This article will examine temporary layoffs in Ontario, the rights provided by the Employment Standards Act (“ESA”), common law (decisions by judges) and answer common questions.

A temporary layoff in Ontario is generally illegal at common law and is considered constructive dismissal entitling the dismissed employee to common law reasonable notice.

Being laid off can refer to a temporary layoff or a permanent layoff. Generally being laid off refers to when an employer reduces or stops an employee’s employment for a period of time.

A temporary layoff is when an employer reduces or stops an employee’s employment for a limited period of time and there is an understanding that the employee will be brought back to work. In most cases a temporary layoff can be treated as a constructive dismissal and entitle you to termination pay.

A permanent layoff is essentially the same as a termination of employment. A permanent layoff would entitle you to common law reasonable notice unless your contract explicitly provides otherwise. This means that you will likely be entitled to a severance package. In the case that your contract restricts the common law reasonable notice period you should still have an Employment Lawyer review it. Often these clauses are found to be invalid due to vagueness and / or breaching the ESA.

Under no circumstances should you attempt to make determinations related to layoffs without retaining an employment lawyer.

In most cases yes you can. However, it is important to recognize that employers have several techniques they can utilize to limit your damages. This article will examine those techniques as well as outline your legal rights.

Most people viewing this article will have been laid off or want to know the answer to their question, what if I get laid off?

There is a process for determining what your rights are from a layoff. Usually these are the first several questions I will ask:

• Are you part of a union? If so refer to the Collective Agreement. We are not able to help you on this matter as your rights will have likely been negotiated by your union.
• What is your Employment Type? Are you an independent contractor, employee or dependent contractor? An independent contractor is not subject to the ESA and as a result an employer can lay them off at will subject to any contract or agreement with them. Note: You probably are not an independent contractor even if you think you are. If you want more clarity on this issue take a look at my article on Independent and Dependent Contractors.
• Do you have an employment contract or agreement which expressly provides that you can be laid off? A correctly drafted clause can entitle an employer to layoff an employee if it meets the minimum requirements provided for by the ESA.
• Have you been laid off previously by your current employer? If you have accepted a layoff previously with this employer, it may be found that layoffs now form part of your employment contract. In this case the employer must only meet the minimum requirements provided by the ESA. If your employer fails to meet these requirements, in most cases you will have been constructively dismissed. This would entitle you to common law reasonable notice which is often for simplicity referred to as a full severance package.
• What is your job / industry? In a very select amount of businesses / industries a layoff is permitted. Typically, these jobs are seasonal in nature.
• How long ago were you laid off? If you wait and do nothing you may be found to have acquiesced to the layoff.
• Have you been recalled into work? This can have a significant affect on the amount of your damages as it will go to the issue of mitigation. A recall is an extremely valuable technique for employers in some circumstances.

There are three factors that determine the Ontario Layoff Rules which are as follows:

• The Employment Standards Act provides your minimum rights as an employee. A contract cannot restrict your rights to less than those of the ESA otherwise it is void or invalid.
• Your Employment Contract: A correctly drafted employment contract can create the right to layoff an employee provided that the clause is clear and provides equal or more rights than the ESA.
• Common Law: The common law refers to decisions made by Judges. The entitlements flowing from common law are available to employees that have not had their layoff rights limited in most cases.

This article will now go through each of these factors and address the legal entitlements provided by each.

The temporary layoff Ontario ESA requirements are outlined in section 56(2) of the ESA. The ESA permits temporary layoffs provided the following:

“(a) a lay-off of not more than 13 weeks in any period of 20 consecutive weeks;

(b) a lay-off of more than 13 weeks in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks and,

(i) the employee continues to receive substantial payments from the employer,

(ii) the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan,

(iii) the employee receives supplementary unemployment benefits,

(iv) the employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so,

(v) the employer recalls the employee within the time approved by the Director, or

(vi) in the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee.”

It is important to remember that the temporary layoff Ontario ESA requirements represent your minimum rights as an employee.

Section 56(1)(c) of the ESA makes it clear that if the layoff exceeds the time frame provided in section 56(2) that it constitutes a termination.

It reads as follows:

(1) “An employer terminates the employment of an employee for purposes of section 54 if,

(c) the employer lays the employee off for a period longer than the period of a temporary lay-off.”

As an employer do not make the mistake of assuming the loss of income will only stem from when termination occurs due to the lay off going beyond the time limits outlined in the ESA. Per section 56(5) of the ESA

“If an employer terminates the employment of an employee under clause (1) (c), the employment shall be deemed to be terminated on the first day of the lay-off.”

The ESA represents employees’ minimum legal entitlements. You can limit an employee’s rights to the minimums provided by the ESA but not less than those rights. If you fail to include a properly drafted layoff clause in your employment contracts employees will usually have the right to claim constructive dismissal. This allows them to seek a full severance package which typically ranges from 3 to 24 months pay.

Employers should take note that the temporary layoff Ontario ESA requirements can be implemented into their employment contracts. A properly drafted employment contract could restrict employee rights in relation to layoffs and termination / severance pay to the minimums provided for by the ESA.

Failing to do so in most cases will allow employees to bring lawsuits based on common law. In employment law, decisions by Judges as opposed to based on contract / statutes tend to be one sided in favour of employees.

The reason common law is so favourable for employees is in part due to the inequality in bargaining power between employers and employees. Judges recognize this and as a result tend to hold employers to high standards in employment disputes.

At common law employers do not have the right to lay off employees. The Ontario Court of Appeal made this clear in their reasoning in Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831 (CanLII) at paragraph 14.

“At common law, an employer has no right to lay off an employee. Absent an agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employee’s employment and would be a constructive dismissal.”

Trites v. Renin Corp, 2013 ONSC 2715 is a decision frequently relied on by employer side lawyers. At paragraph 29, Justice Moore wrote as follows:

“In my view, there is no room remaining at law for a common law claim for a finding of constructive dismissal in circumstances where a temporary layoff has been rolled out in accordance with the terms of the ESA. This said, however, I am not persuaded that the layoff in question in this case qualifies as a temporary layoff under that act.”

The reasoning in Trites runs against a long line of cases and has been expressly disagreed with in subsequent case law. Justice James makes this clear in Michalski v Cima Canada Inc., 2016 ONSC 1925 (CanLII) at paragraph 23 where he wrote as follows:

“The defendant relies on the decision of Moore J. in Trites v Renin Corp.,2013 ONSC 2715  where he says “in my view, there is no room remaining at law for a common law claim for a finding of constructive dismissal in circumstances where a temporary layoff has been rolled out in accordance with the terms of the ESA (paragraph 29). It appears to me that the Trites decision is out of step with the weight of the prior authorities previously referred to. To the extent that the decision of Moore J. in Trites stands for the proposition that the common law conditions precedent to a lawful layoff have been completely displaced by the ESA, I respectfully disagree.”

Despite being consistently disagreed with the Trites decision can be useful in cases where you have an inexperienced employment lawyer or general practitioner representing the employee. This is because they may not be aware of the finer details of employment law.

There is an objective test to determine whether an employee should accept a recall. This test was set out in Gent v. Strone Inc., 2019 ONSC 155 (CanLII) at paragraph 38 where Justice Pollak wrote as follows:

 “Whether a reasonably objective individual in his circumstances would not have concluded that returning to work would be too embarrassing, humiliating, and/or degrading”

The case law has made it clear that if you recall an employee and the objective test outlined in the Gent decision is met that the employee’s damages will be limited to the period from the beginning of the layoff till the end.

At paragraph 27, of Michalski v Cima Canada Inc., 2016 ONSC 1925 (CanLII) Justice James wrote:

“Notwithstanding the finding that the plaintiff was entitled to common law damages in lieu of notice, the calculation of these damages is liable to adjustment on account of a finding that the plaintiff failed to mitigate his damages. In appropriate circumstances, an employee can be required to return to his or her workplace when recalled, even after a constructive dismissal. The key consideration is whether the employee may be exposed to hostility, embarrassment or humiliation upon returning to the workplace, thereby excusing him from the obligation to mitigate the damages he is or will sustain by returning to his former position. The evidence here is that the plaintiff was recalled to work on June 24, 2013. The plaintiff declined to accept this recall, which he was entitled to do, but there is nothing in the evidence that suggests he would have faced embarrassment, hostility or humiliation if he had elected to return to his former workplace to resume his former duties on the same terms as before. Accordingly, my view is that any entitlement to damages at common law ought to terminate with the recall notice, capping the time period at five months or 21.65 weeks (see Evans v. Teamsters, Local 31, (2008), 65 C.C.E.L. 93d) 1 (S.C.C.)”

At paragraph 27, of Bevilacqua v Gracious Living Corporation, 2016 ONSC 4127 (CanLII) Justice E.M. Morgan wrote:

“Gracious Living constructively dismissed Mr. Bevilacqua on September 15, 2014. It offered him his old job back on November 5, 2014, to begin work on December 15, 2014. Mr. Bevilacqua is entitled to pay in lieu of notice for the three months that he would have been out of work had he mitigated his damages by accepting Gracious Living’s offer. Since he kept all of his employment benefits during that time, he is entitled to his salary alone. I leave it to the parties to calculate three months’ pay at the salary that Mr. Bevilacqua was earning in September 2014.”

Some employee side lawyers have argued that because the individual has sued their employer then the objective test cannot be met as the individual would be embarrassed, humiliated etc. This was argued in Gent and Justice Pollak made it clear that while it is a factor it is not determinative. Ultimately, Justice Pollak decided that the recall should have been accepted despite this occurring. At paragraph 51, Justice Pollak wrote:

“Mr. Gent emphasizes that he had already commenced litigation when the recall offer was made. This is a factor that must be considered by the Court in accordance with the jurisprudence I have set out above. That factor is not determinative and does not preclude a finding by this Court that using the objective standard required, Mr. Gent should have accepted, or at least considered Strone’s offer of employment to fulfil his obligation at common law to mitigate his damages incurred by reason of Strone’s wrongful dismissal.”

Recalling an employee where circumstances will meet the objective test could be extremely useful for employers. This is especially useful where an employer has made the mistake of laying off an employee who is older and has been with the company long term. In many cases an individual in that circumstance would be entitled to a severance package of 12-24 months subject to mitigation. 

In Gent, the plaintiff was an employee for 23 years, currently a Health & Safety Training Specialist and was 50 years old at the time of termination. Had he not been recalled Judge Pollak determined he would have been entitled to 18 months notice. Due to the recall Justice Pollak limited the plaintiff’s damages to the 3.5-week period between the layoff and the offer to recall.

Many employers would like to know the answer to how to proceed with laying off an employee in Ontario without being subject to a valid constructive dismissal claim at common law. There are several exceptions which permit or may permit an employer to layoff employees as follows:

• Employment Contract: An express term or clause in an employment contract can permit temporary layoffs provided that it is clear and does not breach the ESA.
• Agreement: An employee may agree in writing to a layoff.
• Acquiescence to Layoff: If an employee has been laid off before by your company then it may be an implied term of your contract. Note: If the layoff relates to Coronavirus its not clear at the time of writing how it will be treated by the Courts.
• Industry: In some industries which are seasonal in nature, layoffs may be legal. Construction is commonly incorrectly assumed to be seasonal in all cases.
• Employment Type: There are 3 types of employment relationships. There are employees, independent contractors, and dependent contractors. An actual independent contractor can be laid off absent a provision in their contract. I would recommend you first review our article on Dependent Contractors and Independent Contractors. After reviewing the article, I would recommend you contact McMackin Law or another employment lawyer to discuss your options.

Employees commonly want to know, “do you get severance if you are laid off.” I usually have to tell them that “it depends.”

If you are treating the employment relationship as being terminated due to a layoff then in some cases, you may be entitled to severance. There is no severance pay for laid off employees who do nothing. In some circumstances a layoff without severance will make sense for both parties as neither party wishes to terminate the employment relationship. In many situations where an employee is going to accept a layoff we will recommend that the employee advise their employer in writing that they are not accepting future layoffs.

Severance is a term under the ESA which provides in simple terms 1 week of pay per year worked as long as you have been with your employer 5 years and the employer has an Ontario payroll in excess of $2.5 million.

In most cases this is not going to be what you want to seek. What you want to seek is known as common law notice or a severance package. Usually this will entitle you to 10’s of thousands of dollars more than severance under the ESA.

Your employer can restrict or limit your right to common law notice and severance packages in numerous ways. The most common way is through a clause in your employment contract. This article also discussed the tactic that employers can use in recalling a laid off employee.

When making decisions regarding severance, severance packages, terminating your employment relationship or claiming for constructive dismissal it is strongly advised you speak with an employment lawyer.

The #1 rule for employees is do not sit and do nothing. Contact an employment lawyer and develop a strategy that works or you.

The reason you cannot do nothing is you may be found to be acquiescing to the layoff. This may create an implied term in your contract allowing your employer to lay you off again in the future. Additionally, it may prevent you from bringing a successful claim for constructive dismissal.

From paragraph 37-39 Justice Wagner in Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 (CanLII) outlines the test for Constructive Dismissal. The relevant part in paragraph 37 is bolded.

“At the first step of the analysis, the court must determine objectively whether a breach has occurred. To do so, it must ascertain whether the employer has unilaterally changed the contract. If an express or an implied term gives the employer the authority to make the change, or if the employee consents to or acquiesces in it, the change is not a unilateral act and therefore will not constitute a breach. If so, it does not amount to constructive dismissal. Moreover, to qualify as a breach, the change must be detrimental to the employee.”

Do not run the risk of losing your rights by sitting and doing nothing. An employment lawyer can help you draft a response to a layoff aimed at protecting your future rights even in the case you decide to accept the layoff.

A temporary layoff at common law can essentially be treated as a termination absent agreement or acquiescence in most cases. However, it is not automatically a termination as you would have to take steps beyond simply being laid off to terminate your employment.

A permanent layoff is essentially a form of termination. There is for all intents and purposes no difference between a permanent layoff and termination.

Being “fired” implies you have lost your job and that you will not be recalled again into work. In the case of a temporary lay off the expectation is that at some point in the future you will be recalled back to work.

All to often we hear upset individuals say, “I got laid off without warning.” These individuals usually ask, “are employers required to give notice of layoff?”

It certainly is not best practice to layoff an employee without providing advanced notice where possible. However, under the ESA employers do not have to provide any advanced notice of a layoff. Additionally, employers do not have to give notice of termination until the last day of the layoff.

Employers often will ask questions like “How much notice before layoff.” The general response to this is going to be almost always as much as possible. A layoff is not a legal right in common law bar specific exceptions. As a result, the employer in many cases will be exposing themselves to a constructive dismissal claim. It could assist the employer in arguing mitigation if notice was provided well in advance of the layoff.

If you need assistance in your layoff severance package negotiation or simply need advice regarding a layoff do not hesitate to contact McMackin Law.