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Layoffs and Work Sharing

Your relationship with your Ontario Employees is governed by the Employment Standards Act (“ESA”) and the Common Law.

The ESA allows you to temporarily layoff employees, and to enter work sharing agreements. However, this is subject to some ESA and Common Law restrictions, which I will discuss below.

If your business is federally regulated, then it is governed by the Canada Labour Code (“CLC”) for employment purposes, but the same common law rules apply. I will explain the differences for CLC workplaces below.

 

The Meaning of “Temporary Layoff” Under the ESA:

An employee is on temporary layoff when an employer temporarily cuts back or stops the employee’s work (e.g. laying someone off at times when there is not enough work to do), with the understanding that the employee will be recalled within a certain period of time.

The mere fact that the employer does not specify a recall date when laying the employee off does not necessarily mean that the layoff is not temporary.

Should the layoff exceed the maximum period of time allowed under the ESA, it will transform into a termination at law.

For the purposes of the termination provisions of the ESA, a “week of layoff” is a week in which the employee earns less than half of what he or she would ordinarily earn (or earns on average) in a week.

A week of layoff does not include any week in which the employee did not work for one or more days because the employee was not able or available to work, was subject to disciplinary suspension, or was not provided with work because of a strike or lockout at his or her place of employment or elsewhere.

 

Under the ESA, a “Temporary Layoff” can Last:

  1. not more than 13 weeks of layoff in any period of 20 consecutive weeks;
    or
  2. more than 13 weeks in any period of 20 consecutive weeks, but less than 35 weeks of layoff in any period of 52 consecutive weeks, where:
    • the employee continues to receive substantial payments from the employer;
      or
    • the employer continues to make payments for the benefit of the employee under a legitimate group or employee insurance plan (such as a medical or drug insurance plan) or a legitimate retirement or pension plan;
      or
    • the employee receives supplementary unemployment benefits;
      or
    • the employee would be entitled to receive supplementary unemployment benefits but isn’t receiving them because he or she is employed elsewhere;
      or
    • the employer recalls the employee to work within the time frame approved by the Director of Employment Standards;
      or
    • the employer recalls the employee within the time frame set out in an agreement with an employee who is not represented by a trade union;
      or
  3. a layoff longer than a layoff described in ‘b’ where the employer recalls an employee who is represented by a trade union within the time set out in an agreement between the union and the employer.

 

Benefits and Pension Contributions:

An employer is not required to continue benefits unless it intends to extend the duration of the layoff past the initial 13-week period described above. In such a case, the employee must agree in writing to these payments in lieu of a firm limit on the length of the layoff.

 

Written Notice and Temporary Layoff:

Employers are not required under the ESA to provide employees with a written notice of a temporary layoff, nor do they have to provide a reason for the layoff. They may, however, be required to do these things under a collective agreement or an employment contract. However, there must be clear communication to the effect that it is intended to be temporary and in compliance with the ESA.

 

Deemed Termination if ESA Layoff Period Exceeded:

If an employee is laid off for a period longer than a temporary layoff as set out above, the employer is considered to have terminated the employee’s employment. Generally, the employee will then be entitled to ESA pay in lieu of notice, ESA Severance if the annual payroll is greater than 2.5m dollars and the employee’s length of service is greater than five years, and Common Law pay in lieu of reasonable notice (unless they have signed an employment contract waiving their right to reasonable notice).

 

Temporary Layoffs Under the Canada Labour Code:

For federally regulated employers and employees under the Canada Labour Code, the maximum duration of a layoff is three months. This may be extended in the following circumstances:

  1. the layoff is a result of a strike or lockout;
  2. at or before the time of the layoff, the employer provides written notice of a time no more than six months in the future on which the layoff will end, and the employer recalls the employee to their employment in accordance with that notice;
  3. the employee continues during the term of the layoff to receive payments from the employer in an amount agreed on by the employee and the employer;
  4. the employer continues to make payments for the benefit of the employee to a pension plan that is registered pursuant to the Pension Benefits Standards Act or under a group or employee insurance plan;
  5. the employee receives supplementary unemployment benefits;
  6. the employee would be entitled to supplementary unemployment benefits but is disqualified from receiving them pursuant to the Employment Insurance Act; or
  7. for unionized workers:
    • the term of the layoff is 12 months or less and the layoff is mandatory pursuant to a minimum work guarantee in a collective agreement; or
    • the term of the layoff is more than three months but not more than 12 months and the employee, throughout the term of the layoff, maintains recall rights pursuant to a collective agreement.

In most of these circumstances, the employee may be recalled to work for any period less than two weeks without affecting the duration of the layoff.

Employers are not required to provide advance notice or written notice of the layoff (except for the six-month layoff described in section (b) above). However, providing notice in writing is always a good idea to avoid misunderstandings and future disputes.

Similar to layoffs under the ESA, the employer is not required to continue benefits during a Canada Labour Code layoff unless it intends to extend the duration of the layoff under section (d) above.

Under the CLC, the employee’s statutory entitlements upon termination are different than under the ESA, but the same principle applies: an improper layoff may be treated as a termination even if intended to be temporary, in which case the employer will be required to pay the CLC minimums as well as common law reasonable notice (depending on the terms of the employment contract).

 

Restrictions on Employers’ Rights to use Temporary Layoff:

A layoff, even if intended to be temporary, may result in constructive dismissal claims, unless:

  1. There is an enforceable employment contract that specifically allows for temporary layoffs;
  2. Temporary layoffs are standard in the employer’s industry; or
  3. The employee agrees freely to be laid off (in which case, the agreement should be set out in writing, and the employee should be provided with some compensation to make the agreement binding).

While an employee can treat a temporary layoff as tantamount to an immediate termination of employment, giving rise to a claim for severance, this approach would be risky for the employee in the context of the COVID-19 outbreak and given the current economic situation and government restrictions affecting operations. The COVID-19 outbreak is unprecedented, and the law may imply an employer has the right to implement a temporary layoff as a health and safety measure or because of work shortages which arise in these unique circumstances. We suggest that this discussion be held in response to any employee claims, if and when they arise.

 

Benefit Amount:

The maximum amount payable for EI benefits is 55% of the employee’s average insurable earnings up to a maximum of $573.00 per week.

 

Work Sharing Program:

Where employers seek to avoid layoffs and there is a temporary reduction in the normal level of business activity that is beyond the employer’s control, Service Canada allows the employees to receive income support provided certain conditions are complied with. In particular, a work sharing agreement must be entered between the employer, the employees, and Service Canada. The minimum duration of the work-sharing program is 6 weeks and the maximum duration is 76 weeks.

Employers are eligible to apply for the Federal Work-Sharing Program if they have been in business in Canada year-round for at least one year, they are able to demonstrate that the shortage of work is temporary and beyond their control and they can demonstrate a recent decrease in business activity of approximately 10%.

The program requires a minimum of two employees. The employees must be “core employees” and must be eligible to receive EI benefits. The employees must agree to a reduction of their normal working hours to share the available work.

There is a process involved whereby application is made to Service Canada. For more details, click HERE to be redirected to the Government of Canada website.

 

Canada Emergency Response Benefit (CERB)

The federal government has combined its two previously announced emergency income relief programs into one, now named the Canada Emergency Response Benefit (CERB).

To qualify, an applicant must be at least 15 years old and have earned at least $5,000 in income in 2019 or in the 12 months preceding their CERB application. This includes income from self-employment. The application will be processed in four-week periods. Within each four-week period the worker must be without work and income for 14 consecutive days for reasons related to COVID-19. It appears then that an employee could work a two weeks on, two weeks off schedule and still qualify. In addition, statute allows the government to make exceptions to the “no income” rule using regulations. No such regulations have been announced yet, but it is possible that they will be enacted between now and when the application process is expected to come online on April 6, 2020. Workers are not eligible if they quit their employment voluntarily. Applications must be filed by December 2, 2020.

The application schedule for the CERB is based on the month of birth of the applicant. Those born between January and March can apply on April 6; those born between April and June can apply on April 7; those born between July and September can apply on April 8; and those born between October and December can apply on April 9.

The most that a worker may receive is a maximum of 16 weeks of benefits at a maximum rate of $2,000 per month. These benefits will be paid out weekly at a rate of $500.00 per week.

A worker is not allowed to receive the CERB and EI at the same time. However, a worker who’s already receiving EI may receive the CERB if their EI runs out before October 3, 2020 and they’re not back to work by that time. A worker who receives the CERB first may receive EI if they’re not back to work by the time the CERB runs out, provided they qualify for EI at that time.

For workers who were laid off due to COVID-19 prior to April 6, 2020, and are in receipt of EI, the government has confirmed that these claims will be automatically transferred into the CERB. Therefore, there is no need to reapply for the month of April.

Workers who have applied for EI on or after March 15, 2020 will automatically receive the CERB, regardless of whether they qualify to receive EI. If a worker was already receiving EI prior to March 15, 2020, they can continue to receive those benefits and elect to receive CERB once those benefits cease.

Eligibility periods are fixed in 4-week cycles. If your situation continues, you can re-apply for CERB for multiple 4-week periods, to a maximum of 16 weeks (4 periods). Below is a breakdown of the 4-week cycles

More details should be available as the CERB application process is implemented and refined.

 

Records of Employment

During a temporary layoff, and if a work sharing program is in place, employees are eligible to receive employment insurance provided that a Record of Employment “ROE” has been filed.

The following details how to complete the ROE:

CODE A Shortage of Work (Layoff) When you are laying off employees due to a shortage of work or a temporary business closure.
CODE D Illness or Injury When an employee is absent due to illness, quarantine, or ordered self-isolation.
CODE E Quit When an employee quits their job, or refuses to come into work.
CODE H Work-Sharing When you have received approval to participate in the work-sharing program and the employee needs to apply for benefits.
CODE N Leave of absence Can be used if an employee is unable to work; for example, schools and day cares are closed and so they must stay home with a child.

DO NOT put any comments in the comments box on the ROE; this will slow down processing as the ROE will need to be reviewed manually.

 

Recommendations:

  • Consider continuing benefits during the layoff period. While this is not required in the initial layoff, it will allow you to avail yourself of the longer layoff period if required, and create an argument that the employees are being provided consideration for agreeing to the layoff and that it does not constitute an event of dismissal;
  • Provide a letter to the employees stating something similar to the following:
Unfortunately, all of us are suffering the unexpected consequences of the coronavirus. The impact on our business includes restrictions on the number of personnel who can be present within the premises, absences due to illness and quarantine requirements, and a dramatic reduction in business due to the economic impact.

Our objective is to keep all of our employees safe, and to do everything we can to ensure the long-term viability of our business. In order to achieve these objectives, we will have to implement temporary layoffs of many employees, in accordance with the provisions of the Ontario Employment Standards Act (“ESA”).

Accordingly, you will commence a temporary layoff from your job effective the insert day of insert, 2020. It is our intention to recall you to your employment within the time period prescribed by the ESA.

We are not required to continue your benefits during this layoff, however we are prepared to do so provided you agree to the layoff, that it is reasonable and necessary in the circumstances, and that you do not consider it to be a termination of your employment. If you are agreeable, please sign where indicated below.

You will be provided with a Record of Employment, so that you may avail yourself of the Employment Insurance offered through Service Canada.

You will receive written notice from us when you are to be recalled to your employment.

  • If you are reducing hours and not terminating employment, immediately pursue a work sharing approval with Service Canada. Any reduction in base salary should be proportionate to the reduction in working hours. You will need to have the affected staff agree to the arrangement, and your administrative staff can pursue the communication with Service Canada to obtain approval, and to confirm whether, if you implement the arrangement immediately, it can be retroactively approved by Service Canada.

 

Business Interruption Insurance

Communicate with your commercial insurance provider and review your insurance policy to determine whether you are entitled to business interruption payments.

 

Communicate with your Employees

You should provide your employees with written policies and procedures addressing workplace operations and health and safety guidelines specific to the virus.

 

Employee Eligibility for EI while Quarantined

Employees who are quarantined or who are ordered to self-isolate due to COVID-19 are eligible for EI sick benefits. The one week waiting period for EI sickness benefits will be waived for new claimants who are quarantined so they can be paid for the first week of their claim. There is priority EI application processing for EI sickness claims for employees under quarantine. Employees claiming EI sick benefits due to quarantine do not have to provide a medical certificate. Employees who cannot complete their claim for EI sick benefits due to quarantine may apply later and have their EI claim backdated to cover the period of delay. Service Canada services can be accessed by calling 1-800-0-Canada.

 

Employees Working at Home Because Schools and Daycares are Closed

If working from home is an option, it should be considered for your employees. If it is not possible, they may be asked if they want to take their vacation. If they do not wish to take their vacation, then they will need to file a ROE using either Code E for Quit, or Code N for Leave of Absence. Unpaid leaves of absence are available under the provisions of the Employment Standards Act. It is not recommended that Code K, or putting any comments in the comment box, are used because that will slow the processing time of the ROE.

 

Childcare Needs

Human Rights Law requires that employers accommodate the childcare needs of employees. Employers and employees must also work together to determine if there are other arrangements for childcare that can be implemented or any other adjustments to the role, such as different hours of work so that a spouse or other family member can care for the children while the employee is attending work. If there are no other reasonable options available, then the employee is entitled to unpaid time off to stay home to watch their children. The Employment Standards Act entitles the employee to unpaid leave.

 

Workplace Health and Safety Obligations

The Occupational Health and Safety Act requires employers to provide a safe workplace for their employees. This includes ensuring that preventative measures are in place which could include:

  • ensuring that hand washing facilities are available;
  • encouraging employees to encourage good hygiene and providing written explanation of hand washing and social distancing recommendations;
  • having safety products available (hand sanitizer, disinfecting wipes, etc.);
  • ensuring employees are aware of the symptoms and risks of the virus;
  • holding health and safety meetings with employees and/or their representative to review the health policies;
  • permitting employees to work remotely where possible;
  • providing disinfecting wipes and encouraging disinfecting of door handles, computer keyboards, telephones, etc.

 

Employee’s Right to Refuse Unsafe Work

Under the Occupational Health and Safety Act, employees have a right to refuse work if they have reasonable grounds to believe it is dangerous to their health or safety. Employees also have a duty to report dangerous situations to their supervisor, and the employer has a duty to take remedial action by having the workplace health and safety committee and/or representative investigate. The Government Health and Safety Officer may also need to investigate. If an employee refuses to work, the employer may choose to reassign the work, and the employee may be entitled to receive wages and benefits. Legal advice should be obtained in these circumstances.

 

Questions that an Employer can Ask an Employee Related to COVID-19

Employers have a duty to ensure that the workplace is safe. They are entitled to ask questions designed to determine if an employee poses a threat to health and safety. These questions could include:

  • Is the employee exhibiting symptoms of COVID-19?
  • Was the employee in close personal contact with anyone who has exhibited symptoms of COVID-19?
  • Was the employee in the same physical vicinity with anyone who is confirmed to have COVID-19 within the last several weeks?
  • Has the employee travelled to an affected area where there was a COVID-19 outbreak?
  • Was the employee in close personal contact with anyone who recently travelled to an area with a COVID-19 outbreak?

The employee cannot be fired if they answer yes to any of these questions, however they can be asked to immediately leave the workplace and not to return until such time as they have complied with the Public Health and Safety Guidelines that ensure that there is no risk that they will infect other workers.

 

Employee Emergency Leave: Declared Emergencies and Infectious Disease Emergencies

The Ontario legislature has passed Bill 186 – The Employment Standards Amendment Act (Infectious Disease Emergencies), 2020, to amend the leave of absence provision under the ESA. These amendments repeal a pre-existing Declared Emergency Leave provisions and replaces it with a leave called “Emergency Leave: Declared Emergencies and Infectious Disease Emergencies”. These amendments are retroactive to January 25, 2020.

The declared emergency leave is unpaid and will be available for the duration of the declared emergency, and it is available only for “designated infectious diseases” which included COVID-19. A leave is available if the employee cannot perform their job duties as a result of being under medical investigation, supervision, treatment, quarantine, or caring for a designated family member, unable to return to Ontario as a result of travel restrictions, or for any other reason that may be prescribed by regulation. Note that other sections of the ESA also provide job protection for statutory leaves of absence and these continue to apply equally to these emergency leaves.

 

Federal Government Wage Subsidy

The federal government has announced but not yet implemented a wage subsidy. It will be available to businesses of all sizes as well as charities and non-profits, as long as they have suffered a revenue reduction of at least 30%, as compared to the same month in the previous year, because of COVID-19. The subsidy will cover up to 75% of the first $58,700 of salary per employee. Employers must reapply each month. It is not yet clear how this will be implemented, what evidence will be required, or how the 30% revenue loss will be calculated. Employers should keep paying attention to the news as further details are announced.

 

If you have any questions or if you require assistance with issues related to matters covered in this post, please contact our office.

Dana Tierney, Partner

*This post has been written in collaboration with other members of our legal team.

Disclaimer: This article is provided as an information resource. This article should not be relied upon to make decisions and is not intended to replace advice from a qualified legal professional. In all cases, contact your legal professional for advice on any matter referenced in this document before making decisions. Any use of this document does not constitute a lawyer-client relationship. Please note that this information is current only to the date of posting. The law is constantly changing and always evolving.

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