Employers are able to temporarily layoff all or some of their workforce in challenging times, such as when an organization is experiencing financial difficulties. Temporary layoffs can be challenging for both employees and employers to navigate, so it's important to handle them properly.
What is a temporary layoff?
Generally, a layoff is a period when an employer ceases to provide work and (in most cases) compensation to an employee temporarily. Where permitted by relevant employment legislation, the parties treat the employment relationship as ongoing, despite this interruption of work and/or compensation, with the understanding that work and compensation may resume in the future.
The definition of layoff differs by jurisdiction. In Ontario, a layoff week is a week where the employee earns less than one half of the amount that they would earn at their regular rate in a regular week or their average earnings for the period of 12 consecutive weeks prior to the layoff period.
According to applicable employment standards legislation, employers may have the obligation to provide notice of the temporary layoff. It is best to provide written notice of the temporary layoff and outline the effective date and the expected length of the layoff. We recommend clearly outlining the recall process and methods of communication between the employee and employer during the layoff period.
How long can a temporary layoff last?
In regular times, temporary layoffs are just that – temporary. If they exceed the statutory limit, then an employer will generally be deemed to have terminated an employee’s employment (unless an exception applies) and would be required to proceed with termination and the associated compensation. In Ontario, temporary layoffs cannot exceed (a) 13 weeks in any period of 20 consecutive weeks, or (b) more than 13 weeks in any period of 20 consecutive weeks but less than 35 weeks in any period of 52 weeks where:
the employee continues to receive substantial payments from the employer, or
the employer continues to make payments for benefits or a legitimate retirement or pension plan, or
the employee receives supplementary unemployment benefits (EI), or
the employee would be entitled to supplementary unemployment benefits but isn’t receiving them because they are employed elsewhere, or
the employer recalls the employee within a time frame approved by the director of employment standards or as set out in an agreement with an employee not represented by a trade union, or where the employee is represented, as set out in an agreement with the trade union.
Is advanced notice required before a temporary layoff?
In BC, Ontario and Quebec there are no advance statutory notice requirements before an employee can be placed on a temporary layoff.
Do employers pay employees while on temporary layoff?
Subject to an employment agreement, policy or collective agreement that says otherwise, layoff periods are generally unpaid. However, in some cases, employees may qualify for employment insurance.
Employees may also, on a voluntary basis, use their vacation time during a period of a temporary layoff to continue to receive pay.
Are employers required to continue benefit or pension contributions during a layoff?
This depends on the terms of employment, including applicable employment contracts, collective agreements, employer policies, and third-party plans. In most cases though, absent contractual terms to the contrary, employers are not required by statute to continue benefits or pension plan contributions during temporary layoffs.
What else should employers know?
Employers are encouraged to provide timely, transparent, and ongoing communications to their employees in respect of any temporary layoffs, including with respect to any anticipated recall dates or extensions to the layoff period. To that end, employers will want to ensure that they have up to date contact information for each affected employee so that communications are effective.
A record of employment (ROE) must be issued for each of the employees that are on a temporary layoff. Information about completing ROEs can be found here.
Have more questions about temporary layoffs and your particular situation? Book a discovery call to discuss further.