As noted by an RBC Report on Covid 19, the recent disruption of shipping grain and oil due to the CN rail strike, and  blockades and layoffs stopping rail traffic nationally in sympathy with Wet’suwet’en protests, has resulted in some industries or businesses facing a downturn due to, for example, client uncertainty or a disturbance of their supply chain.

Recently, we have been consulted by various clients about whether – and how – they could temporarily lay off some of their employees in the current turmoil. The answer to this question is more complicated that a simple yes or no and can vary on a case by case basis. Without proper strategies in place, it can be easy to make costly mistakes that will have a greater impact on business than temporary outside factors.

Some employers think they have a right to temporarily lay off employees during economic difficulties, according to the Ontario Employment Standard Act (the “ESA”). However, this belief is wrong. Employers do not always have a right to lay off employees. It depends on whether their employment contracts (including collective agreements) allow them to do so. If not allowed, the cost could be staggering.

This can be no better demonstrated then the case of Bevilacqua v Gracious Living Corporation, 2016 ONSC 4127. The employer Gracious Living Corporation (“GL Corp”) was going through an economically difficult phase and was downsizing, so they notified the employee, Mr. Bevilacqua, in writing that he was temporarily laid off, and committed to calling him back in three months, and did call him back in three months, eventually offering him the same position with the same compensation. The employee had a personal friendship with the owners of the business, and he knew that the layoff was not personal. However, the employee felt shocked when he was laid off, and he was so disappointed that he decided to sue GL Corp for wrongful dismissal. The court agreed that it was a wrongful dismissal, and awards him termination pay in lieu of notice. The court makes it clear that short of a contractual provision to the contrary, the ESA does not authorize the employer to lay off people temporarily; unilaterally laying off people without contractual provision, even it is temporary in nature, constitutes a constructive dismissal.

Determining organizational risk

Laying-off people can be a delicate process. Employers must understand if they have the authorization to do so.  Otherwise, they may still be found liable.  Even when a company has the right, how it is done can nevertheless critically damage relations with valued employees.  In a time of low unemployment many employees can simply choose to leave turning the temporary layoff into a staffing crisis for the company.

Employers can trigger liability due to ambiguous call back notices or a lay off period that is too long. In many cases the court will find the employer has terminated the employment, and therefore, is liable for termination pay.  In some case the employer is required redo the notice of termination as if the previous notice had never been given and costs are increased.

It would be wise for employers to plan strategically and be cautious about temporary layoffs. If planned and carried out properly, it can help businesses overcome financial difficulties and retain key employees. If not, employers may end up spending more money and losing trusted employees.

At Hum Law  we work with you to proactively design policies to mitigate risks associated with your worker or employee contracts. To ensure your contracts are not an organizational liability and your employment strategies during temporary economic downturn are sound, contact us today.