Employee Lay-offs During the COVID Crisis
The COVID-19 pandemic has created an unprecedented set of challenges for employers and employees. In Ontario, many companies have faced sudden and precipitous declines in business. As of March 25th, non-essential businesses have been ordered to close, and many of those that remain open have been forced to rapidly implement work from home arrangements for essential staff, while closing their offices to the public.
These economic realities have led many businesses to lay-off some or all of their employees. For many employees, this has made an already challenging situation untenable as they face an indefinite future without any income. In these difficult circumstances, it is important that both employers and their employees understand their rights with respect to lay-offs:
- Many people use the term “lay-off” loosely, and sometimes it can be confused with a permanent “termination”. Legally speaking, a lay-off means a temporary cessation of work without pay. The expectation is that the employee will be called back to work if business improves at some point in the future.
- The Ontario Employment Standards Act allows employers to lay-off employees without pay for up to 13 weeks. The lay-off can be extended for up to 35 weeks in certain circumstances (including if the employer pays the employee or provides benefits continuation during the lay-off).
- However, courts have held that a lay-off is only valid if the employee has signed an employment contract which allows the employer to impose temporary lay-offs.
- If the employee has not signed a contract with lay-off provisions, then courts have treated the lay-off as a termination, and the employee would be entitled to termination pay. Failure to pay appropriate termination pay could give rise to a wrongful dismissal claim.
- Things get more complicated if the employer in question has been ordered by the government to shut down due to the COVID-19 crisis (ie. all non-essential businesses). An employer who is forced to lay-off employees to comply with a government order may have several defences to a wrongful dismissal claim.
- However, for any businesses that have not been ordered to close (essential businesses, or those that are functioning through work-from-home arrangements) any lay-off could give rise to a wrongful dismissal claim.
In short, both employers and their employees should seek legal advice regarding any lay-offs. In some cases, the lay-off may be justified and it may be the best compromise available to the parties. In many other circumstances, a court will treat it as a termination and the employee will be entitled to termination pay.
The lawyers at Millard & Company can assist you in understanding your rights regarding lay-offs, terminations or any other employment issues that may arise in these challenging times. Contact us today to find out how we can help.
And stay safe out there!
