Terminations and Temporary Layoffs: Responding to the COVID-19 Pandemic
As a result of the tremendous economic uncertainty produced by the COVID-19 pandemic, many businesses across Ontario have terminated or laid off employees to ensure their operations can be maintained as the virus runs its course. Employers should be mindful of the termination and temporary layoff provisions of the Employment Standards Act, 2000 (the “ESA”), as well as the related requirements of the common law, so they can properly weigh their options.
Here are key legal considerations when dealing with terminations and temporary layoffs.
Termination
Generally, employers may not terminate employees without providing notice of termination or pay in lieu thereof. An employee’s entitlements on termination can be substantial, especially if the employee has not entered into an employment contract limiting his or her termination entitlements to the minimums required under the ESA. In those cases, the employer may be obligated to provide the employee with reasonable notice at common law which, depending on the circumstances, can be upwards of four times the statutory minimums.
Terminating employees may be the only viable option for businesses to stay afloat in the wake of COVID-19. However, employers should first seek legal advice to ensure terminations are conducted in a manner that complies with all existing and newly enacted applicable legislation, the common law, and their own contracts and workplace policies.
Temporary Layoff
Unlike a termination, which attracts an employer’s obligation to give notice or pay in lieu of notice, a temporary layoff carries no such requirement, so long as the layoff is provided for in an employment contract and complies with the layoff provisions of the ESA. If a layoff fails to meet these requirements, it may be treated as a termination rather than a temporary layoff and may thus entitle the employee to termination pay.
To avoid triggering a termination under the ESA, a temporary layoff must not exceed 13 weeks in any period of 20 consecutive weeks. This can be extended to a period of less than 35 weeks in any period of 52 consecutive weeks if one of the following conditions is met:
(i) The employee continues to receive substantial payments from the employer,
(ii) The employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan,
(iii) The employee receives supplementary unemployment benefits,
(iv) The employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so,
(v) The employer recalls the employee within the time approved by the Director, or
(vi) In the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee.
In Ontario, one of the most common ways to extend the temporary layoff period is to continue the employee’s group benefits coverage throughout the duration of the layoff.
Other Considerations
Employers who are contemplating terminating or temporarily laying off employees should consider how such measures will interact with their human rights obligations under the Ontario Human Rights Code (the “Code”). Employers should be cognizant of their obligations under the Code, exercise caution and seek legal advice before terminating or temporarily laying off employees who may be entitled to a leave of absence under the ESA and/or any other applicable legislation
Employers should also consider how they will secure their intellectual property when employees are terminated or temporarily laid off. Employees should be reminded of their confidentiality, intellectual property and other post-employment obligations.
Conclusion
The COVID-19 pandemic will impact businesses for months, if not years, to come. Employers will need to develop a solid strategy to meet their operational requirements while fulfilling their obligations under occupational health and safety, human rights and employment standards legislation. Terminations and temporary layoffs should be planned and executed with the assistance of legal counsel to minimize exposure to risk and legal liability.
Sutherland Law has been advising businesses of all sizes and industries for decades, including during the SARS crisis in 2003 and H1N1 flu pandemic in 2009, and is closely monitoring developments relating to COVID-19. Contact a member of our Labour/Employment team for assistance with managing terminations and temporary layoffs, updating employment contracts and workplace policies, and managing the health and safety of your workers.
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Government Resources
For more information on COVID-19, please see:
· Employment and Social Development Canada
· Public Health Agency of Canada