Do non-union employers have the right to implement temporary layoffs?

Employment standards legislation, considered in isolation, appears to provide all employers with the right to implement layoffs for a specified duration, subject to recalling employees, without triggering a termination at law. For example, the Ontario Employment Standards Act, 2000 (the "Act") permits a temporarily lay off of an employee without pay, for up to 13 weeks within a period of 20 consecutive weeks. If the unpaid layoff exceeds that period, it will no longer be deemed “temporary” and the employer will become liable for termination pay, and severance pay, if applicable. In addition, the employer may layoff an employee for up to 35 weeks in a period of 52 consecutive weeks, provided it continues to provide certain benefits including pension, group insurance benefits, or supplementary employment benefits.1 The employment standards legislation in the majority of other Canadian jurisdictions include similar provisions.

However, an employer’s obligations at common law may restrict its ability to implement layoffs, even within the bounds specified by that legislation. A layoff may be found to constitute constructive dismissalthe unilateral and fundamental breach of the employment contract- entitling the employee to treat him or herself as dismissed

When will temporary layoffs be permitted under the common law?

In Stolze v. Addario,2 an employee was laid off temporarily without pay by his employer. The notice of layoff indicated that pursuant to the Act, the appellant’s employment would be considered terminated if the layoff exceeded 35 weeks in a 52 week period. The Court objectively assessed the written communication provided to the employee (rather than relying on the employer’s intentions) and found that the layoff was indefinite rather than temporary. In addition, the court found that “…in the absence of evidence of a policy or practice within the employer company of laying off “key” employees…” the lay-off constituted a constructive dismissal. Evidence of a policy or practice of layoffs, i.e. an express or implied term to layoff, may be necessary to defend a constructive dismissal claim in such instances.

When will a term permitting temporary layoffs be implied into the employment contract?

Where layoffs occur regularly at the same time each year, or where the employee is effectively given notice of an impending layoff, a term permitting layoffs may be implied into the employment contract. That was the case in MacKay v. Intertape Polymer Group3 where a temporary layoff was considered to be an implied term of the employment contract. In MacKay, the plaintiff was familiar with the cyclical nature of the employer's business, and knew that there would be layoffs of employees that were less senior. The employer's handbook included a policy providing that where an employee is not called back to work within 180 days, seniority is lost. Following a layoff with no recall, the employee claimed constructive dismissal. However, the court dismissed his claim on the basis of the provision in the handbook and the fact that the employer's practices were well known, and well communicated to the employee.

Temporary layoffs should not be considered a band-aid solution for weathering a recession or a change in business circumstances, though they may be a solution for companies who have used them in the past in response to regular business cycles, or where expressly contemplated in the employment agreement.