Reducing hours

When reducing hours, keep in mind that typically reducing pay by 20% or more could be considered constructive dismissal. If employees are reduced 40% or more, you need to issue a Record of Employment.

If possible, we recommend offering employees options: for example, “In order to respond to the pandemic and support our business continuity plan, we have no choice but to look at all options. We understand that none of these options are ideal, but we are committed to working with our employees during this time while ensuring that our business is poised to return following the pandemic. As a result, we have the following available options:

• Temporary layoff effective (insert date);
• Reduction in hours from (insert current amount) to (insert new amount); or
• Reduction in pay of (insert percentage).

Please review the options above, discuss your choices with (insert name) and let us know by (insert date) which option works best for you. If you decide to reduce your hours or take a pay reduction, please note that this is a temporary strategy that would be reviewed every (insert time frame).”

Providing options and working with your employees can help mitigate constructive dismissal concerns.

Does seniority play a role in determining whom to lay off?

Seniority should always be considered when determining your strategy. If you are within a unionized workplace, this is likely outlined within the collective agreement and you must complied with its terms.
Non-unionized workplaces have more flexibility for layoff strategies. Seniority considerations are important when looking at potential financial risks to the business, as those with longer seniority also have a greater entitlement to termination and severance (if applicable) if the temporary layoff is eventually deemed a constructive dismissal or moves to a termination of employment.

About constructive dismissal

You should consider whether the actions you take (like reduced hours or temporary layoffs) could be perceived as constructive dismissal by your staff. If an employee makes a claim of constructive dismissal, the business may have a case for frustration of contract based on the unprecedented nature of the pandemic, which, if successful, would limit the financial impact to minimum statutory entitlements within your jurisdiction. When considering reducing hours or offering temporary layoffs, we encourage you to talk with your staff and provide options. Some staff may want a layoff and some may want reduced hours. Working with your staff and providing options can help to reduce the concerns of constructive dismissal.

Do I need to provide severance?

Severance would only be applicable if the temporary layoff becomes permanent. Permanent layoffs must align with termination entitlements under each jurisdiction.

How to deal with vacation / vacation pay

Process to follow for temporary layoffs as a result of COVID-19

Develop a communication strategy to ensure that employees are aware of business changes and that you will remain in contact with them during this time.

1. Review employment contracts and jurisdictional requirements laid out in employment standards legislation, keeping in mind that we are currently operating in an unplanned emergency situation, and that normal practices may not be applicable. Seek a legal opinion if you are unsure of the legal implications of moving forward with a temporary layoff.
2. If applicable, review your collective agreement and connect with your union representatives.
3. Determine whether you will continue to provide health and dental benefits during the temporary layoff. If possible, try to continue to provide these benefits.
4. Contact your benefits provider to see life, long-term disability, and other types of insurance will be affected during a temporary layoff.
5. It is not necessary to pay out vacation accounts during a temporary layoff. As a best practice suggestion, you may want to let employees know what is available within their account, so that they can use vacation before the temporary layoff takes effect.
6. Prepare a Record of Employment for each employee you lay off, as they will need it to secure EI
   o    Use Code A: Shortage of Work; and
   o    Select “Unknown” for the return-to-work date.
   
   

Layoff wording

If the temporary layoff is based on needing to close because your business is deemed non-essential, we suggest using the following language in your temporary layoff letters:
“Based on the recent government announcement, we are mandated to close effective (insert date) for approximately (insert number) weeks. The mandate could change and result in a longer disruption to our workplace. As a result of this mandate, you are temporarily laid off until the government approves a return to business.”