Mass layoffs could get harder

Rules may be tightened for federally regulated employers
By Marcel Vander Wier
|Canadian HR Reporter|Last Updated: 10/31/2016

Implementing massive staff layoffs is expected to get a lot more difficult for federally regulated employers.

Sectors such as telecommunications and banking are required to give the federal government 16 weeks’ notice before laying off 50 or more workers over a month’s span. Employers are also required to ensure employee-employer committees are formed to help workers find new jobs.

But the Canadian government recently reviewed the criteria behind layoffs of 50 employees or more in an effort to ensure group terminations could no longer be conducted without warning. If the stricter ruling is implemented, employers requesting waivers would now be required to provide specific economic and financial reasons behind the mass layoffs, according to documents obtained by the Canadian Press.

The move clarifies worker rights, said Canada’s Labour Minister MaryAnn Mihychuk.

“I work every day to ensure the rights of employees are upheld,” she said. “That’s why I recently called for a review of the criteria for group termination waiver
requests under the Canada Labour Code.

“We’ve strengthened the criteria used to assess the merits of the request for a waiver, which should be granted on an exceptional basis only.”

Too paternalistic?

Stricter enforcement will be a marked headache for federally regulated employers, said Ron Minken, managing director at Minken Employment Lawyers in Unionville, Ont., adding the rule’s intent is to help transitioning employees find new jobs.

“In disguise, this is kind of like an employer outplacement committee,” he said. “Needless to say, employers are up in arms about this. The last thing you want is more regulation. They don’t want to have to take on a paternalistic role.”

Yet it appears that’s what the federal government expects through this alteration, said Minken. The regulation change is part of the pendulum
swing expected when a new federal party forms government, he said.

“It’s definitely going to be more of a burden,” said Sara Kauder, a lawyer at Minken Employment Lawyers. “It’s going to be one more thing that an employer is going to have to do as part of the termination process, and there’s already a number of steps that are involved. From an employer standpoint, it’s a burden from a time standpoint, from a financial standpoint.”

Mass layoffs are typically caused by major organizational upheaval spurred by financial strain, she said. Adding further red tape to the process will be upsetting to employers.

“I think the rationale behind it is: When you have all these employees flooding the marketplace at once, it’s naturally going to take longer for them to find work,” said Kauder.

It’s possible the federal government is doing this to lessen its employment insurance (EI) obligations, said Minken, “because instead of allowing employees to collect EI, if the onus is put on employers, then they’re going to be lessening the EI ask and getting them re-employed quicker.”

The real question is whether the onus to find work should be on the employer or employee, he said.

Struggling employers may be able to find other methods of mass terminations without penalty, said Minken.

“It may be a greater burden on them, but we’ll probably find employers will be more creative.”

On the right track

On the other hand, the move effectively closes a loophole that employers were using much too frequently, said Basu Sharma, human resources professor at the University of New Brunswick in Fredericton.

“It’s a very serious issue because when someone loses their job, it has a lot of implications for that person, the family, the community,” he said. “So I think the minister is on the right track.”

The law already existed, but abuse of the “exceptional circumstance” clause was rendering it ineffective, he said.

“This has more to do with closing a loophole,” he said. “They were exploiting that particular provision. The government isn’t trying to hurt the employer, but rather (have them) use this law appropriately.”

Abuse is still possible, said Sharma, pointing out companies could technically still lay off 49 workers over the span of a month. More work may need to be done in that respect.

“In today’s economy, employers are facing a lot of competitive pressure from all around the world, but employment security is really in jeopardy,” he said. “The way we understand employee security does not exist anymore. So whichever way we can protect the workers, I think we need to do our best.”

Situations vary

But it’s not that easy, said Jamie Knight, president of the Canadian Association of Counsel to Employers (CACE) in Hamilton.

“This is a very multi-layered issue and it seems to us that the government is looking at just a small slice,” he said. “It’s not a simple one-size-fits-all situation. It seems to us that the government is tinkering without really looking at the overarching question as to whether or not the legislation — as it currently stands — properly serves the interests of employers and employees, or whether it’s really based on an outdated legal fiction.”

While the law was originally implemented to address major closures, current layoff situations could be as simple as relocating a government office, said Knight.

“In a very fluid economy where you have a large organization with employment locations across the country, it’s not always smart or applicable legislation,” he said. “Tinkering with a waiver
sounds a lot like window
dressing, not a fundamental initiative that is either important or warranted.

“When you hear the word ‘waiver,’ it sounds like a company is trying to avoid its statutory obligations and getting government approval to do so, but that’s generally not the case at all. Let’s face it, in most cases, having employees hang around for 16 weeks simply to comply with a statutory obligation… doesn’t make any sense.”

Poor morale and disinterest could cost the company even more, he said.

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