COVID-19 and Temporary Layoffs: What Are Your Risks?

April 7, 2020


There are no shortage of newspaper articles, blogs, etc. commenting on the legality of temporary layoffs.  Many are from law firms.

A number of articles state that a lay off (even during unprecedented times like these) is a construction dismissal or termination.  In my opinion, they do so without adequately addressing the “risks” or “realities” of taking such a legal position.

Let’s start with the law.  Under normal circumstances, a temporary layoff is generally considered a termination unless:

    • the employment contract expressly permits a layoff (meaning there is an actual, valid clause in the contract that gives the employer the right to layoff the employee);
    • layoffs are a well-known industry-wide practice;
    • the employee has been laid off before; or
    • the employee consents to the layoff.

Now, in these unprecedented times (meaning the Covid Pandemic in which many employers were forced to shutdown) it is not clear whether a lay off would trigger a constructive dismissal.  It might. It might not.  We will know someday (probably no less than 6 months to 12 months) in the future – after someone files a legal claim and it works its way through the courts and before a judge.  Until then, it’s a legal position.

Now, let’s assume that the employee takes the legal position that being laid off (because of the Covid virus) is a constructive dismissal.  Let’s assume that they hire a lawyer, and that lawyer sends off a demand letter to the employer.  Let’s also assume that the employer is not in a financial position to take the employee back at this time.  Here is what the employee has probably accomplished:

    • They have engaged a lawyer.  They will pay that lawyer either hourly, a fixed fee, or a contingency (percentage of recovery).
    • They have taken a legal position that, frankly, is not certain.
    • They have probably eliminated any prospect of returning to their job, if the employer is even capable of surviving financially.
    • They may have jeopardized their entitlement to government benefits (you must explore these yourself).
    • They may get the employer to pay something (but how much?) – most likely where the employer can afford it, and where the employer wanted to get rid of the employee anyway.
    • Even if they are 100% correct about a layoff (under these circumstances) being a constructive dismissal (which can only really happen once the court decides on this issue), the employee’s entitlements are determined in the same fashion as if they were terminated without cause.  In other words, there is no special “bonus” or “uptick” in their entitlements because it was a “constructive dismissal”.  It’s still a dismissal.

An employee’s termination entitlements are based on the following:

    • For employees who are provincially regulated, Ontario’s Employment Standards Act, provides for automatic, minimum entitlements.  You get those whether or not you signed an employment agreement.
    • Again, the Employment Standards Act provides for minimum standards.  Your entitlement to anything more depends on whether you have a valid employment agreement.
    • If there is a valid, written employment agreement that expressly “caps” or “limits” your entitlements at a certain amount, then you are entitled to only that amount.  The key here is that the employment agreement cannot stipulate that you will get less than Employment Standards Act.  That would not be a valid contract.  If an employment contract clearly “caps” or “limits” your entitlements to those stated in the Employment Standards Act, then you would only be entitled to the Employment Standards Act minimums.  [Caution: always have a lawyer review your employment contract]. Sometimes an employment agreement will provide for another amount (something more than the Employment Standards Act minimums)
    • Lastly, if you have no written employment agreement (either because one doesn’t physically exist or your lawyer is clever enough to “invalidate” the termination provision in it) then your entitlements are determined by the “common law”.  With few exceptions, the “common law” measure of entitlements is more generous than Employment Standards Act. 

The Takeaway:

It is possible that your layoff is a constructive dismissal.  It is possible that taking this position will work out for you.  But, actions have consequences, and I have set out some potential consequences above.

If you would like to discuss your employment situation with me, I offer free 15 minute phone consultations.

In order to arrange one, please call us at 416.572.9900 or email us at info@ertl-law.ca

Feel free to use our severance calculator to help understand what your potential common law entitlements are.

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