Benefits and vacation time during temporary layoffs

What are the employer's obligations regarding benefits, vacations, service time accrual, etc., for employees on temporary layoff

Benefits and vacation time during temporary layoffs

Question: What are the employer’s obligations regarding benefits, vacations, service time accrual, etc., for employees on temporary layoff?

Answer: Contrary to popular belief, most employers do not have the right to temporarily lay employees off, and doing so can lead to a constructive dismissal claim. Some of the confusion in this regard stems from the fact that employment standards legislation refers to temporary layoffs. However, those statutes set out the parameters for implementing temporary layoffs; they do not give employers the right to do so, which must come from the contract.

When an employee is temporarily laid off, they are off work and are not being paid; layoffs effectively pause the employment relationship.

Employers are generally not required to continue benefits during a temporary layoff period, although specific rules vary from jurisdiction to jurisdiction. For example, under the Canada Labour Code, a temporary layoff for federal employees can be:

  •  a layoff of three months or less, or
  • a period of more than three months and:
    •  the employee is notified of the date they will be recalled (within six months),
    •  the employee continues to receive benefits or pension or insurance plan contributions or
    •  the employee receives or could be entitled to receive supplementary unemployment benefits.

In Ontario, temporary layoffs are governed by the Employment Standards Act (ESA), which provides that layoffs cannot last for more than 13 weeks in any period of 20 consecutive weeks, unless:

  •  the employee continues to receive substantial payments from the employer,
  •  the employer continues to make payments for the benefit of the employee under a pension or insurance plan,
  • the employee receives supplementary unemployment benefits,
  • the employee would be entitled to supplementary unemployment benefits but isn’t receiving them because they are employed elsewhere,
  •  the employer recalls the employee within the time approved by the director,
  • in the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee, or
  • where the employee is represented, as set out in an agreement with the trade union.

If those criteria are met, a layoff can last up to 35 weeks in any period of a 52-week period.

It is important to note that some of these time limits have been adjusted where the layoff relates to the COVID-19 pandemic. Ontario enacted Regulation 228/20, which effectively changed all COVID-19-related layoffs to leaves of absence. Normally, employees on a statutory leave of absence are entitled to continuation of their benefits, but an exception was carved out for those already on leave where benefits had already been suspended.

In most cases, employers are not required by statute to continue benefits or pension plan contributions during temporary layoffs.

Stuart Rudner is the founder of Rudner Law, an employment law firm in Markham, Ont. He can be reached at [email protected] or (416) 864-8500.

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