Last updated: Mar. 28, 2021
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By Elizabeth Traynor, Partner – Labour & Employment, Siskinds Law Firm
Leaves, layoffs, and furloughs – what are the differences? What are the risks?
Perhaps you thought that recent whipsawing between two revisions to the Employment Standards Act, 2000 (“ESA”) in one year was confusing. In my humble opinion, that was nothing compared to the deluge of acronyms and information flooding employers in this COVID-19 world. If it feels like things are changing daily (sometimes hourly), you’re not imagining it. Let’s try to sort it out.
Emergency Leave (“EL”) and Infectious Disease Leave (“IDL”) are protected leaves under the ESA. This means employees have all the same protections as individuals on pregnancy/parental leave such as continuing group benefits. To be eligible for EL, Ontario must declare a state of emergency and the employee must be unable to work either because of an order issued in that regard (e.g. is employed in non-essential business which closed down) OR because the employee is required to care for a family member. To be eligible for IDL, the employee must be quarantined, isolated due to illness, exposed/potentially exposed to the virus, caring for a child, etc. The employee must advise the employer that they are taking the leave.
Temporary Layoffs should be used when business slows as a result of the pandemic but EL/IDL are not applicable or the employee does not wish to take the protected leave. The ESA currently provides that a layoff of more than 13 weeks in 20 is deemed to be a termination of employment, unless the employee continues to receive some benefit from the employer (often continuing group benefit coverage), in which case the layoff can last up to 35 weeks in 52. There is speculation that the Ontario government will amend this provision, as other provinces already have done.
Furlough is a term historically used in the United States and the United Kingdom to refer to a temporary layoff. We are now seeing it used sometimes here, including in some government documents.
Canada Emergency Response Benefit (“CERB”) is the federal government’s financial support program for individuals who are not able to earn an income for any reason (EL/IDL, layoff, furlough). More information about this program can be found here.
Canada Emergency Wage Subsidy (“CEWS”) is the federal government’s financial program for organizations suffering a reduction in revenues due to the pandemic. More information can be found here.
Risks?! As a labour lawyer, I am not going to comment on the business/economic risks inherent in this chaotic situation, other than to acknowledge that they exist. However, I can comment on the risks to employers of taking steps to protect the long-term viability of the enterprise by imposing temporary layoffs. Some commentators have opined that because many employment contracts don’t refer to the possibility of temporary layoff, and many employees never contemplated the possibility of being laid off, then a layoff must constitute constructive dismissal as a fundamental change to the employment contract. Under normal circumstances, this is consistent with the caselaw.
However, those commentators seem to have missed the glaringly obvious fact that these are not normal circumstances! Employers and employees almost certainly never contemplated the possibility of a global pandemic shutting down life as we know it, either.
While it will take years to develop a body of case law clarifying the validity (or not) of how employers handle this crisis, I expect that:
- Courts and tribunals will find that most layoffs in the context of COVID-19 were necessary and unavoidable and do not constitute constructive dismissal;
- If employment is deemed to have ended, it will be due to frustration of the employment contract, i.e. through no fault of either party, the contract of employment could no longer be performed. In this analysis, employees would not be able to successfully claim entitlements under the ESA or damages under the common law;
- At the very least, employees will be recalled when the crisis ends and will be required to return to work to mitigate their damages. In the meantime, they will have been obliged to claim CERBs to further mitigate their damages. If they are found to have been constructively dismissed, their damages will be limited to the difference between CERBs and their regular income during the period of layoff.
Note: While I have included the third option as a theoretical possibility, I think it is highly unlikely that Court and tribunals will inflict further pain on organizations already pummeled by the effects of COVID-19.
Lawyers are notoriously uncomfortable when we can’t rely on precedents, case law, or even analogies to determine the “right” answer, so this situation makes us all a bit itchy. However, like our clients, we are doing our best with the information available from day to day, trusting that common sense, careful analysis and goodwill go a long way towards making good decisions.
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Disclaimer: The material above is provided for educational and informational purposes only.