When is a Layoff Really a Termination in Disguise?

BY SIMRAN BAKSHI, ASSOCIATE LAWYER 

There are big differences between the ways the law treats employee layoffs and permanent terminations. 

Although the terms are often used interchangeably when describing employment that has ended, they are not the same thing at all.

A layoff, by definition, is temporary in nature, premised on the mutual understanding that the employee will in due time be recalled to return to work. In contrast, a termination is generally intended to be a permanent end of employment, and requires that the employer provide notice or pay in lieu of notice, where the dismissal occurs without any just or proper cause.

Where an employee has not consented to this arrangement, the attempted layoff may be challenged as actually being a constructive dismissal. That is, the employer may be seen as having fundamentally altered the terms of the parties’ employment agreement, by choosing to no longer actively employ the employee. In such circumstances, the employee may be entitled to treat the employment relationship as having been effectively terminated, and claim notice or pay in lieu of this notice for this termination.

It is therefore a good idea to consult with an employment lawyer if you have been laid off, to determine assess your circumstances and entitlements.An important question to consider then is when is a layoff actually a layoff, and when is it merely a termination in disguise?

Ontario's courts have long held that for an employer to legally lay off any employee, there must be an employment contract with that employee that specifically or implicitly authorizes such a layoff. 

[As a side note, in the 2013 decision of Trites v Renin Corp., the Court suggested that, contrary to this generally-accepted legal principle, there is in fact no formal requirement that an employment contract include any layoff-permitting provisions, so long as the employer otherwise complied with the ESA. This decision does not however appear to have been applied or followed by the Courts thereafter, and in fact was expressly rejected in the more 2016 case of Michalski v Cima Canada Inc.] 

The employer must also fully comply with the layoff provisions set out in the Employment Standards Act. In particular, in accordance with section 56(2) of the ESA:

Temporary lay-off

(2) For the purpose of clause (1) (c), a temporary layoff is, 

(a) a lay-off of not more than 13 weeks in any period of 20 consecutive weeks; 

(b) a lay-off of more than 13 weeks in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks and, 

(i) the employee continues to receive substantial payments from the employer,(ii) the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan,(iii) the employee receives supplementary unemployment benefits,(iv) the employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so,(v) the employer recalls the employee within the time approved by the Director, or(vi) in the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee; or 

(c) in the case of an employee represented by a trade union, a lay-off longer than a lay-off described in clause (b) where the employer recalls the employee within the time set out in an agreement between the employer and the trade union.  

The employer may not be required to provide a specific recall date (unless the employment contract provides for otherwise), but it must strictly adhere to the time frames set out in the ESA. If the employer lays the employee off for a period longer than the period of a temporary lay-off, it will be held to have terminated the employee’s position of employment.

Overall, it is important to appreciate the requirements of a layoff in order to better understand whether the circumstances presenting constitute an actual temporary layoff, or rather reflect a permanent termination of employment.

- Simran Bakshi, Associate Lawyer Toronto

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