Layoffs and Terminations | Author: Simon Pelsmakher, Employment Lawyer, Lecker & Associates.
The COVID-19 pandemic caused governments to act swiftly to prevent the virus from spreading. We returned from March break to a sudden stoppage in commercial activity. With it came an unprecedented loss of jobs. Employers were forced to lay off workers without clear recall dates. Our employment laws permit employers to temporarily lay off staff for 13 weeks. That is why we expected some changes to the law as the emergency measures continued. Predictably, the Ontario government introduced the unpaid Infectious Disease Emergency Leave (IDEL) provision as a temporary amendment to the Employment Standards Act (ESA). Even though it allowed employers to legally extend the layoffs to some benefit, it categorically did not allow them to avoid the butcher’s bill of termination packages.
On September 4, 2020, the temporary amendments to the ESA will expire. This means that employers will no longer be able to hide behind ambiguous layoffs. The terms layoffs and terminations are frequently used interchangeably and erroneously in the media. Employees must now clearly understand which one applies to you. Your rights vary greatly, depending on how your employer treats your employment status. They now have three choices. They must either recall you back to work, extend your layoff according to the terms allowed in the ESA, or terminate your employment. Anyone presently on IDEL must understand what this means.
A layoff constitutes a temporary interruption of employment if you earn less than 50% of your former income for one week or more. The law permits employers to pause a worker’s employment for up to 13 weeks within a 20-week consecutive period for economic, supply chain or seasonal reasons, for example. During the layoff, you remain an employee of the organization and your employer does not owe you severance pay. The COVID-19 emergency is government-mandated across Canada. It gives employers a valid reason to call a temporary layoff. Nonetheless, the ESA requires your employer to fulfill the following requirements. They must:
- Keep your vacation pay intact and continue all health, disability and other benefits.
- Issue a recall date within 13 weeks.
- Provide you with a Record Of Employment (ROE) that may allow you to claim income replacement from government programs.
No Recall Date
Your ROE may have indicated the recall date as “unknown“. At this stage, your employer has had several weeks to get the business in order for reopening; your employment status should be clear. Consequently, if your employer has continued to evade this issue, contact us for an assessment. You may require legal intervention. We normally interpret ambiguous recall dates as constructive dismissals.
Taking Sick leave
If you require time off due to illness or quarantine, the provincial government has enacted extended sick leave protection to you. This means employers cannot terminate your employment, even if you require time to tend to a sick family member. Ensure you communicate your expected return to work date clearly to your employer to prevent them from accusing you of “abandoning” your employment.
Extended Layoffs & ESA Amendments
In 2001, the case Elsegood v. Cambridge Spring Services cleared the way for employees to actively engage in discussions about the extended layoff. And this decision was supported in 2016 in the case, Bevilacqua v. Gracious Living Corporation, where the court affirmed that a unilateral layoff, without employee agreement, constitutes a substantial change in one’s employment and can be interpreted as constructive dismissal.
Consequently, the ESA allowed your employer to extend layoffs to 35 weeks within a 52-week period, but not unilaterally. They needed your agreement about the terms of the extended layoff. With it, you remain an employee of the organization, entitled to all your benefits and seniority. Your employer must stipulate a recall date and you are free to work elsewhere, provided they cover this in your extended layoff agreement.
Many of these provisions for extended layoffs were kneecapped temporarily by the IDEL provisions. And now, those temporary amendments are coming to an end. If your employer has not commenced negotiations with you about the terms of an extended layoff, then you may consider yourself terminated. And in this case, they must follow ESA rules for terminations.
During terminations, the law requires your employer to compensate you commensurate with your circumstances. Many employers offer their departing employees the ESA minimum, as required by law. And they count on employees not knowing any better. Our regime of common laws offers a second layer of protection to some employees. And it ensures you remain sufficiently compensated financially until you find another job.
This is why you must exercise your right to seek legal advice. Do not let unreasonable deadlines, which are sometimes not enforceable, drive you into making hasty decisions. Never sign a severance package release until a lawyer has vetted your documents.
If your employer has simply neglected to recall you, or terminated your employment without any severance package, then we encourage you to contact us with urgency.
The Gray Zone: Between Layoffs and Terminations
The trajectory of the virus, or the discovery of a vaccine, will determine how quickly commercial activities to return to normal. We believe this unpredictability will strain employment relationships for the next little while. Accordingly, we counsel employees to remain patient but vigilant about their employment status during this time.
This is precisely the type of environment where unscrupulous employers will try to walk in a murky gray zone between layoffs and terminations, counting on employee ignorance of the law. An economic downturn presents them with an opportunity to clean up shop, issue layoff notices in bad faith to save on payroll, all while also avoiding the butcher’s bill of termination packages. You need to contact us right away if you believe your employer is not playing fairly and taking advantage of this situation.
In 1997, we represented Gladys Martellacci in a case against her employer CFC/INX Ltd. She had worked for them as a purchasing agent for 16 years, without incident. In April 1996, CFC gave Ms. Martellacci a notice of temporary layoff for 12 weeks, stating financial hardship and the need to reduce staff. Yet later that year, she discovered that a former assistant was performing her job. When she initiated consultations with us, we found tell-tale signs of a sham layoff in her Record Of Employment, which did not indicate a recall date. The layoff had left her completely unprepared financially. She had never signed any agreement that stipulated layoffs as a remote possibility and the company did not have a history of layoffs. They imposed it on her unilaterally and without notice. They did not pay her during the layoff and she received reduced benefits.
Shortly after, her employer extended the layoff by three more months. But aware of our involvement in her case, they reinstated her full benefits to comply with their legislative obligations. As a final insult, when they finally recalled her back to work, it was to a much junior clerical position. This was a textbook example of a business operating in bad faith and contravening common law provisions. We successfully obtained wrongful dismissal damages for this client.
Harassment and Constructive Dismissal
Employees must lookout for similar patterns of bad faith behaviour by some employers. They could begin a targeted campaign of harassment and bullying against individuals they want to get rid of by overworking or pushing them to perform tasks unsafely, all with the intention of pressuring them into quitting. They could also or selectively impose unpredictable layoffs, citing economic conditions, while the rest of the business continues to operate normally. All of the situations described above are illegal.
The ESA rules also apply to non-traditional employment relationships, like commission sales agents and dependent contractors. Here, you should look out for sudden changes in employment terms, reduced commissions, bonus payments and hours, or contract terminations without notice. Contacting us as early as possible will allow us to assess your situation and counsel you to your advantage.
Insolvency & Bankruptcy
Businesses with severely compromised cash flow might simply not recover, even after economic activities resume. To keep creditors at bay and seek “emergency life support,” your employer may go into receivership. An appointed receiver will attempt to restructure the business to get it back into the black. While many leave employment relationships alone, the law allows them to conduct insolvency layoffs as a temporary measure. Here, they must follow ESA rules, as described above for layoffs.
If the business shuts its doors and declares bankruptcy, your prospects for securing back wages or severance may be quite grim. You now become a creditor. This puts you in a line, along with taxes owed to the government, costs related to the receivership and debts held by secured creditors, like banks.
The Bankruptcy and Insolvency Act (Canada) and the Companies’ Creditors Arrangement Act (Canada) received major facelifts in November 2019. They give due consideration to employee and pensioner entitlements. However, it remains freshly minted and untried in the courts. This is a complicated area for anyone to navigate alone and consequently, we encourage you to contact us for a consultation.
About the Author
Simon Pelsmaker, B.A. (Hons), J.D., is an employment lawyer with a practice dedicated to employee advocacy.
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