How secure is your job if a recession hits? | Authors: Bram Lecker & Simon Pelsmakher
In recent weeks, economists and journalists alike are sounding the alarm of a pending recession. US-China trade tensions, a shrinking European economy and rising inflation leave analysts nervous about the state of the world economy. Canadians are particularly susceptible to what occurs in the U.S. because a large part of our trade depends on U.S. customers. If they sneeze, we end up debilitated. It is prudent for employees to take stock of the goings-on within your organizations to determine how secure your job really is. If much of your revenue comes directly or indirectly via U.S. trade, then prepare for some belt tightening at work. The largest expense for most employers is payroll. And this is the first place many turn to when they need to cut back on costs.
Losing Your Job in a Recession
The law expects employers to ride out tough economic times with minimal job loss. Indeed, many are loathed to lose good employees during a recession, particularly if the turbulence is expected to be short lived. However, do not let naivety blindside you. Temporary layoffs and permanent restructurings will become a reality when financial circumstances demand it.
Ontario’s Employment Standards Act protects non-unionized employees under these circumstances. Everyone should understand the difference between a temporary layoff and a permanent termination because your rights and entitlements differ, depending on which one it is.
Temporary layoffs are common in seasonal industries, like fishing, agriculture and construction. Normally, employers plan them in advance and execute them with forewarning to you. They come stipulated with a clear recall date.
Short-term layoffs cannot exceed 13 weeks out of a period of 20 consecutive weeks. Extended layoffs must remain 35 weeks or under, within 52 consecutive weeks. For the latter, you remain an employee of the business and your employer must continue your employment benefits, such as medical, dental and life insurance. In addition, they must compensate you substantially for the extended layoff.
If you do not work in a seasonal business, your employer could still announce a temporary layoff during a recession. They must follow the same rules noted above. If you find yourself caught up in random temporary layoffs without specific recall dates, then your employer might be skirting the law. Some employers use sham layoffs to avoid their regular contractual obligations. They are illegal and you should seek legal advice if this is happening to you.
Terminations With Cause
Any layoff that does not meet the above conditions is a termination. In Ontario, employers can terminate employees in two ways, with or without cause.
Terminations with-cause occur less frequently, generally for egregious behaviour, such as insubordination, workplace violence, intoxication, misconduct, theft, etc. Regardless of the reason, your employer owes you severance in the form of notice or pay in lieu. The law allows them very narrow leeway to withhold termination payments if they can prove willful misconduct on your part. Most judges are reluctant to support such terminations and courts put a very high burden on employers to prove this.
Contact us right away if your employer has fired you without severance. We have a lot of experience with such cases and can offer advice if you have cause to sue.
Terminations Without Cause
In most cases, employers terminate employees without cause. This puts you in a position of advantage. Here, your employer has decided to part ways with you for reasons that are no fault of yours. They owe you a severance package. Depending on your circumstances, this can span anywhere from 2 weeks to 24 months, sometimes even higher.
Consulting with a lawyer before you sign the bottom line will ensure you do not leave money on the table.
U.S. Employment Contracts
In far contrast, employers in U.S. “at will” jurisdictions have the upper hand during a recession. Their laws permit them to dismiss employees without notice or severance, regardless of years of dedicated services. Sometimes, Canadian employees working in multinational organizations fall victim to contracts drawn up by the U.S. head office, where management remains completely unaware of, or chooses to ignore, the cultural and legal differences that separate us.
Consequently, employees should have employment or termination contracts vetted by a lawyer well versed in Ontario employment laws. Judges will throw out contracts that do not follow the laws of our land.
Federally Regulated Employees
Employees working in federally regulated industries, such as banking, telecommunications, mail delivery and cross-border transportation, operate under the Canada Labour Code.
After 12 months of employment, non-managerial employees, terminated without cause, can file for wrongful dismissal and seek an order of reinstatement, if the termination was not related to a redundancy of the position. This unique remedy provides substantial leverage during severance package negotiations. Employers, who risk forced reinstatement of employees they have just fired, remain motivated to offer generous packages. Consequently, federally regulated employees enjoy superior job security, akin to those of unionized employees.
Recession: Employer Goes Bankrupt
In rare circumstances, a recession can cause permanent damage to a company’s finances, leaving them open to insolvency protection and even declaring a bankruptcy. This can be problematic for employees, depending on how things play out. A provision in the Bankruptcy and Insolvency Act legally allows businesses of all stripes to walk away from their termination obligations. In such circumstances, employees fall through a large black hole that fails them, in a province with employment laws that otherwise fiercely defend them.
Lecker & Associates have practised Employment and Disability Benefits Law for over 35 years, primarily representing employees. If a recession becomes a reality, contact us for advice on your layoff, termination or severance package to ensure you receive the maximum protection the law affords you.