Temporary Layoffs in Ontario: Lessons from U.S. Layoffs Due to Trump’s Tariffs

In the United States, temporary layoffs have often been a response to economic downturns, policy shifts, and global trade conflicts. A notable example was the wave of temporary layoffs in industries affected by President Trump’s tariffs. Many employers in the U.S. used temporary layoffs as a mechanism to manage financial uncertainty, often with the expectation that workers would return when conditions improved.

Unlike the U.S., where temporary layoffs are frequently used, Ontario has strict legal parameters governing them. Employers must be aware that imposing a temporary layoff outside the confinements of the Employment Standards Act, 2000 (ESA) and the common law can result in significant liability.

The Ontario Employment Standards Act, 2000(ESA)

The ESA permits temporary layoffs, but under strict conditions:

• A layoff must not exceed 13 weeks in any 20-week period, or
• A layoff can extend up to 35 weeks in a 52-week period, but only under certain circumstances.

However, the ESA does not grant employers an automatic right to impose temporary layoffs. Layoffs are only lawful if explicitly permitted in an employment contract, if they are a well-established industry practice, or if the employee has previously accepted one with the same employer.

Temporary Layoffs and the Common Law

Courts have repeatedly held that a unilateral layoff, even if temporary, may constitute a fundamental breach of contract and give rise to a constructive dismissal or wrongful dismissal claim. This means that an employer who temporarily lays off an employee without a contractual right to do so could be liable for termination pay, severance pay, and other damages.

What You Need to Know

1. Employers Cannot Assume They Can Lay Off Employees: Unlike the U.S., where layoffs are widely accepted, Ontario employers cannot impose them unless they have clear contractual permission or a history of accepted layoffs.
2. Employees Could Have a Wrongful Dismissal Claim: If an employer imposes a temporary layoff without contractual or historical grounds, an employee may be entitled to treat it as a termination and seek compensation.
3. Employees Should Seek Written Documentation: If faced with a layoff, employees should request written details, including the reason, duration, recall date, and whether benefits will be maintained.
4. Legal Advice is Essential: If you have been temporarily laid off, speaking with an employment lawyer is crucial to understanding your rights and entitlements.

While U.S. employers may have more flexibility in implementing temporary layoffs due to economic pressures like tariffs, Ontario’s legal framework provides stronger employee protections. Employers in Ontario must tread carefully, ensuring they comply with both the ESA and common law principles to mitigate legal risks.

If you are facing a temporary layoff, contact us today understand your rights and obligations. Temporary layoffs are not always as “temporary” as they seem, and failing to handle them properly can result in consequences to your employment and entitlements.