Temporary Layoffs: What Everyone Needs to Know

Temporary layoffs are an attractive option for employers facing economic downturn, business or financial troubles, or a global pandemic like COVID-19. While it may appear to be a good way to eliminate staff without paying termination pay or severance, there are many misconceptions that both employers and employees have.

This article aims to help you understand everything you need to know about temporary layoffs under Ontario employment law and should be used as a guide whether you are a business owner considering laying off staff or an employee who was laid off.

Temporary Layoffs Are Not Allowed for Most Employees

The first and most important thing to understand about temporary layoffs is that in most situations they are not allowed. There is no implied right to layoff an employee. Even though the ESA provides guidelines concerning the maximum length of a temporary layoff, the Ontario Courts do not permit an employer to layoff, or suspend an employee, without pay, unless:

  1. It is one of the written terms in the employment contract; or
  2. The layoff or suspension was agreed to by both employee and employer—this agreement can take the form of a written contract, a well-communicated policy or indirectly through a widely known practice within your employer’s organisation or industry (i.e. seasonal workers, construction industry, etc…).

Any layoff (even a temporary one) that doesn’t meet the above test is a constructive dismissal. The foundational case on this issue is Stolze v. Addario, 1997 CanLII 764, by the Ontario Court of Appeal, in which the Court wrote:

… the absence of evidence of a policy or practice within the employer company of laying off “key” employees, constitutes the lay-off a repudiation of a fundamental term of this employee’s contract. He was, therefore, constructively dismissed.

Read my earlier article Termination of the Employment Relationship in Ontario for more information.

Only if the employer makes it over this first and difficult hurdle, does the law concerning temporary layoffs become relevant.

What is a Temporary Layoff?

A temporary layoff is when a employee’s hours are reduced or eliminated on a short term basis with the intention that they will shortly be recalled. At the time an employee is laid off, an employer is not required to provide a specific recall date, however, if they do, they must generally comply with it.

The maximum length of a temporary layoff is specifically defined in the Employment Standards Act (“ESA”). If an employee’s layoff lasts even just one day longer than the specified time set out in the ESA, then the employee has been terminated retroactive to the first date of the layoff. As a result, that terminated employee is entitled to pay in lieu of notice and severance. 

The definition of temporary layoff according to the Employment Standards Act is as follows:

What constitutes termination
56 (1) An employer terminates the employment of an employee … if, …

(c) the employer lays the employee off for a period longer than the period of a temporary lay-off.

Temporary lay-off
(2) For the purpose of clause (1) (c), a temporary layoff is,

(a) a lay-off of not more than 13 weeks in any period of 20 consecutive weeks;

(b) a lay-off of more than 13 weeks in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks and,

(i) the employee continues to receive substantial payments from the employer,

(ii) the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan,

(iii) the employee receives supplementary unemployment benefits,

(iv) the employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so,

(v) the employer recalls the employee within the time approved by the Director, or

(vi) 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;

If the specific requirements for a layoff to be considered “temporary” are not met than that layoff is a termination. In a nutshell (and explained in more detail below), if your layoff lasts longer than the temporary layoff time periods or does not meet any of the conditions set out above, the employer is considered to have terminated the employee’s employment. The employee will therefore be entitled to termination pay, severance or damage for wrongful dismissal

Temporary Layoffs of More than 13 Weeks but less than 35 Weeks

A layoff more than 13 weeks but less than 35 weeks, can only be considered temporary where at least one of the following conditions are met:

  1. The employee continues to receive substantial payments from the employer;
  2. The employer continues to make RRSP, pension plan, or group health and/or dental insurance plan contributions;
  3. The employee receives supplementary unemployment benefits (or would be entitled to receive this benefits if not for the employee having alternative employment during this period); or
  4. the employer recalls the employee within the time approved by the Director.

Ongoing “Substantial Payments” or Benefit Plan Contributions by Employer

The payments contemplated under 1 and 2 need to have been made throughout the entire period of the temporary layoff in order to satisfy this condition. If the employer did not make regular and on going payments during the first 13 weeks of the temporary layoff or stopped making payments at any time, this condition is not satisfied.

The term “substantial payment” is not defined and will likely depend on any individuals particular employment circumstances. Employers and employees should consider getting legal advice on this requirement because it will be highly case specific.

With respect to benefit plans, specifically, the terms of the plans provided by the employer must be the same as before the layoff began (unless the employee specifically agreed to an amendment to the plan or the amendment was made for a legitimate cause such as a legislative change). Employers cannot drastically cut benefits and then continue making the reduced payment in an attempt to get around this requirement.

Supplementary Employment Benefit (SUB) Plans

The Government of Canada offers a program called the Supplementary Unemployment Benefit Plans (SUB Plans) that provides employers with the ability to set up and provide additional financial assistance to employees during a period of layoff due to temporary stoppage of work, training, or illness, injury or quarantine.

If an employer has a SUB plan, employees will likely already know about it. This plan provide to employees a top up of some amount over and above EI. For more details consider the Government of Canada’s Guide to Supplementary Employment Benefit Program.

Approval by Director of the Ministry of Labour

In special circumstances the Director of the Ministry of Labour can provide exceptions to certain employers. Employers would be obliged to inform their employees.

Other Frequently Asked Questions

How do employees recall temporarily laid off employees?

During a temporary layoff, an employer upon notice to their employee, can set a recall date requiring the employee to return. Typically, this is done by the employer providing a “recall notice” informing the employee of the return to work date.

What happens if an employee is recalled in a situation where the layoff was wrongful or not temporary?

If an employee is provided with a recall date that either (a) falls outside or afoul of the temporary layoff provisions in the ESA, or (b) in the course of a layoff that was never permitted in the first place, then the employee has two options:

  1. Return to work and abandon his claim to termination pay, severance pay and/or damages for wrongful dismissal; or
  2. Refuse to return to work and claim constructive dismissal,

Only in rare circumstances are both options available. If an employee refuses to return to work and claim constructive dismissal they would be obliged to comply with their Duty to Mitigate.

What happens if an employer is unable to recall an employee during a temporary layoff? 

If an employer is unable to recall the laid off employee for any reason, even if doing so was unintentional or through no fault of their own, the layoff becomes a termination and the employee is entitled to termination pay, severance pay and/or damages for wrongful dismissal.

What if an employee’s job is no longer available?

Generally, an employee should be recalled to the job they had before the layoff. However, if the job is no longer available, the employee must be given a similar or comparable position with the same or greater benefits and pay.

What if an employee refuses to return after a temporary layoff?

Employees are considered employed during a temporary layoff and, therefore, are required to return upon being recalled by their employer. A refusal to return may be considered job abandonment.

What about temporary layoffs for unionised workers?

The above legal information is generally applicable only to non-unionized employees. If you are in a union you need to speak with your union representatives.

What about temporary layoffs because of COVID-19?

The COVID-19 pandemic is novel and unprecedented. While it may not have an effect on the current law, it is important to understand that there is no way to know for certain how Ontario employment law might change or how the Courts may react. If you are facing a particular employment issue because of COVID-19, you should speak to a lawyer. 


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Termination within Probation Periods

Probation at the start of employment may seem simple, but they don’t always automatically allow employers to fire someone in their first 3 months free and clear. Probationary periods are actually legally intricate.

Employees terminated during probationary periods often accept their fate without seeking legal advice when in many cases they may be eligible for severance payments (even severance payments of several months or more). Likewise, employers may dismiss an employee within a probationary period only to be surprised and unprepared when they’re told termination pay for wrongful dismissal is owed.

Purpose and Effect of Probation Periods

The reason for probationary periods in employment contracts is to provide a safeguard to employers. It allows an employer a period of time to assess a new hire on their suitability for the role. This benefits employees to the extent that an employer may be more willing to take a chance on an employee they are not certain about, if they have a period of time to change their mind without consequence.

The Ontario Employment Standards Act (“ESA“) does not define probation or probationary period. Instead, it allows an employer to terminate an employee without cause in the first three months of employment, without notice or pay in lieu of notice. It frequently doesn’t matter, therefore, for the purposes of the Employment Standards Act whether an employment contract contains a probationary clause (although it is important that the probationary clause does not provide for less notice than the minimums required under the ESA). If an employee is employed less than 3 months, under the ESA, he or she gets no ESA notice. If an employee is employed 3 months or more they are entitled to ESA notice. The existence, or lack thereof, of a probationary clause doesn’t change this.

The true purpose of a probationary period in an employment contract is to rebut the common law rule that employees are entitled to reasonable notice.

It may come as a surprise to some that even if you’ve been employed for a single day (or even if you haven’t started yet), the Courts have declared that terminated employees are entitled to some form of notice or pay-in-lieu of notice. In fact, recent trends in case law, suggest that short term employees (people employed only a few months) may be entitled to even more notice. A properly drafted and enforceable probationary clause may rebut this presumption and disentitle employees on probation to notice.

Termination within Probation Periods

In order for an employee to be subject to a probationary clause it generally must be:

  1. expressed (in writing) – the courts will not imply the existence of a probation period;
  2. it must be neither vague or ambiguous; and
  3. it must not provide for less notice than the minimums set out in the ESA

Further, and most critically, in order for an employer to be relieved from paying reasonable notice to the terminated probationary employee, it must act in good faith. This means that it must have provided the employee with a fair opportunity to demonstrate their suitability for the role and acted fairly in determining that the employee was unsuitable for the role.

Suitability

Defining “suitability” can be challenging. The Courts recognise that assessments of probationary employees involve the consideration of factors that are intangible and subjective. As a result, they often extend wide discretion to employers. Overall, the grounds used to establish unsuitability must be reasonable and must demonstrate that employees are given a fair chance to meet the requirements of the job.

Example of factors that may be taken into consideration to determine suitability of a probationary employee are as follows:

  • Performance
  • Attitude and compatibility
  • Capability and skill
  • Capacity to meet future production requirements

Clear and Unambiguous

Courts pay strict attention to the wording and language of any probationary periods. They must be clear and unambiguous. The court will not likely imply a probationary clause from the contract term “employee performance will be reviewed after three months”. However, in at least one case, the Ontario Court of Appeal concluded that the clause “Probation… six months” was enforceable and that the word “probation” in that case had a clear and unambiguous meaning that the employer could rely on to limit the employee’s notice. See for example: Nagribianko v. Select Wine Merchants Ltd., 2017 ONCA 540 (CanLII)

Best Practices for Employers

Best practice is for an employer to take steps to document the specific actions taken to determine suitability or unsuitability. Employers should:

  • Communicate the expected reasonable standards;
  • Inform the employee of any deficiencies as they arise;
  • Explain that any failure to address and try to improve deficiencies will result in termination of employment at the end of the probation period; and
  • Provide the employee with a chance to show that they tried to improve.

The important thing for employers to do, is to honestly treat the probationary period as a time for evaluation and training. The employer should work with the employees on a regular basis to determine if they can be transitioned into the role successfully. Actions taken to carefully assess, advise and remedy performance issues should be evident. Any decision about dismissal should not be made at the last moment, give regular performance review so that a decision to terminate prior to the end of the probationary period isn’t a surprise to anyone.

If you are interested in learning how to update your employment contracts to include a probation period, take a look at my article “How to Change Employment Contracts” or feel free to contact me.

Tips for Employees

Anyone terminated from their employment, whether within a probationary period or otherwise, should seek legal advice. 


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

COVID-19’s Effect on Reasonable Notice of Termination

COVID-19 is having significant economic impacts on both employees and employers. Mass layoffs are happening across Canada despite government initiatives to avoid them. Many employers are considering staff cuts to remain profitable. While terminating employment for legitimate business reasons (such as a downturn in the economy) is lawful, generally speaking, an employee terminated in these circumstances is entitled to reasonable notice of termination, or pay in lieu of notice.

What is Reasonable Notice?

Courts require employers to give terminated employees “reasonable notice” or pay in lieu of notice upon termination.  Such notice is based on a variety of factors to assist the employee in finding comparable employment.

In doing so, the courts consider the following criteria:

  1. The character of employment. For example, general labourer, middle manager, executive, professional, technical worker, etc.
  2. The length of the employee’s service. Employees are generally entitled to a longer notice period the longer they have been employed.
  3. The employee’s age. Employees close to retirement are generally entitled to a longer notice period.
  4. The availability of comparable employment.

For more information in general see my earlier article “How much notice/severance should I get after being fired?“.

Reasonable Notice in a Poor Economy

The state of the economy can influence the availability of comparable employment and, in turn, can likewise affect the length of reasonable notice awarded by courts.

There are arguments on all sides as to how a general economic downturn should affect the reasonable notice period. Employees argue that it should be increased because they may have more difficulty finding new employment when jobs are scarce. Employers argue that they do not have the financial resources to provide employees with a longer notice period, and the pay and benefits that go with it.

Generally, courts in Ontario have favoured employees:

  • They have often sided with employees that an economic downturn should extend the notice period. For example, in Zoldowski v Strongco Corporation (“Zoldowski”), the Court increased the notice period in part because of the “economic climate of Southern Ontario and particularly the GTA”, and its impact on the employee’s ability to find alternative employment.
  • They have rejected the idea that a specific employer’s economic difficulties are a basis for reducing the reasonable notice period. In Michela v. St. Thomas of Villanova Catholic School (“Michela”), the Court of Appeal rejected this argument, reasoning that the “character of employment” factor was about the nature of the employee’s position, not the employer’s finances. While those finances may be the reason for the termination, “they justify neither a reduction in the notice period in bad times nor an increase when times are good.”

Nevertheless, COVID-19 may have a Different Affect on Reasonable Notice

Despite its decision in Michela, the Court of Appeal left open the possibility that a more general economic crisis may limit the reasonable notice period by approving and referencing the following passage in a 1982 High Court decision, Bohemier v. Storwal International Inc. (“Bohemier”):

It seems to me that when employment is unavailable due to general economic conditions, there has to be some limit on the period of notice to be given to discharged employees even if they are unable to secure similar employment within the notice period.

The reasoning in Bohemier suggests that, where there is a general economic downturn, evidence of difficulty finding a job cannot be used to extend a notice period as was done in Zoldowski. Employers may still have to provide a lengthy notice period based on the other factors, but not one that is unreasonable in the circumstances of the broader economy.

As a result, it is unclear how the general economic conditions created by COVID-19 will affect the reasonable notice period.

While employers ordinarily have difficulty relying on their financial hardship to reduce an employee’s notice period, COVID-19 is posing new legal challenges and how the law may evolve in the face of them is uncertain.

What is certain, however, is that we have entered unprecedented times. As always, we recommend that employers avoid premature layoffs or terminations without first seeking legal advice and understanding the consequences of those decisions.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.