Temporary Layoffs in Canada: What You Need to Know

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Temporary Layoffs in Canada: What You Need to Know

Temporary layoffs can be stressful and confusing events for employees. A temporary layoff occurs when an employer suspends an employee’s work duties and pays for a limited period of time, with the expectation that the employee will return to their job in the future.

Layoffs can be an attractive option for employers looking to cut expenses while avoiding termination costs like severance pay. However, employees also have rights in layoff situations. Understanding the legal landscape is crucial. This guide will explore when layoffs can occur, how long they can last, and what options employees have – including potential severance claims.

What is a Temporary Layoff in Canada?

A temporary layoff occurs when an employer suspends an employee’s job duties and compensation for a certain period of time, with the expectation that the employee will eventually be recalled to work. The employment relationship is put “on hold” but not terminated.

Some common reasons employers use temporary layoffs include:

• Downsizing during a recession or industry downturn
• Restructuring or changes to staffing needs
• Seasonal work slowdowns in industries like construction

Employees are typically given little to no notice before a temporary layoff. You show up for work one day and are told not to return for an unspecified period. It can be an extremely stressful and difficult situation for employees.

Are Temporary Layoffs Legal in Canada?

While layoffs are permitted under employment standards laws in each province, employers do not have an automatic right to temporarily lay off employees. Certain conditions must be met for a layoff to be legally valid.

In provinces like Ontario, British Columbia and Alberta, the common law establishes that temporary layoffs generally qualify as constructive dismissal. This means employees could quit their jobs and sue their employer for wrongful dismissal if laid off.

However, there are some exceptions where layoffs are permitted in Canada:

• If the employee’s contract allows explicitly temporary layoffs
• The employee consents and agrees to the layoff.
• Past practice has established an implied right to layoff (e.g. the employee accepted a layoff in the past)
• Customary in specific industries like construction or oil and gas

Unless one of those conditions is met, a temporary layoff imposed unilaterally by the employer could be grounds for a lawsuit. Employees should get legal advice before accepting a layoff.

When Can an Employer Impose a Temporary Layoff?

In most Canadian jurisdictions, employers cannot unilaterally impose temporary layoffs unless:

• The employee’s contract specifically allows for layoffs
• The employee gives their explicit consent
• Layoffs are an accepted industry practice, like construction
• The employee has accepted layoffs previously with the same employer

Some provinces had special rules allowing COVID-19-related layoffs, but these provisions have now expired in Alberta and Ontario.

Although employers hold more power in the layoff process, employees still have protections under both common law and employment standards legislation. Some key employee rights include:

• The ability to refuse an improper layoff and claim constructive dismissal
• Entitlement to full compensation if the contract doesn’t allow layoffs
• Continuation of benefits during the layoff period in most cases
• Recall to the original position once the layoff ends
• Treatment of layoff as a termination if it exceeds maximum legal duration

When faced with a layoff, seeking qualified legal advice is critical for employees to understand and exercise their rights.

How Do Temporary Layoffs Differ from Terminations?

Unlike terminations, layoffs temporarily suspend the employment relationship. The main differences are:

• Layoffs: No job but remain an employee. Usually, there is no severance pay. May get EI.
• Terminations: The employment is ended completely. There are two main types:
  • Termination For Cause is when an employee is fired for misconduct. No severance is required.
  • Termination Without Cause is when an employee loses their job through no fault of their own. The employee is often entitled to severance pay.

Exceeding the maximum layoff period in law can lead to a “deemed termination”, transforming a layoff into complete termination with associated severance rights.

Some other key differences include:

Feature	Layoff	Termination
Employment status	Remain employed	Employment ended
Compensation	Normally none	Usually severance pay
Benefits	Often continue unchanged	End, unless severance states otherwise
Return to work	Right to original job	No return, employment over

One of the biggest employee concerns with layoffs is missing out on severance pay they would receive if terminated. However, there are a few ways laid-off employees may still be able to claim severance:

• Treating improper layoff as constructive dismissal
• A layoff exceeding the maximum legal duration
• Employer bankruptcy during layoff
• Accepting recall offer with severance agreement

Any severance after a layoff is determined based on the same common law factors as a standard termination. This includes age, service, and ability to find new work.

What is the Maximum Layoff Period By Province?

Provincial employment standards laws establish maximum time periods for temporary layoffs, after which the employment is legally terminated. This allows employees to claim severance pay. The maximum layoff duration varies by province, as outlined below:

Province	Maximum Layoff Period
Ontario	13 weeks in 20 week period. Up to 35 weeks if conditions are met.
Alberta	90 days in a 120-day period
British Columbia	13 weeks in 20 week period
Federal Jurisdiction	3 months normally. Can exceed if certain conditions are met.

Exceeding these timeframes can allow the employee to claim the layoff has effectively become a termination.

If an employee is not recalled by the end of the statutory temporary layoff period, their employment is deemed terminated and they can pursue compensation without resigning.

What Happens if I Refuse a Temporary Layoff?

Employees can generally refuse layoffs that do not meet the required criteria, as it represents a substantial change to their employment contract.

Refusing a layoff could prompt a constructive dismissal, allowing the employee to resign and seek severance pay. However, accepting a layoff could strengthen the employer’s case for future layoffs.

Employees should seek legal advice before refusing a layoff to understand their full rights and negotiate the optimal outcome.

Constructive Dismissal

Constructive dismissal occurs when an employer unilaterally changes the employment contract in a way that is so substantial that the employee can treat it as an effective termination of their job.

Some examples of constructive dismissal include:

• Improper layoff
• Drastic demotion
• Major pay cut
• Relocation of job

Resigning due to constructive dismissal allows an employee to pursue severance pay through wrongful dismissal. Employees have the burden of proof, making legal consultation vital.

What Pay and Benefits Are Owed During a Layoff?

Unless an employment contract specifically states otherwise, employees are typically entitled to their full regular compensation during a temporary layoff.

Some employees may also qualify for government statutory guarantee pay while laid off. This is around $38 CAD daily in some provinces.

Benefits like group health insurance and group life insurance often remain unchanged during the layoff period, ensuring employees maintain coverage.

Paid time off, such as vacation and sick days, also remains intact and continues accruing in many cases. Any accrued paid leave is owed to the employee if they are later terminated or resign following a layoff.

If an employee does not have a standard work week, determining their regular wage for layoff compensation purposes can be more complicated. Some options include:

• Average earnings over the past 12 weeks
• Any minimum weekly hours set out in the employment contract
• A weekly average established over the course of employment

Obtaining legal advice can be beneficial for employees to ensure their full pay entitlement is calculated correctly.

How Should Employees Respond to Temporary Layoffs?

If faced with a temporary layoff notice, an affected employee has several potential courses of action:

• Notify the employer in writing if the layoff seems improper or illegal
• Consult an employment lawyer to fully understand their rights
• Weigh the pros and cons of accepting the layoff or claiming constructive dismissal
• Negotiate a separation package if willing to leave the company anyway

Accepting the layoff preserves the employment relationship and eventual recall rights. Refusing the layoff and resigning allows the employee to seek severance pay immediately.

Some questions for employees to consider when assessing their layoff options:

• Does my contract allow for layoffs?
• Is the layoff duration legal?
• When will I be recalled?
• Can I afford to be laid off?
• Should I ask for a separation package?
• What are my severance entitlements if I resign?

Obtaining legal advice provides employees with expert guidance on navigating these choices and advocating for their best interests.

What Happens After the Maximum Layoff Period Ends?

Once the maximum legal layoff period dictated by employment standards legislation has been reached, the temporary layoff is automatically converted to a termination of employment.

For example, in Ontario, this occurs after 13 weeks in a 20-week window.

At this point, the employment relationship is severed, and the employee can pursue compensation through a wrongful dismissal claim. This includes entitlements like:

• Severance pay
• Payment for unpaid wages or benefits
• Bonuses owing for the period employed
• Vacation pay

The severance package depends on the common law factors of age, length of service, job position, and likelihood of finding replacement work. The employer also loses the ability to recall the employee if they gain more business later on.

There are some exceptions where the maximum layoff period can be extended beyond the legal limit:

• Collective bargaining agreement with different terms
• Employer continues paying wages or benefits
• Employer provides a return to work date

However, the employee must agree to any extension beyond the normal statutory maximum. Obtaining legal counsel is wise before consenting to an exceptional longer layoff.

How Much Severance Pay Am I Entitled to If Laid Off?

There are two potential avenues where a laid-off employee could receive severance pay:

1. Treating the layoff as a constructive dismissal and resigning
2. Reaching the maximum layoff period, triggering termination

In both scenarios, the severance pay entitlement depends on common law factors like age, length of service, job position, and ease of finding new employment.

Courts tend to award 1-2 weeks per year of service, but many other factors influence the final severance package value. It is common for long-term employees laid off later in their careers to receive over 12 months’ pay.

Severance usually increases for older, long-serving employees in more specialized roles with generous compensation like large bonuses. Legal advice can help employees quantify their potential severance if they choose to resign after a layoff rather than wait for a recall.

Does an Employer Need to Provide Notice for a Temporary Layoff?

In most provinces, employers do not have to provide any advance notice before temporarily laying off an employee.

The exception is Alberta, where legislation requires written layoff notice including:

• Confirmation it is a temporary layoff
• The date the layoff takes effect
• A copy of the relevant sections of the law
• Any other required information

The lack of mandatory advance notice across Canada allows employers to institute sudden layoffs as economic conditions change. However, providing reasonable notice is beneficial for employee relations and productivity.

While not strictly required, it is also good practice for employers to give laid-off employees notice before recalling them to work. This allows employees time to make necessary arrangements for their return.

The bottom line

Temporary layoffs allow employers to strategically reduce labour costs in the short term during periods of economic distress. However, Canadian employment law sets strict limits on their use to prevent abuse and protect workers.

Employees have options when faced with a temporary layoff. It is essential to understand their rights and weigh the pros and cons of accepting the layoff or resigning and pursuing severance. Before making any decisions, obtaining qualified legal advice tailored to their specific situation ensures employees can make the most informed choice.

FAQs related to temporary layoffs in Canada

Article Sources

• Temporary Layoffs – stlawyers.ca
• Temporary Layoffs in BC – stlawyers.ca
• Temporary lay-offs – nidirect.gov.uk
• Temporary layoffs: What employers need to know – nortonrosefulbright.com

Temporary Layoffs in Canada: What You Need to Know
Ben Nguyen