The world of work is not always smooth sailing, as economic turndowns, industry fluctuations, and unforeseen events can pose substantial challenges for employers and employees. In some cases, these issues can necessitate temporary layoffs. However, it is important to understand the differences between temporary layoff and termination. In Ontario, understanding your rights and the options available to you as an employee is vital for making informed decisions.

This blog will explain what constitutes a temporary layoff and outline employer responsibilities and employee rights, providing insights into professional and financial well-being options.

What is a Temporary Layoff?

A temporary layoff occurs when an employer suspends an employee’s work for a specified period of time with the intention of calling them back to their position when business conditions improve. Generally, an employer only has the right to temporarily lay off an employee if the employment agreement contains a provision allowing it. A temporary layoff is distinguished from a termination, which completely severs the employment relationship.

If the employer does not specify a recall date when laying off the employee, this does not necessarily mean that the layoff is not temporary. However, even if a layoff is intended to last temporarily, if it is not allowed by the employment contract, it may result in a wrongful dismissal claim.

When Do Temporary Layoffs Happen?

There are several reasons why an employer will temporarily lay off an employee. Often, temporary layoffs are used by businesses to:

  • Address seasonal fluctuations: If the business operates in an industry that experiences seasonal ups and downs, the employer may temporarily lay off the employee(s) to allow for workforce adaptations.
  • Navigate economic uncertainty: During periods of economic uncertainty, businesses may utilize temporary layoffs as a precautionary easter to avoid permanent job losses.
  • Reduce Costs During a Slow Period: If demand for the goods or services provided by the business slows, the employer may temporarily layoff the employee(s) to adjust manage expenses through workforce reduction until the goods or services are in higher demand.

Employers should ensure that the selection of employees to be temporarily laid off is a fair and non-discriminatory process.

Temporary Layoffs and the Employment Standards Act

Ontario’s Employment Standards Act outlines the legal framework for temporary layoffs of provincial employees. It provides that temporary layoffs may last for a maximum of 13 out of any 20 consecutive weeks, although this period may be extended to a maximum of 35 weeks in any 52 consecutive weeks if certain conditions are met, such as continuance of benefit payments. While not mandatory, choosing to continue certain benefits for the affected employee(s) can help retain qualified employees after the layoff period.

Under the Employment Standards Act, an employer is not required to provide written notice to the employee for the temporary layoff; however, employers should provide reasonable notice based on the employee’s length of service and the circumstances of the layoff. It is important to note that an employer may be required to do these things under a collective agreement or if the employment contract explicitly states to do so.

Employee Rights Under the Employment Standards Act During a Temporary Layoff

During a temporary layoff, an employee retains job security and is entitled to retain their employment status with the right to be recalled to their position once the layoff period ends. Although, employees are generally permitted to seek and accept alternative employment without jeopardizing their right to be recalled by their original employer.

Employees, however, are not entitled to severance pay under the Employment Standards Act as the employment relationship has not been permanently severed, nor are they entitled to employer-paid benefits during such time unless the layoff exceeds a certain duration.

Mitigating Risk and Liability

There are certain steps employees and employers can take to mitigate risk and ensure fairness during temporary layoffs.

Employers

Employers should document the business reasons necessitating the temporary layoff as this can help strengthen their position if the layoff is challenged by the employee(s). It is also important for employers to maintain open and clear communication with the employee(s) regarding the situation and anticipated timeline for employee recall. To further minimize risk of legal liability, it is beneficial for employers to consult with an experienced employment law lawyer who can ensure legislative compliance throughout the process and help employers avoid potential legal disputes.

Employers may also wish to consider alternative cost-saving options before resorting to temporary layoffs, such as implementing temporary reductions in work hours for employees or offering voluntary buyouts or early retirement incentives.

Employees

Employees should educate themselves about temporary layoffs and be familiar with their rights and responsibilities during a temporary layoff under the Employment Standards Act. If an employee has concerns regarding the circumstances of the temporary layoff or wishes to better understand their rights during the layoff period, it is best to consult with an employment law lawyer who can provide comprehensive legal advice regarding the matter.

When Does a Temporary Layoff Become a Termination?

If a temporary layoff extends beyond the prescribed period, it may be deemed a termination, at which point the laid-off employee may become entitled to notice or pay in lieu of notice. The employee may also be eligible for additional entitlements at common law. However, if the employee is recalled to their position within the outlined timeframe, the employment relationship will resume.

Contact the Skilled Employment Lawyers at Tierney Stauffer LLP for Advice on Layoffs

At Tierney Stauffer LLP, our experienced team of employment lawyers are focused on identifying strategic and effective solutions for both employees and employers facing employment disputes. We help parties navigate a variety of employment law matters, including wrongful dismissal claims, severance packages, and employment standards matters. Call us at 1-888-799-8057 or contact us online to schedule a confidential consultation with a member of our team.

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