We are still feeling the effects of COVID-19. On top of that,
inflation is rising and interest rates are up. Faced with these
challenges, some employers have started to announce
This resource discusses the non-COVID-19 options available to
employers to manage the unexpected downturns and, if necessary, to
reduce their labour force. All of these options are subject to
restrictions in any collective agreement in unionized workplaces,
and in any employment agreement in non-unionized workplaces. All
options should be considered carefully in light of potential risks
Voluntary and Involuntary Temporary Layoffs
Provincial employment standards legislation has provisions
dealing with situations of temporary lay-offs. Some have specific
requirements. Others are more permissive. Ontario, for example, has
provisions dealing with temporary leaves up to 35 weeks in a 52
week period (with a number of conditions) and up to 13 weeks in a
20 week period (with significantly fewer conditions). Temporary
layoffs that adhere to the statutory provisions will not violate
employment standards legislation. Generally, if a layoff lasts
longer than permitted under employment standards legislation,
termination of employment will be deemed to have occurred.
Collective agreements typically contain layoff provisions. These
provisions will generally apply for unionized employee temporary
layoffs and recalls. For non-union employees, an unpaid layoff may
be considered to be a constructive dismissal unless the employer
has a contractual right to layoff or that right is implied by past
Other Voluntary Measures for Employees
Employers may be assisted by voluntary measures accepted by
employees. These can include:
- a voluntary agreement to reduce pay;
- a voluntary agreement to reduce weekly hours, or implementation
of rotating shifts (e.g., one week on, one week off, etc.);
- a voluntary agreement to take an unpaid leave of absence
- a voluntary work sharing agreement (see below for more
- a voluntary separation agreement.
All of these voluntary measures should be reduced into written
agreements. Employers should consider what, if anything, they may
be able to provide employees in exchange for these agreements (e.g.
Other Involuntary Measures for Employees (Short of
In addition to a temporary layoff, employers may have the
following measures at their disposal, without employee consent if
the change is not substantial:
- a reduction in pay; and
- a reduction in hours.
Employers should seek specific legal advice before making any
unilateral changes of this nature.
The federal government has a work sharing program available for
employers and employees. Under the program, if employers and a
specific unit of employees agree, those employees may
“share” the work being performed by reducing each
employee’s work week by as much as 60%.
Under the program, if an agreement is in place between these
employers and employees and accepted by Service Canada, Service
Canada will provide employment insurance benefits to employees to
make up some or all of their lost income.
Work sharing arrangements are subject to an employer
application, agreement from employees, acceptance by Service Canada
and other qualifying criteria. There are also reporting
Termination of Employment (Non-Unionized Employees)
Employers continue to have the right to terminate employees’
employment as a result of economic circumstances. Contractual or
common law rights, equal to or in excess of employment standards
rights, will apply.
For employees who are entitled to common law notice, the
economic environment may impact the common law notice period. If
there is a scarcity of work, this may, in particular, have the
impact of lengthening the common law notice period – the theory
being that it will take longer for the employee to find alternate
work in a downturn.
Employment Insurance Benefits, ROEs and Top Ups
If an employee is put on a temporary layoff, is starting a
Service Canada-approved work sharing agreement, or has their
employment terminated, a Record of Employment (ROE) is required. In
many cases, employees may qualify for employment insurance
Employers may wish to provide employees top up payments while on
layoff or during any period they are receiving employment insurance
payments. To ensure these top-ups are not subject to employment
insurance claw backs or other deductions, it is recommended that
the employer review requirements for supplemental unemployment
benefits (“SUB”) registration with Service Canada and
apply to register their SUB.
Employers have many options available to manage their workforce
and plan for temporary or sustained economic downturns. The options
set out above may create circumstances where an employee can, and
may, allege constructive dismissal and claim termination
entitlements, among other risks.
It is highly advisable for employers to obtain legal advice on
their options, and an assessment of related risks before taking any
steps. In all cases, it is advisable for employers to develop clear
communications to employees, and to update those communications as
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.