Temporary Layoffs in Ontario

Temporary laying off an employee in Ontario often occurs in the context of seasonal businesses that required a reduced headcount during slow times of year or businesses that are in general decline. Rather than paying our full severance obligations to an employee, as required on the termination of employment, as discussed here and here, a temporary layoff affords the employer the opportunity to take an employee off of payroll for a defined period of time.

In employment law in Ontario, termination and a layoff have two very distinct meanings. A termination is a complete end to an employment agreement, which, if implemented on a without cause basis, gives rise to severance obligations. A layoff, on the other hand, is when an employer temporarily cuts off an employees employment, with the expectation that they will return back to work within a defined time period. Should the layoff exceed the maximum amount of time permitted to layoff an employee in accordance with the employment standards legislation in the province, the layoff will transform into a termination.

Under the Employment Standards Act in Ontario, employers are permitted to temporarily layoff an employee for a period of up to 13 weeks in a 20-week period. There are also rights to extend the layoffs under certain conditions. Under the Employment Standards Act, section 56 governs the layoff of employees working in Ontario.

A key issue with layoffs that an employer must be aware of is that despite the right to issue a temporary layoff as contained in Section 56 of the Employment Standards Act, an employer does not have the unilateral right to temporarily lay off an employee without a contractual right to do so. In other words, an employment agreement must be signed between the employer and employee that expressly authorizes a temporary layoff. Absent an agreement authorizing the layoff, the employer is not permitted to layoff the employee for any period of time. As such, the layoff will constitute a constructive dismissal at law, if the employer does not agree to bring the employee back to work immediately.

If you are an employee that has been temporarily laid off in Ontario, it is best to consult with an employment lawyer to determine whether the employer has complied with their obligations. It is imperative that you seek legal advice before agreeing to a layoff to ensure that you understand your legal rights.