COVID-19 and Temporary Lay-Offs: What Employers and Employees Need to Know

COVID-19 and Temporary Lay-Offs: What Employers and Employees Need to Know

Posted by  on 12-04-2020
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The COVID-19 pandemic has hurt Canada’s job market more than anything since the Great Depression. Businesses and workers are both suffering to an extent not witnessed in most of our lifetimes. The country lost more than one million jobs in March and a recent Angus Reid survey found that a whopping 44% of Canadian households have suffered job losses or reduced hours.

Not all those who are suffering have been officially terminated from their positions. Many people have been subject to what is known as a “temporary lay-off.” This article discusses the legal rights and obligations that arise when an employer temporarily lays off an employee.

Rights of employees who have been temporarily laid off

Under section 56 of the Employment Standards Act, an employer can lay off employees without actually terminating them, if the lay-off is 13 weeks or less in any consecutive 20-week period. In other words, if an employer lays off an employee for 12 weeks and then recalls the person back to work, under the Employment Standards Act, the employee was never actually terminated. The Act also provides that temporarily lay-offs can last for more than 13 weeks in a very specific set of circumstances.

This is not the entire story, however. Ontario courts have consistently said that a worker who has been temporarily laid off will often still have a claim against his or her employer for wrongful dismissal (see for example Michalski v Cima Canada Inc., 2016 ONSC 1925 (CanLII)). An employer who temporarily lays off an employee has unilaterally altered a fundamental term of the contract, and this amounts to “constructive dismissal” under the common law. Constructive dismissal is, in effect, the same as termination; even though an employee may not have actually terminated the employment contract, by changing an essential aspect of the contract, the employee is entitled to construe the employer’s actions as if a termination had occurred. An employee who has been constructively dismissed can therefore sue for wrongful dismissal just the same as an employee who has been directly terminated. 

The courts have said that s.56 of the Employment Standards Act does not displace this common law rule. As such, while an employer who lays off an employee for 12 weeks may not technically terminate that employee, the employee will still have a valid claim for wrongful dismissal.

There are, to be sure, exceptions to this general rule. Where the contract of employment expressly provides for temporary lay-offs, an employer will be entitled to exercise that clause and lay off an employee (provided this is done in accordance with the Employment Standards Act). Similarly, where the industry is such that lay-offs are common, a court may be willing to read the employment contract to implicitly include temporary lay-offs. Outside this context, however, the courts will not read into an employment contract a right of temporary lay-off. An employer who wishes to ensure that it can lay-off employees accomplish this with relative ease by inserting a layoff provision into its standard employment contract. Where an employer has failed to incorporate such a provision and where lay-offs are not common in the industry, a temporary lay-off will be interpreted as being a constructive dismissal, and thus akin to termination. 

How much are temporarily laid off workers entitled to receive?

An employer who has been terminated or constructively dismissed by their employer is entitled to be paid damages in lieu of notice (in addition to any other claim they may have for compensatory, aggravated or punitive damages). The notice period is calculated based on the “Bardal factors,” which include the character of the employment, the length of service of the employee, the age of the employee and the availability of similar employment, having regard to the employee’s experience, training and qualifications (see Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), at p. 145). By the same token, however, employees have a legal duty to “mitigate” their damages by seeking alternative employment. And where the employer recalls the temporarily laid off employee, that employee will often have a duty to return to work for the employer, failing which he or she cannot claim any damages for the period after the offer for re-employment was made.

This very situation arose in the recent case of Gent v. Strone Inc., 2019 ONSC 155 (CanLII). The court agreed that the employer’s temporary lay-off amounted to constructive dismissal, but the employee’s damages were reduced significantly on account of the fact that the employer had made an offer of re-employment within just a month after the lay-off, which the employee had rejected. The court noted that the parties had a good relationship and that the employee was being recalled on substantially the same terms and had been assured he would be treated well. The court found that the employee had acted unreasonably in refusing to return and therefore had not “mitigated his damages.” As such, the court awarded the employee just $4,846.50, being less than one month’s pay. 

The takeaway for employers and employees

The upshot is that workers who are temporarily laid off as a result of COVID-19 will often be entitled to advance a claim for damages, but the quantum of those damages may be reduced significantly.

If you are an employer who is considering laying off one or more employees to cope with the strains imposed upon your business, or if you are an employee who has recently been laid off, it is important that you contact a lawyer who can explain your rights and obligations and help you to make a well-informed decision about how to protect your interests. 

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Asher practices in the area of employment law, representing both employers and employees. He offers a free consultation and flexible retainer models. Contact him to learn more.

Disclaimer: This blog post is for general information purposes only. It is not intended to provide legal advice or opinions of any kind and may not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely upon the materials provided on this website, any hypertext links or other general information without first seeking appropriate legal or other professional advice. 

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