The COVID-19 pandemic continues to have rapid and far-reaching effects on Canadian workplaces.
One of the unfortunate realities facing employers is the state of their businesses and the economy. Everyone is feeling the financial impact and sometimes this results in tough circumstances where there is not enough work available for employees, or segments of a business must be shut down temporarily. This can be a scary thought. What happens then? How can employers notify employees? Do employers have other options?
In this article, we answer those questions for Ontario, British Columbia, Alberta and Quebec. In all cases, please be advised that different considerations may apply under the terms of a collective agreement, if applicable.
Before we effect a layoff, what other options do employers have?
If the concern is about employees being present in the workplace due to a risk of transmitting the COVID-19 virus, or providing flexibility for employees as they handle personal and family matters, one of the first considerations should be to have employees work from home where possible. Depending on an employee's personal circumstances, they may prefer to use this time to voluntarily work a reduced schedule, while using accumulated sick days, personal days or vacation to supplement their income.
If it is necessary to reduce hours, employers should also consider the flexibility inherent in some employment and collective agreements. Consider whether there is an option to reduce hours while not breaching the applicable agreement. For example, if employees are paid hourly and subject to fluctuations in hours of work, is it possible to work within those parameters? This requires assessment on an individualized basis.
New Funding Announced from the Federal Government
The Federal Government announced a coordinated package of measures to support Canadian businesses. Prime Minister Justin Trudeau recently announced further measures to provide support for Canadian businesses facing hardship as a result of COVID-19.
To prevent layoffs, the Federal Government is proposing to provide eligible small employers a temporary wage subsidy for a period of three months. The subsidy will be equal to 10% of remuneration paid during that period, up to a maximum subsidy of $1,375.00 per employee and $25,000.00 per employer.
Businesses will be able to benefit immediately from this support by reducing their remittances of income tax withheld on their employees' remuneration. Employers benefiting from this measure will include corporations eligible for the small business deduction, as well as non-profit organizations and charities.
Tax measures and a program for ensuring access to credit have also been announced.
The Work-Sharing Program
The Work-Sharing (WS) Program, offered through the Federal Government (specifically Service Canada), allows eligible employers to reduce employees' workweeks while employees receive employment insurance (EI) benefits for the days they are not working. It is designed to help employers avoid layoffs when there is a reduction in normal business activity.
The Government of Canada has extended the maximum duration of WS agreements from 38 weeks to 76 weeks for businesses affected by COVID-19. These temporary special measures are effective March 15, 2020 to March 14, 2021.
The employer and the employees (and the union, if applicable) must agree to participate in the WS agreement and apply together. The Government of Canada has waived the standard waiting period so that employers with a recently expired agreement may immediately apply for a new agreement. In any event, the application must be submitted a minimum of 30 days prior to the requested start date. The Government of Canada has also eased the requirements for a recovery plan for the duration of the WS agreement.
Which employers are eligible for temporary special measures?
Employers who have the following are eligible for the temporary special measures:
- WS agreements signed between March 15, 2020 and March 14, 2021;
- WS agreements that began, or ended between March 15, 2020 and March 14, 2021; and
- WS agreements that ended between June 23, 2019 and March 14, 2020 and are in their mandatory cooling off period.
The business must:
- be experiencing a recent decline in business activity of at least 10%;
- be experiencing a recent decline in business activity directly or indirectly related to the impact of COVID-19;
- demonstrate the shortage of work is temporary, beyond its control and not a cyclical/recurring slowdown;
- be a year-round business in Canada for at least two years;
- be a private business, a publicly held company or a not-for-profit organization;
- have at least two employees in the WS unit; and
- be willing to implement a recovery plan to support the ongoing operations and viability of the business.
Which groups of employees are eligible to participate in a WS program?
Employees that are not eligible include:
- seasonal employees and students hired for the summer or a co-op term;
- employees hired on a casual or on-call basis, or through a temporary help agency;
- employees who are needed to help generate work and/or who are essential to the recovery of the business; and
- employees who hold more than 40% of the voting shares in the business.
A WS unit is a group of employees with similar job duties who agree to reduce their hours of work over a specific period of time. The unit generally includes all employees in a single job description. A WS unit must have at least two employees. A WS agreement may include more than one WS unit.
Please refer to the WS Applicant guide for the temporary special measures for more information on how to complete an application, or contact a member of Gowling WLG's Employment, Labour & Equalities Group for assistance.
Record of Employment
A Record of Employment (ROE) must be provided to each employee who will be participating in the WS program. A ROE cannot be issued until the employees have completed their shifts up to the start date of the agreement. The reason for issuing the record should indicate "Code H, Work-Sharing".
Consider Statutory Leaves of Absence
Before an employer considers laying off any employees, it is critically important that they consider whether some or all of their workforce is subject to a form of statutory leave. Statutory leaves provide employees with a job-protected leave of absence, which in some provinces will involve a continuation of benefits during the leave. Employers may not be able to effect a layoff in those cases unless the legislation specifically enables them to.
If an employer is planning a layoff, and employees are subject to a form of statutory leave, employees should first be given the option of commencing an available leave.
Our company may need other options to curtail operations. Can we temporarily lay off workers?
In some circumstances, a temporary layoff may be the best (or only) option. But it requires careful consideration of the risks and context of the decision.
The main risk to employers in effecting a layoff is that, unless there is an express provision allowing a temporary layoff in the applicable employment or collective agreement, there is a possibility that it could be deemed to be a constructive dismissal under the common law. Of course, it is yet to be determined how courts will interpret the scope of an implied right to layoff in the context of the COVID-19 pandemic. It is possible that courts and tribunals will be more lenient when it comes to providing flexibility to employers trying to do their best in the circumstances. Unfortunately, this will be determined only months after the worst of the pandemic is over, and with the ability to consider the issues when the dust is more settled and with the benefit of hindsight.
If the employee is found to have been constructively dismissed, they will be entitled to claim all termination entitlements as if they had been terminated without cause, including possibly common law reasonable notice (subject to their requirement to mitigate their damages).
If effecting a temporary layoff, it is important to first consult with an employment lawyer about the availability and impact of this option.
Do employees receive some form of partial pay during a temporary layoff?
For details regarding employment insurance benefits and other possible options, please refer to our post on employment insurance and other supplemental benefits. It is important not to make any representations to employees about their eligibility for EI benefits.
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