Introduction
Voluntary and involuntary temporary layoffs

Other voluntary measures for employees
Other involuntary measures for employees

Work sharing
Employment termination for non-unionised employees
Employment insurance benefits, records of employment and top-ups
Comment


Introduction

The COVID-19 pandemic has caused disruptions and slowdowns in almost all industries. The situation is fluid and government, business and social responses have and must be dynamic.

This article discusses the options available to employers outside Quebec to manage the unexpected downturns and, if necessary, reduce their labour force (for further details please see "Pandemic planning for employers: responding to coronavirus").(1) All of these options are subject to restrictions in any collective agreement in unionised workplaces and employment agreement in non-unionised workplaces. All options should be carefully considered in light of the potential risks.

Voluntary and involuntary temporary layoffs

Provincial employment standards legislation deals with temporary layoffs. Some have specific requirements, while others are more permissive. For example, Ontario has provisions dealing with temporary leave for up to 35 weeks in a 52-week period (with numerous conditions) and up to 13 weeks in a 20-week period (with significantly fewer conditions). Temporary layoffs that adhere to the statutory provisions will not violate employment standards legislation. If a layoff lasts longer than permitted under employment standards legislation, termination will generally be deemed to have occurred.

Collective agreements typically contain layoff provisions. These provisions will usually apply for unionised employee temporary layoffs and recalls. For non-union employees, an unpaid layoff may be considered a constructive dismissal unless the employer has a contractual right to layoff or that right is implied by past practice.

Other voluntary measures for employees

Employers may be able to utilise voluntary measures accepted by employees, including:

  • voluntary agreements to reduce pay;
  • voluntary agreements to reduce weekly hours or implement rotating shifts (eg, one week on, one week off);
  • voluntary agreements to take an unpaid leave of absence (furlough); and
  • voluntary work-sharing agreements (further discussed below).

All of these voluntary measures should be reduced into written agreements. Employers should consider what, if anything, they may be able to provide employees in exchange for these agreements (eg, compensation).

Other involuntary measures for employees

In addition to temporary layoffs, employers may be able to implement the following measures without employee consent if the change is not substantial:

  • a reduction in pay; and
  • a reduction in hours.

Employers should seek specific legal advice before making any unilateral changes of this nature.

Work sharing

The federal government has a work-sharing programme available for employers and employees. Under the programme, if employers and a specific unit of employees agree, those employees may share the work being performed by reducing their working week by as much as 60%.

Under the programme, if an agreement is in place between these employers and employees and accepted by Service Canada, Service Canada will provide employment insurance benefits to employees to make up all or part of their lost income.

Work-sharing arrangements are subject to:

  • an employer application;
  • agreement from employees;
  • acceptance by Service Canada; and
  • other qualifying criteria.

Reporting requirements also apply. Once issued, work-sharing agreements apply for up to 26 weeks, with the potential for extension. Work-sharing arrangements made as a result of COVID-19 may be extended for up to a maximum of 76 weeks (subject to approval). Otherwise, work-sharing arrangements are typically limited to a maximum of 38 weeks.

Employment termination for non-unionised employees

Employers continue to have the right to terminate employees as a result of economic circumstances. Contractual or common law rights, equal to or in excess of employment standards rights, will apply.

For employees who are entitled to common law notice, the economic impact of COVID-19 may affect a common law notice period. If there is a scarcity of work, this may lengthen a common law notice period as it will in theory take longer for the employee to find alternate work in a downturn.

In some cases, depending on how situations develop, there may be grounds to assert that frustration of employment has occurred, which could end the relationship between the employer and employee and limit the employee's entitlements. These situations are highly specific and fact driven. Before asserting frustration of an employment relationship, employers should obtain specific legal advice.

Employment insurance benefits, records of employment and top-ups

A record of employment is required if an employee:

  • is put on a temporary layoff;
  • is starting a Service Canada-approved work-sharing agreement; or
  • has had their employment terminated.

In many cases, employees may qualify for employment insurance benefits.

Employers may wish to provide employees top-up payments while on layoff or during any period in which they receive employment insurance payments. To ensure that these top-ups are not subject to employment insurance clawbacks or other deductions, it is recommended that employers review the requirements for supplemental unemployment benefits registration with Service Canada.

Comment

Employers have many options available to manage their workforce and plan for temporary or sustained economic downturns. All of the options discussed above may create risks, including circumstances where an employee could allege constructive dismissal and claim termination entitlements.

It is highly advisable for employers to obtain legal advice on their options and an assessment of related risks before taking any steps. In all cases, employers should develop clear communications with employees and update those communications as situations change.

For further information on this topic please contact Marc Rodrigue at Fasken by telephone (+1 416 366 8381) or by email ([email protected]). The Fasken website can be accessed at www.fasken.com.

Endnotes

(1) For more information please see "The Novel Coronavirus: Preparing Employers to Respond".