Terminations and COVID-19: What employers and employees need to know

Employers have had to balance their business needs and legal obligations for termination during pandemic

Terminations and COVID-19: What employers and employees need to know

The economy is in a state of turmoil. Rail blockades by protesters early in the year followed by interruptions to travel and the supply chain caused by the coronavirus have impacted many businesses. As a result of all this uncertainty, terminations have been happening.

For employers in the unenviable position of having to fire someone, it is important to know their responsibilities under the law.  Also, for employees in the unfortunate position of being let go, it is important they know their rights. In this article, we will give a brief overview about what both employees and employers need to know about terminations in Ontario as an example — other jurisdictions vary but have similar standards — especially during these unprecedented times that we are in.

Reasonable notice or pay in lieu of notice
According to the Ontario Employment Standards Act, 2000 (ESA), in most cases, an employee is entitled to written notice of termination or pay in lieu of notice if they have been working for at least three months and they are fired without cause — they are not being fired because of something egregious that they did or didn’t do. An employee is also entitled to severance pay if the employee has worked for a company for at least five years and the employer’s payroll is at least $2.5 million or at least 50 employees are being terminated within a six-month period because all or part of the business permanently closed.

Currently under the ESA, written notice of termination or pay in lieu of notice is generally considered to be a minimum of one week for every completed year that the employee has worked with the company, up to a maximum of eight weeks. Exceptions are employees who have worked for at least three months but less than one year that would be entitled to one week and employees who have worked for one year but less than three years that would get two weeks. Employees who are entitled to severance pay receive one week for each completed year of service up to a maximum of 26 weeks.

It is important to know that an employee may be entitled to additional notice or pay in lieu of notice under the common law, which can be substantial in some cases. Common law notice is based on a number of factors including the employee’s seniority, age, position and re-employment prospects, and it can vary widely depending on those factors.

Not all employees, however, are entitled to notice of termination or termination pay. Exceptions include employees who are guilty of misconduct, hired for a specific length of time or until the completion of a specific task, construction employees, employees who are temporarily laid off, those who refuse a reasonable offer of alternate employment and employees who have lost their job due to the contract of employment being impossible to perform or frustrated by an unexpected or unforeseen event or circumstance. Employers are considering whether this latter exception applies to COVID-19. 

When is termination illegal?
While employers are not required to give a reason for an employee’s termination, there are certain circumstances when an employer cannot legally terminate an employee. This includes firing or penalizing an employee for asserting their rights under the Occupational Health & Safety Act (OHSA) — such as refusing to work if the workplace is unsafe due to COVID-19 — under the Human Rights Code (HRC) — such as for terminating an employee who has an illness that is considered a disability under the HRC — and under the ESA such as refusing to work more than the maximum hours or for taking a leave of absence as outlined in the ESA.

Constructive dismissal
Constructive dismissal occurs when an employer makes major unfavourable changes to an employee’s work conditions such as lowering their wages, dramatically reducing hours or making significant changes to their duties. If the employee resigns as a result and it is found that they have been constructively dismissed, the employer will be required to provide them with a severance package subject to the employee’s duty to mitigate by continuing to work for that employer. With the current COVID-19 circumstances, we will need to wait and see whether the courts treat constructive dismissal cases any different than usual.    

It is important to note, however, that minor changes to an employment contract will not trigger constructive dismissal, as employers have the right to make reasonable changes.

Temporary layoff
When terminations are done for economic reasons, such as COVID-19, many companies opt for temporary layoffs as they intend to bring their employees back when conditions improve. In order for a company to make temporary layoffs, however, it must be agreed upon in writing in the employment contract that this is allowable or implied in the contract of employment, such as for seasonal workers. According to the ESA, a temporary layoff is one that lasts:

  • Not more than 13 weeks of layoff in any period of 20 consecutive weeks; or
  • More than 13 weeks in any period of 20 consecutive weeks, but less than 35 weeks of layoff in any period of 52 weeks where certain conditions are met such as payments, benefit coverage and/or supplementary unemployment benefits are paid.

Employers are not required to set a specific recall date when they temporarily lay off employees; however, a temporary layoff could result in a constructive dismissal claim if the layoff is not allowed by the employment contract. Despite not having grounds to do so, given COVID-19, many employers have selected the temporary layoff option. As we are in unchartered waters, we do not know whether legislation will be retroactively amended — B.C. and Alberta have already extended their temporary layoff periods — to make this exception for employers or whether the courts will begin to favour this option although currently being contrary to law.

 

Ronald S. Minken is a senior lawyer and mediator at Minken Employment Lawyers, an employment law boutique in Markham, Ont. Minken and his firm can be reached by visiting www.MinkenEmploymentLawyers.ca.

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