Employer Advice on Terminating Employees

Layoffs and Temporary Layoffs: What Employers Need to Know

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Understanding Layoffs and Temporary Layoffs

A layoff occurs when an employer temporarily suspends an employee’s work, with the potential for recall. In Ontario, the Employment Standards Act (ESA) sets out rules for temporary layoffs, which are defined as:

Lasting no more than 13 weeks in any consecutive 20-week period; or
Extending beyond 13 weeks but less than 35 weeks in a consecutive 52-week period, provided certain conditions are met (e.g., continued benefits or substantial payments).

If a layoff exceeds these limits, it may be considered a termination, requiring the employer to provide termination and potentially severance pay.

Do Employers Have the Right to Lay Off Employees? Employers do not automatically have the right to impose a layoff unless:

The employment contract explicitly states that layoffs are allowed.
There is a clear precedent in the workplace for temporary layoffs.
The employee agrees to the layoff.

If none of these conditions apply, a layoff could be seen as constructive dismissal, which may lead to legal claims.

Key Considerations for Employers

1. Employment Contracts Matter

To legally lay off an employee, your employment contract should include a layoff clause. Without it, you could be at risk of a wrongful dismissal claim.

2. Notice and Communication

When implementing a temporary layoff:

Provide clear written notice to the employee.
Outline the expected duration of the layoff.
Specify any conditions for recall to work.

3. Employee Entitlements

During a temporary layoff, employers may be required to:

Continue certain benefits (e.g., health insurance, pension contributions).
Follow ESA regulations regarding severance and termination pay if the layoff exceeds ESA limits.

Need Help Managing Layoffs?

If you're unsure how to handle layoffs and temporary layoffs while staying compliant with employment laws, Employer Advice is here to help.

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