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Addressing temporary layoffs

Considerations for in-house counsel in managing the impact of COVID-19

Closed due to coronavirus

Covid-19 presents challenges that, as a whole, the Canadian economy has not had to address in over a century.

It’s still unclear how long the lockdown will continue. But economic activity will return, and when it does, most sectors will have to respond to accelerating consumer demand.

In coping with the immediate impact of the current downturn, businesses must nevertheless keep an eye on the future, especially when it comes to managing employees, events of default, and supply chains.

Employment standards legislation allows for temporary layoffs and provides minimum severance payments. But a temporary layoff in common law is equivalent to dismissal. That means there is always a risk of an action for inadequate notice or pay in lieu.

Legal departments must ask themselves a few questions.

  • Is there an employment contract or collective agreement in place? And what’s the protocol to follow in case of layoff.
  • Are layoffs common in your industry?
  • What is the business risk of employees not returning at the end of the layoff (especially if they are highly skilled)?
  • Is your business essential according to provincial emergency declarations? Layoffs may not be necessary.
  • Have you considered work-sharing (one week on, one off with EI benefits)?
  • How much notice would you need to give under statutory law?
  • Do you need to give notice of mass termination, and if so, how long is the notice?
  • Do you have mental health supports for the people being laid off? With social distancing enforced, regular social networks are not available. Domestic violence and mental health issues can rise in addition to the pressure of loss of income.
  • How much banked overtime do you have to pay out?
  • Do you have to pay out earned vacation pay?

In the case of termination of a large number of employees, some provinces (Manitoba, Nova Scotia, New Brunswick), and the law isn’t always clear on exceptions due to an epidemic. The rules governing temporary vary from one province to the other, but they cannot exceed a specific period.

An employer must be mindful of acting in a non-discriminatory fashion. Be careful in deciding to lay off one group of workers if that group is not representative of your workforce as a whole -- part-time workers if they are mostly women, for example, if your full-time workforce is predominantly male.

Finally, if workers are on sick leave or absent to look after family members or under quarantine or self-isolation orders, you may have a duty to accommodate.