Temporary layoff is not the same as termination of employment.
Temporary layoff may be for up to 13 weeks and often relates to a shortage of work.
A “week of layoff” is a week in which you are paid less than 50% of your usual wage.
After 13 weeks, the layoff automatically becomes a termination and severance is payable.
The employer must reserve the right to lay off in a written contract, or the layoff may be a constructive dismissal.
Even if there is no contractual right to lay off, mitigation may be an issue.
Many employees are facing temporary layoff from their employment because of Covid-19. Where an employer faces a temporary shortage of work, temporary layoff is often seen as a good solution (for reasons set out below, it may not be as good as the employer thinks). The employee can collect employment insurance and then be recalled to work when the temporary disruption ends. Seasonal employees are often laid off in this way.
What is a temporary layoff?
Temporary layoff is governed by the Employment Standards Act. Under the Act, you may be temporarily laid off for up to 13 weeks in a 20-week period. A week of layoff is a week in which you are paid less than 50% of your usual weekly wage, averaged over the past 8 weeks.
Under the Act, if the layoff goes on for longer than 13 weeks, it would become a termination automatically. This means the employer would need to pay severance. Severance might be based on Employment Standards Act notice only (up to 8 weeks after 8 years of employment), contractual notice if the employment contract specifies something else, or reasonable notice if the contract is silent about severance.
Employers do not automatically have the right to lay off
The Act sets out minimum standards for the protection of employees. It is not primarily intended to help employers. As a result, the employer needs to contract – in writing – for many rights that the Act gives to employees. This means that if you have not agreed in a contract to be temporarily laid off, the employer likely does not have the right to temporarily lay you off.
Where the employer has reserved the right to lay off, you may be laid off in accordance with the rules set out in the Act.
Where the employer has no contractual right to lay off, the interruption in earnings may be a constructive dismissal. A constructive dismissal happens when the employer changes important terms of your employment without your agreement or without advance notice to you. If you have been constructively dismissed, then you would be entitled to severance under the ESA, the contract, or reasonable notice as described above.
Where there is no contractual right of layoff but you have been laid off in the past and have not protested, or there has been some verbal agreement, then the employer may be able to rely on that past conduct or verbal agreement to lay off now without terminating the employment.
Constructive dismissal and temporary layoff
Constructive dismissals are always more complex than outright dismissal, where the employer terminates the employment all at once. One reason is that the employer is likely to argue that they have not changed a fundamental term of your employment (this is usually the difficulty with constructive dismissal claims).
There is an added complexity in claiming a constructive dismissal on a temporary layoff: the prospect that you will be recalled to work after 13 weeks (or less). Because of the duty to mitigate your damages in a wrongful dismissal situation – to take reasonable steps to search for similar work – being recalled to work after a temporary layoff would be a major impediment to a constructive dismissal case. It might mean that your damages would be reduced to only the period of temporary layoff until you were recalled to work. This might be substantially less than a reasonable notice claim on an outright termination, where there is no prospect of being recalled to work.
For this reason, in the context of the widespread economic disruption of the coronavirus pandemic, one good option for many laid off workers is: wait. If you are not recalled after 13 weeks, you will have a simple outright dismissal. On the other hand, you may be recalled to work before the end of 13 weeks, and not need to worry about the termination of your employment after all.
