Businesses Beware: “Temporary Layoffs” Can Cost You

April 2, 2020

As of late, my practice has come across the following issue: how can businesses go about employee layoffs in the best possible way?

The answer to this might not be so simple. Although there is a common conception in Ontario that layoffs and business are “pen and parcel” with each other, there is an overwhelming grey area here which continuously eludes businesses. For example, in Ontario, many businesses, particularly small to medium size businesses, often do not realize that where an Employment Agreement/Contract does not include layoff provisions, laying off an employee can be the equivalent of wrongful dismissal. As businesses know, the words “wrongful dismissal” automatically ring the “Code Red” alarm bell. It is a situation that all too many businesses have unfortunately learned the hard way, and do not wish to repeat.

However, with a properly drafted Employment Agreement/Contract, businesses can save themselves a lot of headaches. In particular, where layoff procedures are specified in writing, the ability to layoff employees without consequences, becomes a whole lot easier.

Now, at this point in my blog, the question might be this: if my business specifies layoffs in my Employee Contracts, can my business layoff employees when and where needed? Not so fast.

Under Ontario’s Employment Standards Act, 2000 (ESA), employee layoffs are strictly regulated. For example, the ESA requires for any consecutive 20-week period, layoffs cannot last more than 13 weeks. Even a layoff lasting one more day than this prescribed 13 weeks can technically, constitute the dreaded wrongful dismissal. In some circumstances, temporary layoffs can last 35 weeks in any consecutive period of 52 weeks. However, this is only true in certain circumstances (i.e. the Employer still needs to pay the Employee substantially and/or provide the Employee with benefits, if the Employee would still be entitled to Employment Insurance (EI)).

Basically, if an Employer wants to avoid a wrongful dismissal lawsuit via what it believes is a justified “temporary layoff”, it starts with the Employment Contract. As the Ontario court in the landmark case Bevilacqua v Gracious Living Corporation indicated, even where the Employer and Employee agree to a temporary layoff (i.e. including an established start and end date of layoff), where layoffs are not specified in the contract, they can constitute wrongful dismissal. That is where a carefully construed layoff provision in an Employment Contract makes a huge difference for a business.

For more information or assistance when it comes to temporary layoffs, feel free to reach out to my office at (416) 659-6665, or at aaron@aaronmilleryourlawyer.com. If you are representing an Ontario business or are an Ontario employee caught in layoff dilemma, I would like to hear from you.