should consult with an employment lawyer about their severance package entitlement. The severance entitlement may entail several months of compensation.
Call the experts
For more information about temporary layoffs, contact us at Pak Smith Employment Lawyers today for expert legal advice.
This is a rapidly changing situation. The information in this article is current as of the date of publication.