COVID-19, Temporary Layoffs and Claims of Constructive Dismissal
Ontario’s Employment Standards Act, 2000 provides employers with the ability to place employees on a temporary layoff for a specific period of time.* However the pre-COVID-19 case law (I fully expect that there will be a post-COVID case law era) has largely held that unless the employment contract expressly provides for the possibility of a temporary layoff, an employer who places their employee on temporary lay-off will have constructively dismissed their employee.
There are genuine reasons to be concerned about the use of temporary layoffs. Historically there has been a worry that employers may use temporary lay-offs to avoid their notice and severance obligations by placing the employee on indefinite layoff.
The situation that many employers are faced with today is, however, unique.
Between the declaration of a global pandemic, Public Health Authorities recommending social distancing, the mandated closure of many businesses and the genuine concerns of employees that they neither be exposed to, nor potentially contribute to the spread of COVID-19 I would suggest that in this context, in a crisis, there may be an implied term that an employer can place an employee on a temporary layoff such that employees being placed on a temporary lay-off due to COVID-19 have not been constructively dismissed.
Even if a Court concluded that there was no such implied term to lay off employees during the COVID-19 crisis, in order to establish that an employee has been constructively dismissed it will still be necessary to establish that a reasonable person, taking into account all of the circumstances, would conclude that when they placed the employee on a temporary layoff, the employer no longer intended to be bound by the terms of the contract.
Proceed with Caution:
Even if it is the case that there is an implied term allowing employers to place employees on temporary layoff it is recommended that employers:
- Maintain records to support the necessity of the decision to place their employees on temporary layoffs (and that it was not simply a disguised attempt to avoid obligations);
- Ensure that any temporary layoff proceeds in accordance with the ESA;
- Request employee’s consent to the temporary lay-off;
- Provide consideration for the employee’s agreement to go on a temporary lay-off. Explore whether continuation of benefits or other payment such as topping up the employee’s EI through a supplementary Employment Insurance plan is possible. For more information, click here; and
- Be mindful of the length of time that the employees are left on a temporary layoff. Many employers who have placed their employees on temporary layoffs this week will want to turn their minds to what happens next at the beginning of June.
All of this said, whether you have a temporary layoff clause or not, employers should get advice before proceeding.
*What is a Temporary Layoff?
Under a temporary layoff, an employer can suspend the employee’s employment for up to 13 weeks in a period of 20 consecutive weeks after which the employer either needs to recall the employee to work or pay the employee notice of termination and severance if any. It is also possible, under 56 (2) of the ESA to place an employee on a longer temporary lay off (up to 35 weeks within a 52 week period), if certain conditions are met such as the employee continues to receive substantial payments, the employer continues to make payments for the benefit of the employee under a legitimate pension plan or group or employee pension plan.