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COVID-19: Employer Lay-off Considerations & Cautions

As Ontario, Canada and the world grapples with the COVID-19 crisis, business owners are having to face ground realities in running their businesses and with respect to their obligations towards their employees Over the past weeks I’ve fielded quite a few calls on the topic of what employer options are – “How can I put off a lay-off scenario?”, “Can I reduce hours temporarily?”, “There’s no other option, how do I conduct a layoff?”

The reality is that although some laws have been amended, and temporary programs have been put in place or expanded, the fundamental employment law – The Employment Standards Act (2000) and it’s other statutes – in Ontario hasn’t changed. What this means is that employers don’t automatically have the right to temporarily lay employees off. This is a shock to many employers and the immediate next questions are “I thought the ESA says I can do a lay-off?” or “So what do I do now?”

While it is true that in certain industries like the construction industry or the forestry (including gardening & plant growing industries), for example, it’s pretty much a given that due to the seasonal nature of work, things slow down, and you lay people off temporarily. But aside from that, unless there’s either an explicit clause/agreement in the employment contract, employers DO NOT have that right to perform a temporary lay-off. If employers DO lay somebody off temporarily, without having the above mentioned clause or an agreement in place, that would be a construed as constructive dismissal or a wrongful dismissal and they would be liable to pay notice & severance costs and potentially damages as well if the employer faces a legal challenge raised by the employee(s).

What other options are available to the employer?
• In an effort to alleviate lay-off situations Employers can consider the Federal Govt. Work-Sharing (WS) program. This is an Employment Insurance (EI) program that helps employers and employees avoid layoffs when there is a temporary decrease in business activity beyond the control of the employer.
• There is also a program to support employers/businesses that are facing revenue losses and to help prevent lay-offs, the government is proposing to provide eligible small business employers with a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375 per employee and $25,000 per employer. (In the week ending March 27th 2020, Prime Minister Justin Trudeau has announced a major increase to the wage subsidy for small and medium sized businesses, boosting it to 75%, up from the 10% previously promised.)
• The federal Govt. has also established a Business Credit Availability Program (BCAP) to provide more than $10 billion of additional support, largely targeted to small and medium-sized businesses, through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC).
• There are also some other options that the federal Govt. has set up that business owners can explore as relevant and applicable.
• From an Ontario Stand point, according to the Ontario Finance Minister’s March 2020 Economic & Fiscal Update, beginning April 1, 2020, penalties and interest will not apply to Ontario’s businesses that miss any filing or remittance deadlines under select provincially administered taxes. This will continue for a period of five months, up until August 31, 2020, under certain provincially administered tax programs. Businesses will not be required to provide any documentation supporting their reasons for late filing or payments and they will not be required to advise the Ontario Ministry of Finance of their inability to meet their deadlines.
• Some employers are trying to be creative with wording – “We’ll pay you until the end of March and then we’ll have to reassess at that time”. I’d advise employers to be very careful with this approach. If you’re sending employees home due to COVID-19 for the self isolation period (employer obligations under OHSA), it could be a paid leave or you can issue an ROE for that period, but employers can’t afford to do that for very long. So, at some point, it becomes an unpaid leave, which essentially is a temporary layoff.

Important Ontario Changes

Ontario’s Employment Standards Act, 2000 was recently amended to include an unpaid, job-protected infectious disease emergency leave. This leave is available to employees who are not performing the duties of their position for certain reasons related to COVID-19, including:

  • personal illness, quarantine or isolation in specified circumstances
  • concern by the employer that the employee may expose other individuals in the workplace to COVID-19
  • to provide care or support to certain family members for a reason related to COVID-19, including school or day care closures.
  • due to certain travel-related restrictions.

The leave is retroactive to January 25, 2020. Employers cannot require employees to provide medical notes to prove they are eligible for the leave.

In addition, Ontario declared an emergency due to COVID-19 on March 17, 2020. During a declared emergency, an employee may have the right to take an unpaid, job protected leave if the employee will not be performing the duties of his or her position because of the emergency and because certain circumstances apply.

I Have No Options Except Conducting a Temporary Layoff
• Ultimately there is the option of a temporary layoff. Assuming that you do have the right to do so as described above, or when the employee agrees, then Ontario’s employment standards legislation (ESA) sets out the parameters for the Temporary Layoff.
• A layoff cannot be more than 13 weeks in any period of 20 consecutive weeks; or 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.
• You may still be able to enact the temp layoff if you have a (documented) agreement with your employees in question to do so. (contact us if you need a template or guidance on this.) Once you have the necessary agreement in place the temporary layoff will have to be operated in accordance with Ontario ESA guidelines.
• These guidelines/rules you’ll need to follow for temp layoff include the option of continuing group benefits (payment of premiums) for the affected employees, for the duration of the temporary layoff (Easiest and most feasible option, IMHO).

Some Tips for Navigating this Scenario & Outcomes
• Talk to your employees in a spirit of collaboration, partnership and forbearance when asking them to agree to temporary layoffs. Its a stressful time for everyone, and its not easy with responsibilities and families that rely on a paycheck to keep the “wheels in motion”.
• I’ve been advising that employers have very frank discussions with employees while asking them to agree to a temporary lay-off. Outline to employees that “considering the unprecedented circumstance we’re in, the company needs everyone’s to pitch in and help alleviate impacts.” If the employee agrees, then of course employers can proceed with the Temporary lay-off.
• Ensure that you have the agreement documented and acknowledged by the employee(s), as outlined above. Again, we encourage our clients to contact us if they need a template or additional guidance on this.
• Depending on circumstances for the respective business, employers can also ask their employees to agree to reductions in hours of work, and in some cases reductions in pay. It goes over a lot better if you can honestly share with your staff the business impacts and that management and owners are taking a hit as well.

What if Employees DO NOT Agree?
Considering the present circumstances that are affecting individuals and businesses, and if the employer approach was as recommended above, I’ve yet to hear of any employee disagreements from our clients thus far. However, if employee(s)do not agree, then the employer has really got three choices.
• Keep things as they are and continue to employ them/pay them.
• Conduct the lay-off or reduce their hours, and take a risk that the employee will bring a constructive dismissal claim against the employer.
• The other option is to explore termination of employment, where the employer will be liable to pay notice and/or severance monies as applicable.

Stay tuned for more, as we continue to work through this crisis, and provide you with relevant updates as they happen. Feel free to reach out to our HR Advisor for additional support or guidance on this and other HR matters affecting your business.