Temporary Lay Offs, in Many Cases, are Illegal

Given the ongoing challenges in today’s economic climate, employees are at greater risk of being placed on a temporary layoff from work. A temporary layoff occurs when an employer cuts back or ceases an employee’s working hours with the understanding that the employee will be recalled within a certain period of time. While the concept of a temporary layoff may be appealing to an employer who is experiencing a decline in business, it is important to be aware that most layoffs (temporary and permanent) will constitute a termination, and bring about all of the same associated costs and consequences of termination. Specifically, employees who have been subjected to an unlawful layoff will be entitled to notice of termination, or pay in lieu thereof. One of the main things employers and employees need to know about temporary layoffs is that, despite being specifically addressed in the Employment Standards Act, a layoff is not de-facto legal. Employers do not have a free-standing right to layoff any employee as they see fit. On the contrary, the right to layoff an employee must be specifically provided for in the employment agreement. In circumstances where no such contractual right exists, a layoff is unlawful. An employee who has been subject to an unlawful layoff is entitled to treat the layoff as a constructive dismissal (i.e. where the unilateral imposition by the employer of a fundamental change to the terms of employment constitutes a violation of the employment agreement and resultant termination). In these circumstances the employee will have an entitlement to wrongful dismissal damages, which could likely find an employer faced with a lawsuit. In the event that an employee accepts a layoff, and returns to work when recalled, the right to layoff can be inferred as an implied term of contract. In these unique cases, the risk of constructive dismissal is significantly reduced.

WHAT CAN BE DONE?

Employers who would like the right to layoff their employees ought to explicitly establish this right through contract, at the beginning of the employment relationship. Employers seeking to layoff employees who have already executed employment agreements will have to issue new agreements with sufficient notice and consideration to render them valid. Absent contractual language permitting layoffs, it is unadvisable to unilaterally layoff your employees. Employees - you should be aware that your employer does not have the de-facto right to institute either a temporary or permanent layoff. Unless the right of layoff is specifically set out in your employment agreement, do not accept a layoff. If you are considering accepting an unlawful layoff, you must be aware that by accepting, you permit your employer to institute further layoffs in future. If you are subject to an unlawful layoff, contact an employment lawyer right away to preserve your rights and entitlements to wrongful dismissal damages.