Thousands of small businesses in Ontario may be inadvertently breaking the law when they lay off their employees due to COVID-19 slowdowns or closures, according to an employment expert.
Toronto employment lawyer Stuart Rudner told the Star that many businesses don’t have the right to lay their employees off, and he thinks there may be a wave of wrongful dismissal lawsuits in the coming weeks or months.
“People don’t realize what they’re doing at this point,” he said.
Most provinces, including Ontario, Alberta, British Columbia and Quebec, have laws that allow temporary layoffs, meaning businesses can lay off their employees without paying them severance, but only for a certain period of time — and only if there’s a layoff clause in their employment contract.
The time limit varies by province: In Ontario, it’s 13 weeks, or in some cases up to 35 if the employer continues to pay their employees’ benefits, Rudner said. If the employee still can’t return to work after that time has passed, they have been effectively terminated and are owed severance pay.
“A lot of people are doing (temporary layoffs),” he said. “They’re just saying, ‘Well, go home. We can’t pay you, but we’ll bring you back as soon as we can.”
Unionized companies usually have such provisions written into employment contracts as a matter of course, and large corporations are more likely to have them than smaller companies, Rudner said. In certain industries, such as construction, these types of layoffs are common.
But Rudner said that a lot of smaller employers will not have layoff provisions in employment contracts and in those situations, even a short “temporary layoff” would be legally interpreted as a termination, meaning that severance must be paid.
If it isn’t, an employee could sue for breach of contract or wrongful dismissal, he said.
Rudner said many of his firm’s clients are facing this dilemma right now. “I feel like we’re talking about this 23 hours a day.”
There is a way out for employers, but it means relying on the goodwill of their employees.
“What a lot of them are doing is they’re going to the employees and having a very candid conversation, and saying … ‘If you’re willing to accept a temporary layoff, then we’ll do whatever we can to help you.’ ”
In such cases, the employer should ask the employee to sign a document indicating their agreement to being laid off temporarily, Rudner said. If the agreement is in their contract or a separate document that is signed before the layoff, the employer is in the clear.
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For employees going through temporary layoffs, Rudner said you should always check your contract after being laid off to see if it provides for the situation. If it doesn’t, the employee has the right to deny the layoff, or to escalate the situation to the courts, he said.
After 13 weeks have passed in Ontario (or the period allowed in other provinces), Rudner suspects there will be more lawsuits from employees who were temporarily laid off and whose former employers cannot afford to pay them severance.
Rudner said thousands of businesses across Canada are “stuck between a rock and a hard place,” which is why it’s important for owners to work through all scenarios now, and to properly understand what their legal obligations are.
“A lot of our clients are … really struggling. They just don’t know what they’re supposed to do.”