If you’re an employer, you should
Each Canadian jurisdiction has its own employment standards legislation with unique layoff language and requirements. The rules are not consistent or straightforward and there are many exceptions and exemptions.
In Ontario, for example, a temporary layoff is deemed a termination of employment if the layoff lasts longer than 13 weeks in any period of 20 consecutive weeks. However, a temporary layoff may last for up to 35 weeks in any period of 52 consecutive weeks if the employer continues the employee’s coverage under a group or employee insurance plan, retirement or pension plan, or provides substantial payments or supplementary unemployment benefits to the employee during the layoff period.
Moving forward
If you think the option to lay off employees could be helpful to your business, but you don’t have written agreements to this effect, all is not lost. Do not simply change your employment agreement without legal advice, as a unilateral change may be unenforceable.
People often use the terms “termination” and “layoff” assuming they mean the same thing. While in casual conversation, glossing over the difference may not be important; for an employer, failing to understand the difference can present a missed opportunity and create unnecessary risk for your business.
Having the legal right to temporarily lay off an employee can provide an employer flexibility to respond to a slowdown or change in business without the need to permanently terminate employment and pay for costly notice periods. However, unless an employment contract includes an express or implied right to lay off an employee, an employer has no right to do so. If there is no express or implied right, a layoff may amount to a fundamental breach of the employment contract (constructive dismissal) entitling the employee to notice or pay in lieu and possibly severance pay, as the Ontario Superior Court ruled in Chen v. Sigpro Wireless Inc.
Here is an overview of what you need to know.
Termination vs. layoff. When an employee is terminated, the relationship between employee and employer ceases to exist. When an employee is laid off, the “employer-employee relationship is said to be suspended rather than terminated” because there exists the possibility of a return to work. The Supreme Court of Canada in Canada Safeway Ltd v. RWDSU, Local 454, clarified the difference:
“While in common parlance the term “layoff” is sometimes used synonymously with termination of the employment relationship, its function in the lexicon of the law is to define a cessation of employment where there is the possibility or expectation of a return to work. The expectation may or may not materialize. But because of this expectation, the employer-employee relationship is said to be suspended rather than terminated.”
Layoff is a tool — not a right. If a business regularly encounters ebbs and flows or is cyclical or weather dependent, the right to temporarily lay off an employee can be very helpful. However, as noted above, without an express or implied right to lay off an employee the employer has no right to do so.
Confusion about this is understandable given that most employment standards legislation in Canada includes some type of layoff language. An employer seeing that language might assume layoff is permitted so long as the legislation is complied with. This is incorrect.
For more information see:
• Chen v. Sigpro Wireless Inc., [2004] O.T.C. 466 (Ont. S.C.J.).
• Canada Safeway Ltd. v. R.W.D.S.U., Local 454, [1998] 1 S.C.R. 1079 (S.C.C.).
