In uncertain times, many employers look for creative ways to
manage payroll, retain talent and minimize risk. These are
not easy challenges to face.
Some industries, such as the construction industry go through
periodic "cycles" where business slows down. Other
businesses face slow periods between orders, deliveries or
contracts. The question that these employers often ask is:
how do I reduce costs during the slow periods?
One way for employers to reduce employment costs is to make use
of the temporary layoff provisions of the Employment Standards
Act, 2000 (the "Act"). Section 56(2)
of the Act permits an employer to lay an employee off for
a period of "not more than 13 weeks in any period of 20
consecutive weeks" or "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". However, if the layoff
falls under the second part (less than 35 weeks in any period of 52
consecutive weeks), there are several additional requirements that
Lay-offs are an effective tool which employers can use to reduce
employee costs over relatively short periods of time. This
may allow employers to survive a period where there is a shortage
of work, or a period between contracts, client orders or where the
employer needs to retool its manufacturing operations.
A lay-off under the Act is available to any employer
with operations in Ontario (provided the employee is normally
employed in Ontario) that falls within the jurisdiction of the
Act (as opposed to federally regulated employers who are
governed by the Canada Labour Code). An additional
consideration is whether or not the employer is a party to a
collective agreement with a union. If an employer's
workforce is unionized, the terms of the collective agreement will
regulate the availability of layoffs.
Lay-offs do come with risk. Before instituting layoffs, an
employer must review the terms of the employee's employment to
see if a lay-off is permissible. If the terms of employment
do not expressly grant the employer the right to institute layoffs,
there is a significant risk that the employee may allege that the
layoff amounts to a termination of his or her employment and may
seek damages for wrongful dismissal or constructive
A second risk is that the lay-off is not conducted in accordance
with the terms of the Act. If the layoff is not in
compliance with the Act, it will very likely be found to
be a termination of employment or constructive dismissal resulting
in damages owing to the employee.
If you are considering making use of statutory layoffs, it is
highly advisable to include a term in your offers of employment or
employment agreements that expressly permits the use of lay-offs,
and seek advice before doing so.
1 There are cases such as Trites v. Renin Corp.
2013 ONSC 2715 which suggest that an employer can unilaterally and
arbitrarily impose a temporary layoff upon an employee in the
absence of an express or implied term in the contract of employment
to support the employer's action. Nevertheless, the best
and safest practice is to include a layoff provision as a standard
term of an employer's offer of employment or employment
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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