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WARNING TO EMPLOYERS:

Extended Lay-offs can be = to a Termination

A Termination = Termination pay/severance pay

As businesses across the nation close their doors in response to the COVID-19 pandemic, the question of temporary layoffs has come up repeatedly in our practice.

A layoff is defined as:

a period where an employer stops providing work and compensation to an employee on a temporary basis.

In Ontario under the Employment Standards Act, 2000 (ESA) a layoff becomes a termination triggering termination pay and possibly severance pay if it extends beyond 13 weeks in a period of 20 consecutive weeks.

If the layoff is more than 13 weeks and up to 35 weeks in any period of 52 consecutive weeks, it will still be considered temporary provided that:

  1. the employee continues to receive substantial payments from the employer;
  2. the employer continues to make payments for the benefit of the employee under an employee pension or insurance plan;
  3. the employee receives unemployment benefits;
  4. the employee is employed elsewhere during the layoff and would be entitled to unemployment benefits if they were not working;
  5. the employee is recalled within a specified time period.

If the lay-off extends beyond 13 weeks and the above exceptions do not apply, the lay-off becomes a termination and the employer is exposed to pay termination pay and severance pay.

Employers may face the following legal issues with temporary lay-offs:

  • whether the right to lay-off has been provided for in the employment contract. Courts in Ontario have held that if there is no right to lay-off in the employment contract and a temporary layoff has been imposed on the employee, the employee has been terminated. This means that the employee now has a claim against the employer for termination pay and possibly severance pay depending on the employment contract.
  • If the employment contract:
    1. is silent on the termination provisions;
    2. has termination provisions limiting termination and severance pay to the ESA that are null and void; or
    3. is declared null and void because of a technicality such as the signing of the contract sometime after commencing to work for the employer;

The employer may be exposed to common law damages which are more substantial than what is owed to the employee under the ESA 2000.

Example:

A 50-year-old employee in a management position with 20 years of service working for an employer with a payroll of less than $2.5 million who has been terminated will be entitled to the following:

Under the ESA:

The employee will be owed termination pay plus 8 weeks of salary and 8 weeks of benefits

Under the common law:

The same employee will be owed severance pay of 15-20 months salary (inclusive of the termination pay) plus benefits for a minimum of 8 weeks

Recent Amendments to the Employment Standards Act

On March 19, 2020, the Ontario legislature passed an amendment to the ESA 2000 to provide a job-protected leave to employees affected by COVID-19 called Emergency Leave: Declared Emergencies and Infectious Disease Emergencies. Employees are now entitled to a job protected leave of absence without pay if any of the following applies:

  • the employee is under medical investigation, supervision or treatment for COVID-19;
  • the employee is acting in accordance with an order under the Health Protection and Promotion Act;
  • the employee is in isolation or quarantine in accordance with public health information or direction;
  • the employee has been directed by their employer not to work due to a concern that COVID-19 could spread in the workplace;
  • the employee needs to provide care to a person for a reason related to COVID-19 such as a school or day-care closure;
  • the employee is under travel restrictions and cannot travel back to Ontario.

The employee is not required to provide a medical note from a health care practitioner in order to be entitled to this leave of absence.

It is important to note that employees cannot be laid off if they are entitled to a leave of absence under the ESA. Employers should seek legal advice before laying off employees affected by COVID-19.

For more information, you can reach Suzanne Desrosiers or Oana Cristea at 705-268-6492.

SUZANNE DESROSIERS PROFESSIONAL CORPORATION