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.

It’s important to understand the legal requirements surrounding temporary layoffs to ensure you are complying with the Employment Standards Act (ESA) and avoiding any legal issues.

Ontario Temporary Layoff Defined

A temporary layoff is when an employer temporarily cuts back or stops an employee’s work with the intention of bringing them back to work at a later date.

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.

Temporary vs Permanent Layoffs

It’s important to note that a temporary layoff is not the same as a “permanent” layoff – otherwise known 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.

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.

The ESA “Week of Layoff”

Under the ESA, a “week of layoff” is a week where an employee earned less than half of what they would usually earn, or earn on average.

A week of layoff under the ESA does not include any week in which the employee was not working because the employee was not able or available to work, was under disciplinary suspension, or was not provided with work because of strikes or lockouts at their place of employment or elsewhere.

Requirements For Temporary Layoffs in Ontario

There must be a written agreement between the employer and employee in place for a temporary layoff to commence. To avoid liability for constructive dismissal, employers should have well-drafted employment contracts that explicitly permit temporary layoffs.

In Ontario, temporary layoffs are governed by the Employment Standards Act, 2000 (“ESA”). A temporary layoff must not exceed the provisions of the ESA, or it will be deemed 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.

How Long Temporary Layoffs Can Last in Ontario

Temporary layoffs have a range of different timings, depending on different variables. Here are the different timings explained, as stated by the ESA.

1)       Temporary layoffs can last no longer than 13 weeks of layoff in any period of 20 consecutive weeks, or

2)       More than 13 weeks in any period of 20 consecutive weeks, but less than 35 weeks of layoff in any period of 52 consecutive weeks where:

• The employee continues to receive substantial payments from the employer, or
• The employer continues to make payments for employee benefits under a legitimate group or employee insurance plan, or a legitimate retirement or pension plan, or
• The employee receives supplementary unemployment benefits, or
• The employee would be entitled to receive supplementary unemployment benefits but isn’t receiving them because they are employed somewhere else, or
• The employer recalls the employee to work within the time frame approved by the Director of Employment Standards, or
• The employer recalls the employee within the time frame set out in an agreement with an employee who is not represented by a trade union, or

3)       For a period of 35 of more weeks in any period of 52 consecutive weeks where the employer recalls and employee who is represented by a trade union within the time set out in an agreement between the union and the employer

4)       For a period of 35 or more weeks in any period of 52 consecutive weeks but less than 52 weeks in any period of 78 consecutive weeks where:

• The employer recalls an employee within the time set out in an agreement between the employer and employee, and
• The employer received an approval for an extended layoff from the Director of Employment Standards

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