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Is Your Employer Allowed to Lay You Off?
Employment Law

Is Your Employer Allowed to Lay You Off?

Employers lay off their employees for a variety of reasons. Whether it be due to lack of work, financial issues, or some other reason, the impact is still the same for employees – loss of work. However, many people do not know whether they can do anything in response to being laid off. This post will outline some of the basic principles relating to layoffs and how employees can respond.

What Is a Layoff?

Many people believe that a layoff is the same thing as a termination. This is not the case – a layoff refers to an employer reducing or stopping an employee’s work without terminating their employment agreement. They generally occur because of a lack of work, economic issues, or because the work is seasonal. They can have an end date, have no specific end date but still be temporary, or be indefinite.

Layoffs and the Employment Standards Act (“ESA”)

Under the ESA, layoffs are legal so long as they are “temporary” as defined in the Act. Under section 56(2) of the ESA, a temporary layoff is:

  • a lay-off of not more than 13 weeks in any period of 20 consecutive weeks;
  • 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,
    • the employee continues to receive substantial payments from the employer,
    • 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,
    • the employee receives supplementary unemployment benefits,
    • the employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so,
    • the employer recalls the employee within the time approved by the Director, or
    • 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; or
  • in the case of an employee represented by a trade union, a lay-off longer than a lay-off described in clause (b) where the employer recalls the employee within the time set out in an agreement between the employer and the trade union. 2000, c. 41, s. 56 (2); 2001, c. 9, Sched. I, s. 1 (12).

Under section 56(1)(c), any layoff for a longer period than that of a temporary layoff results in the employee’s termination. In such cases, the employer must provide the employee with all that he or she is entitled to upon termination of employment.

Is There Anything Else You Can Do?

Even being laid off for one week without any form of reprieve or entitlements can be too long, let alone being laid off for 35 weeks in a 52-week period. Luckily, the law on layoffs is not only governed by statute – the common law provides options for employees. Ontario courts have found that even temporary layoffs are illegal unless they are provided for in an employment contract.[1] This means that in most cases, a temporary layoff constitutes a fundamental breach of the employment agreement on the part of the employer, resulting in the employee’s constructive dismissal. Upon being constructively dismissed, employees are entitled to everything they would be entitled to if their employment was terminated explicitly. This includes pay in lieu of notice and the continuation of benefits.

In most cases, the only way that an employer can retain a right to lay off its employees without constructively dismissing them is by explicitly providing for layoffs in its employment contracts. However, the courts have implied a right to lay off employees in certain rare circumstances. This is most common where the employer is in an industry where temporary layoffs are typical, such as where the work is seasonal.

Takeaways

Employees do not have to take being laid off sitting down and they should seek legal advice upon being laid off. It is important for employees to have a proper understanding of their specific situation and which options are available to them. Further, some aspects of being constructively dismissed through layoff are somewhat unique compared to other wrongful dismissal situations. Namely, a refusal to return to work after being laid off, even if you were constructively dismissed, may be viewed as a failure to mitigate your damages and result in a reduction in your entitlements. Employees should seek legal advice on how to navigate complexities such as these.

Employers who are concerned about being able to lay off their employees in the future should make sure that they explicitly provide for the right to do so in their employment contracts. Also note that employers cannot contract out of the ESA, meaning that they cannot lay off an employee for longer than that allowed in the Act, regardless of what is stated in the employment contract. Employers should always seek legal advice before laying off employees.

[1]   Elesegood v Cambridge Spring Service, 2011 ONCA 831, at para 14.

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