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Lay-Off — a Strictly Regulated Area of Employment

Lay-Off -- Packed Boxes

A lay-off occurs when an employer temporarily reduces or stops an employee’s work (and therefore pay), without terminating the employment. Such arrangements are temporary, usually due to a shortage of work or seasonal employment, and employment is continued again at a future time.

Can Any Employer Issue a Lay-off?

In general, employers cannot temporarily lay off employees unless there exists explicit contractual authorization or agreement by the employee. As most indefinite term contracts do not contain such authorization, lay-offs are often confined to unionized employees. Where such a contractual right does exist, the employer must comply with minimum employment standards legislation. Under Ontario’s Employment Standards Act, 2000 (“ESA, 2000”), an employer need not provide a recall date to laid-off employees unless contractual provisions state that a recall date is required.

Consequences of Violating Lay-off Legislation

If an employer attempts to temporarily lay-off an employee without proper contractual authorization or consent, then the fundamental conditions and terms of the employment contract may be considered to have been altered and the contract breached. As such, the lay-off may be considered constructive dismissal, and the employer would be liable for providing reasonable notice. The same would be true if the lay-off exceeds the maximum amount of time allowable under employment legislation.

How Long Can a Lay-off Last?

According to the ESA 2000, the maximum amount of time a temporary lay-off can last is set out as follows:

  1. Not more than 13 weeks total in any period of 20 consecutive weeks.
  2. More than 13 weeks total in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks and:
    (i)   the employee continues to receive payments of salary or wages from the employer;
    (ii)  the employer continues to make payments for the benefit of the employee under a legitimate   retirement or pension plan or a legitimate group or employee insurance plan;
    (iii) the employee receives supplementary unemployment benefits during the lay-off;
    (iv) the employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so;
    (v) the employer recalls the employee within the time approved by the Director of the Ministry of Labour;
    (vi) in the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee.
  3. Longer than a lay-off described in clause (b) where the employer recalls an employee represented by a trade union within the time set out in an agreement between the employer and the trade union.

For related case studies and more information on Lay-Offs, search our blog.

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