To our Employer Clients:
Over the past week, I have received many calls from our non-unionized employer clients regarding temporary layoffs as a strategy for dealing with the Covid-19 pandemic. In these uncertain times, employers are anticipating a period of reduced revenues and are trying to find ways to cut costs now in order to weather the economic storm ahead. As they explore their options, many are considering resorting to temporary layoffs as a strategy.
From my discussions, it is clear to me that many clients are confused about their legal ability to temporarily lay off their employees. Many are giving the Employment Standards Act, 2000 a cursory reading and are assuming – in many cases, wrongly – that they have a legal right to temporarily layoff their employees, based upon the statute. This email is intended to clarify this issue for our employer clients.
Many of our employer clients do not realize that their employment contracts, while governed by the Employment Standards Act, 2000 are also governed by the common law. The common law is the body of jurisprudence that has been developed by the courts over the years. In Ontario, the Superior Court of Justice has held in the decision of Bevilacqua v Gracious Living Corporation, 2016 ONSC 4127 (CanLII) that an employer does not have a right to lay off an employee, unless that employee’s employment contract contains an explicit provision granting the employer that right. To quote the Court, “The Employment Standards Act, 2000 does not, as Gracious Living might have believed, authorize a layoff in the absence of a contractual provision to that effect.” Absent a contractual provision in the employment contract granting the employer a right to temporarily lay off an employee, a unilateral layoff by an employer of that employee amounts to a substantial change to a fundamental term of the employee’s employment, which the courts have held amounts to a constructive dismissal by the employer. This is the case even where the period of the layoff is less than the 13 weeks provided for under the Employment Standards Act, 2000.
Why does it matter? If a court finds that you have constructively dismissed your employee by temporarily laying off that employee when your employment contract did not give you that right, the court will look at the termination provision contained in your employment contract and require you to provide the employee with the termination pay contained in your employment contract, assuming that the contractual provision complies with the Employment Standards Act, 2000. If your employment contract either does not contain a termination provision, or does contain a termination provision that does not comply with the Employment Standards Act, it gets worse. In either of those circumstances, the court will imply into the employment contract a duty on the employer to provide the employee with common law notice ow with pay in lieu of common law reasonable notice.
The period of pay in lieu of reasonable notice is based upon many factors, including the character of the employment, the length of service provided by the employee, the age of the employee at the time of the termination and the availability of reasonable alternate employment; however, common law reasonable notice periods are in most instances far greater than the notice period provided for under the Employment Standards Act, 2000. Also, in light of the impact that the Covid-19 pandemic is likely to have on the Canadian economy, it is conceivable that notice period could be extended by the courts under the “availability of reasonable alternate employment” factor, since reasonable alternate employment is unavailable at the moment.
Before laying off your employees, check your employment contracts. Make sure that your employment contracts provide you with that right. Make sure that your termination provisions comply with the Employment Standards Act, 2000, since the laws affecting termination provisions have been heavily litigated in recent years. If you simply layoff without having done your homework, you could be adding to the challenges that lie ahead costly wrongful dismissal actions from employees that have been laid off improperly.
For the duration of the Covid-19 pandemic, in order to protect our clients and staff, we are conducting all of our client meetings over the telephone or Zoom.
Stay safe and let me know if you require any assistance.