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A temporary layoff occurs when an employer stops giving an employee work and (usually) pay for a limited period of time. The employer files a Record of Employment and the employee is permitted to apply for Employment Insurance. At the end of the layoff period, the employee is recalled and returns to work with their years of service and all other terms of employment intact.

The parameters of temporary layoffs are set out under both the provincial Employment Standards Act and the federal Canada Labour Code. However, a temporary layoff is treated as equivalent to a permanent dismissal by the Court unless:

  1. There is an enforceable employment contract that specifically allows for temporary layoffs;
  2. Temporary layoffs are a 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 one-time compensation to make the agreement binding).

If none of these conditions are met, the layoff will effectively be a termination and the employer will be required to provide compensation equivalent to what would be due on an outright termination. (The specifics of this compensation will vary depending on the circumstances of each employee and on the contents of the employment contract.) This is the case regardless of whether the layoff otherwise complies with the ESA or the CLC.

The duration of the permitted layoff is different under each statute:

  1. The maximum duration for provincially regulated employees is 13 weeks in a 20-week period.
  2. The maximum duration for federally regulated employees is three months.

Both statutes have exceptions allowing for longer temporary layoffs if certain additional conditions are met. For example, both statutes have longer time limits if the employer tops up the employment insurance received by the employee during the layoff under a supplementary employment benefit program registered with Service Canada.

We recommend any employer considering a layoff obtain individual legal advice before instituting anything. We also recommend that an employee facing a layoff contact a lawyer for advice immediately and prior to signing any proposed agreement.

Please do not hesitate to contact me for more information on topics covered in this post.

Nigel McCready

Associate – Employment Law Group

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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