Layoffs and Terminations | Author: Kimberley Sebag, Employment Lawyer, Lecker & Associates.
The COVID-19 pandemic has 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. Statistics Canada’s unemployment numbers were sobering. Over a million Canadians are out of work.
If you are part of this statistic, then you must understand the issue, legally. In Ontario, the Employment Standards Act (ESA) governs relationships between employees and employers. It sets out clear rules employers must follow during layoffs and terminations. These terms are frequently used interchangeably and erroneously in the media. You must understand which one applies to you because your rights vary greatly, depending on which one it is.
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 indicate the recall date as “unknown“. Under normal circumstances, we would interpret ambiguous recall dates as constructive dismissals. However, with this pandemic, your recall date may depend on factors beyond your employer’s control, requiring us to give them some leeway.
We encourage laid-off employees to stay in touch with your employers about wages they owe you as well as your reinstatement date. You should also apply for federal government income replacement programs, such as the Canada Emergency Relief Benefit. In addition, the federal government has passed the Canada Emergency Wage Subsidy (CEWS) bill. If your employer qualifies, they will receive a subsidy of up to 75% of your wages to a maximum of $847.00 per week. Accordingly, you may inquire about your entitlements under this program.
Taking Sick leave
If you are working and 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.
If the COVID-19 emergency lasts longer than 13 weeks, then the game changes for many employees. Presently, the ESA allows your employer to extend layoffs to 35 weeks within a 52-week period, but not unilaterally.
In 2001, the case Elsegood v. Cambridge Spring Services cleared the way for employees to actively engage in extended layoff discussions, terms and agreements. This was affirmed more recently, in 2016 in the case Bevilacqua v. Gracious Living Corporation, where the court stated that a unilateral layoff, without any previous agreement with the employee, constitutes a substantial change in one’s employment and can be interpreted as constructive dismissal.
If you come to an agreement on terms for an extended layoff, then once again, you remain an employee of the organization, entitled to all your benefits and seniority. Your employer must provide you with a recall date and you are free to work elsewhere, provided this is covered in your extended layoff agreement.
If your job loss does not satisfy any of the conditions above, then under current law, you can consider your employment terminated when your 13-week layoff is up. In this event, your employer owes you termination pay commensurate with your circumstances. It is very important to have your termination documents vetted by a lawyer before you sign them. Contact us as quickly as possible with your employment contract as well as termination papers so we can determine whether you have received a fair severance package.
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 the government lifts emergency measures to allow 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, and also avoid 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 them or pushing them to perform tasks unsafely, all with the intention of pressuring them into quitting. This is illegal behaviour and constitutes a constructive dismissal. They could also or selectively impose unpredictable layoffs, citing economic conditions, while the rest of the business continues to operate normally.
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 we encourage you to contact us for a consultation.
About the Author
Kimberley Sebag, B.A., B.C.L., LL.B., is an employment lawyer with a practice dedicated to employee advocacy.
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