Temporary Layoffs: What Ontario Employers Need to Know

As an employer in Ontario, you may find yourself in a situation where you need to temporarily lay off employees due to unforeseen circumstances, such as a business downturn or a global pandemic. It’s important to understand the legal requirements surrounding temporary layoffs to ensure you are complying with employment standards and avoiding any legal issues. 

What is a temporary layoff? 

A temporary layoff is when an employer temporarily stops an employee’s work with the intention of bringing them back to work at a later date. It’s important to note that a temporary layoff is not the same as a termination of employment. While a termination means the end of the employment relationship, a temporary layoff means the employee is still employed but not currently working. 

What is the difference between a layoff and a temporary layoff? 

A temporary layoff occurs when an employer reduces or stops an employee’s work without ending their employment and with the intention of recalling the employee to work in the near future. In Ontario, a work week is classified as a “week of layoff” when the employee earns less than half of their average weekly wage. An employer might temporarily lay off employees due to lack of work or, as with the coronavirus, due to a government order. 

The goal of a temporary layoff is to respond to the fluctuating workforce needs of a business without constantly terminating and recruiting employees. Temporary layoffs allow businesses to retain already trained and experienced staff without wasting time and money on training new workers. 

Alternatively, if an employee is temporarily laid off for a period longer than the maximum time stated in the employment standards legislation (see below), the employer will be considered to have permanently laid the employee off; this is more commonly referred to as termination of employment. The employee will then usually be entitled to termination pay. 

What are the rules for temporary layoffs in Ontario? 

In Ontario, temporary layoffs are governed by the Employment Standards Act, 2000 (“ESA”). A temporary layoff can last up to 13 weeks within a 20-week period or up to 35 weeks within a 52-week period only in certain circumstances, such as if the employee continues to receive substantial payments or benefits. If a layoff exceeds the maximum time permitted under the ESA, the layoff is deemed to be a termination of employment. 

The ESA does not require employers to provide employees with written notice of a temporary layoff, nor are they required to provide a reason for the layoff. However, employment contracts should always contain a temporary layoff clause. 

Conditions for temporary layoffs 

To legally impose a temporary layoff, there are specific conditions that an employer must meet. These conditions include: 

The right to temporarily lay an employee off must be contained in the employee’s employment contract. 

How long can a temporary layoff last in Ontario? 

The temporary layoff cannot exceed the maximum length of time allowed by the ESA. It’s important to note that if the employer does not meet these conditions, the temporary layoff may be considered a termination of employment, and the employee may be entitled to termination and severance pay, if applicable. 

Although the ESA sets out the basic rules for temporary layoffs, it does not give employers the automatic right to enact them. Employers may temporarily lay off employees only if this is allowed by the employment contract if there is an established custom or practice in the employer’s industry, or if the employer has the employee’s consent, otherwise, employees may consider the temporary layoff to be a constructive dismissal. In this case, the employee will be entitled to termination pay and potentially other damages. An employee will also be entitled to termination pay if they are laid off for longer than the permitted temporary layoff period. 

What notice is required for a temporary layoff in Ontario? 

To avoid liability for constructive dismissal, employers should have well-drafted employment contracts that explicitly permit temporary layoffs. If the employment contract does not permit this, the employer should seek the employee’s consent before laying them off. If the employee does not give consent and the employer has no other choice, the employer should be aware of the risks of doing so. 

Recalling employees to work 

Employees have the right to be recalled to work before the layoff period has ended. Employers recalling workers to work must send a written recall notice that includes the date the worker is required to return to work. Employers must deliver this notice in a method that allows them to know the notice has been received. The onus is on the employer to ensure the employee receives the notice, and to explain that failure to return to work may be considered a resignation. 

 Employees upon receiving the recall notice may choose to:   

• Keep their recall rights and return to work on the date set by the notice, or  
• Decline to return to work and forfeit their termination entitlements (including severance pay, where applicable) 

If the layoff extends beyond the allotted layoff period, employees will be considered terminated and, thus, entitled to termination pay (and severance pay, where applicable).  

Do you need advice on how to navigate temporary layoffs? 

Temporary layoffs can be a necessary measure for employers in Ontario during times of economic uncertainty or other unforeseen circumstances. However, it’s important to understand the legal requirements surrounding temporary layoffs to ensure compliance with employment standards and avoid legal issues. By following the conditions for temporary layoffs as outlined in the ESA, employers can effectively manage temporary layoffs while protecting the rights of their employees. 

Whether you need clarification on how to temporarily lay off employees in Ontario or need help implementing employment contracts with temporary layoff clauses, our HR advisors can help you. Speak to our experts today and get the latest legislation updates and HR advice for your business: 1 (833) 247-3652.