The COVID-19 pandemic raises significant workplace issues. One of them is whether an employer may place employees on temporary layoff as a result of downturn in business caused by COVID-19.
This will depend on the individual circumstances of each case.
The Employment Contract
The first place to look is the employment contract itself. Some contracts may include rights and obligations relevant to temporary layoff.
For unionized employees, collective agreements will almost always provide a system for determining the order of layoffs and recall. Union members with concerns should contact their union representative.
The Nova Scotia Labour Standards Code
Under the Labour Standards Code (Code), an employer can place an employee on a temporary and indefinite layoff if there is insufficient work for the employee.
Section 72 of the Code requires the employer to provide the employee with advance written notice of the layoff or pay in lieu of notice. However, notice requirements do not apply where the employee has been guilty of willful misconduct or disobedience or neglect of duty.
The amount of notice required under the Code will depend on the employee’s length of service. Section 72(1) stipulates the following periods of notice:
(a) one week’s notice in writing to the person if their period of employment is less than two years;
(b) two weeks’ notice in writing to the person if their period of employment is two years or more but less than five years;
(c) four weeks’ notice in writing to the person if their period of employment is five years or more but less than ten years; and
(d) eight weeks’ notice in writing to the person if their period of employment is ten years or more.
Employers should note that where more than 10 employees are laid off in less than four weeks, the amount of notice changes (see Section 72(2) of the Code).
An important exception to the notice periods outlined above is found in section 72(3)(d) of the Code. Section 72(3)(d) provides that notice requirements do not apply to:
(d) a person who is discharged or laid off for any reason beyond the control of the employer …. if the employer has exercised due diligence to foresee and avoid the cause of discharge or lay-off.
Depending on the nature of the business or service offered by the employer, the consequences of the COVID-19 pandemic may very well constitute a “reason beyond the control of the employer” disentitling employees to notice of layoff in situations where the employer can be said to have exercised due diligence.
Even if notice is not a statutory requirement, it is a best practice for employers to provide employees with as much notice of layoff as possible and communicate very clearly to the employees that the layoff is temporary and they will suffer no loss of seniority as a result.
The Canada Labour Code
The Canada Labour Code applies to federally regulated employees.
Generally speaking, the Canada Labour Code allows for temporary layoffs due to lack of work or discontinuance of a work function. However, section 235(2) of the Canada Labour Code provides that layoffs are considered terminations except where otherwise provided by regulation. As such, employers should pay close attention to the regulations to ensure their layoff is not deemed a termination. Where a layoff is deemed a termination, minimum notice requirements apply.
Section 30(1) of the Canada Labour Standards Regulations (Regulations) defines what is a temporary layoff and when a layoff is deemed a termination.
A temporary layoff includes:
(1) Layoffs of three months or less.
(2) Layoffs that exceed three months and the employer notifies the employee in writing at or before lay-off that they will be recalled to work on a fixed date or within a fixed period. Recall under fixed date or under fixed period cannot be more than 6 months following the layoff.
(3) Layoffs that exceed three months and:
(i) the employee continues during the term of the lay-off to receive payments from their employer in an amount agreed on by the employee and his employer,
(ii) the employer continues to make payments for the benefit of the employee to a pension plan that is registered pursuant to the Pension Benefits Standards Act or under a group or employee insurance plan,
(iii) the employee receives supplementary unemployment benefits, or
(iv) the employee would be entitled to supplementary unemployment benefits but is disqualified from receiving them pursuant to the Employment Insurance Act.
As per section 30(2) of the Regulations, any period of re-employment of less than two weeks duration does not count towards the term of a lay-off for the purposes of section 30(1)(c), (d) and (f).
In summary, the Canada Labour Code allows for temporary layoffs due to lack of work or discontinuance of a work function. However, layoffs are strictly defined in the Regulations. Where a layoff is for three months or less, no notice is required. Where a layoff exceeds three months, things become more complicated. To avoid the layoff being categorized as a termination, the employer must ensure the layoff meets one of the definitions in section 30(1) of the Regulations.
The Common Law
There is no freestanding right for an employer to place an employee on layoff at common law. If an employment contract does not address layoffs, an employee might consider their layoff a termination of their employment and seek pay in lieu of reasonable notice through the courts by arguing that they were constructively dismissed. However, an employee should take seriously any decision to pursue a constructive dismissal claim because the claim effectively prevents them from returning to work.
Furthermore, it is unclear whether employees will be successful in arguing constructive dismissal in the context of COVID-19. Professor David Doorey wrote a blog that thoughtfully canvasses potential issues with constructive dismissal in the context of COVID-19, for example:
(1) There is a risk a court may find an implied contract term that permits employers to layoff employees due to the pandemic.
(2) The doctrine of frustration may be used by employers to relieve themselves of their obligations to give notice.
The above issues are potential hurdles for any constructive dismissal claim. The success of any claim will depend on individual facts and circumstances. Employees should contact legal counsel before pursuing a constructive dismissal claim.
For further information about workplace issues relating to COVID-19, contact us at (902) 423-7777, toll-free at 1-800-565-4529, or [email protected].
* This information is not legal advice. The answers to these questions will vary, depending on the circumstances of each case. Consult legal counsel for information and advice relevant to your individual circumstances.