Temporary Layoffs in Canada:
Temporary layoffs are a complex yet necessary tool for some employers. HR professionals need to understand temporary layoffs to handle challenges like economic downturns, seasonal demands, or unexpected disruptions. Even in industries where layoffs are uncommon, knowing how to respond to unexpected situations is a valuable skill to have.
Temporary layoffs present both opportunities and challenges for employers, making the process anything but simple. Successfully navigating temporary layoffs requires balancing the preservation of the employee–employer relationship and minimizing potential liabilities.
This blogpost explores the fundamentals of temporary layoffs and offers practical strategies for navigating the process effectively.
Temporary layoffs and compliance
An employer doesn’t have an automatic right to lay off an employee. Employers only have the right to temporarily lay off an employee when it’s explicitly stated in an employment contract, outlined in a collective agreement, or agreed upon or consented to by the employee. Without one of these conditions in place, employers risk facing costly constructive dismissal claims. To ensure compliance and avoid potential legal challenges, seek guidance from one of our Live HR Advisors or reach out to a legal professional early in the process.
What is a temporary layoff?
A temporary layoff occurs when an employer pauses or significantly reduces an employee’s work with the intention of recalling them back to work within a specified period. Unlike terminations, the employment relationship remains intact, with the expectation that the employee will return to work when recalled.
Core elements of temporary layoffs
- Employees remain employed: Employment doesn’t end, but employees generally don’t receive wages during the layoff period.
- Duration set by law: The timeframe for when a temporary layoff turns into a termination is set out in the employment standards legislation of each specific jurisdiction.
For example, under Ontario’s Employment Standards Act, 2000, a layoff is considered temporary if it doesn’t exceed 13 weeks in a consecutive 20-week period, unless specific conditions are met to extend the layoff up to 35 weeks in a consecutive 52-week period. Exceeding this timeframe triggers termination obligations, such as termination pay. Make sure you fulfil all necessary requirements before proceeding with any temporary layoffs.
Benefits and risks of temporary layoffs
Before placing an employee on a temporary layoff, it’s important to carefully consider the benefits and risks involved. While layoffs can offer short-term financial relief, mishandling them can have long-term repercussions.
Benefits of temporary layoffs
- Cost savings: Temporary layoffs reduce payroll expenses during slow periods or economic uncertainty without terminating staff.
- Employee retention: Temporary layoffs signal to employees that you intend to recall them back to work when business conditions improve.
- Flexible workforce: Temporary layoffs offer businesses adaptability in uncertain times without severing the employment relationship.
Risks of temporary layoffs
- Constructive dismissal claims: Temporary layoffs that are not explicitly allowed by contract or collective agreement, or agreed upon or consented to by an employee, may be considered a breach of employment terms.
- Workplace morale: If mishandled, uncertainty about recall dates can erode employee trust and engagement.
- Compliance complexity: Varying rules across jurisdictions mean businesses must carefully adhere to the temporary layoff rules set by the employment standards legislation of their jurisdiction.
Navigating temporary layoffs
Navigating temporary layoffs can be challenging, but with a clear understanding of the process and adherence to legislative requirements and best practices, employers can manage temporary layoffs effectively. The following strategies were crafted to help streamline the temporary layoff process, promoting transparency and efficiency at every stage.
1. Review employment contracts and collective agreements
Start by reviewing employment contracts and collective agreements. Do they allow for temporary layoffs? If not, you’ll need the employee’s consent, or you may risk constructive dismissal claims.
2. Fulfil compliance requirements
Legislation on temporary layoffs differs across Canada, so it’s essential to understand the employment standards legislation relevant to the jurisdiction where your organization operates.
Key considerations include:
- Notice requirements;
- Maximum duration;
- Recall requirements; and
- Mass termination rules if large groups are affected.
3. Provide clear, written notice
Even if written notice of a temporary layoff isn’t a legal requirement in your jurisdiction, it’s best practice to clearly communicate to employees the reasons, start date, expected duration, and recall expectations for the layoff. This ensures transparency and reduces misunderstandings.
4. Help support a swift employment insurance process
Promptly issue a Record of Employment (ROE) to ensure employees can access Employment Insurance (EI) benefits without delay. Timely submission reflects an organization’s professionalism, builds trust, and supports a smooth transition to EI payments.
5. Maintain open communication
Layoff periods bring challenges and uncertainty for employees, making clear communication crucial. Providing regular updates on seasonal changes and potential recall timelines shows thoughtful planning on behalf of the organization and builds trust with employees.
6. Recall employees fairly
When it’s time to bring staff back, issue a recall notice in writing. Be sure to outline their return-to-work details. Include the date and time the employee is expected to return to work and that they will be resuming the same role and responsibilities. Ensure equitable recall practices by prioritizing fairness and basing decisions on objective criteria like seniority.
Establishing an effective temporary layoff plan
Disruptions can be unpredictable, which makes it essential to have a proactive temporary layoff policy in place. Here’s how to prepare effectively for unforeseen or planned disruptions that may result in a temporary layoff.
1. Incorporate layoff provisions into contracts
Include clear provisions for temporary layoffs in all new employment agreements, detailing the layoff and recall process. This helps prevent legal ambiguities in the future.
2. Build a transparent communication framework
Set clear internal guidelines to determine when and how to communicate information about layoffs. Consistent messaging between HR and leadership is key to conveying professionalism and reliability.
3. Review your temporary layoff procedures
Strengthen your layoff procedures by analysing temporary layoff scenarios through roleplay simulations involving other workplace parties, like managers and employees—like a fire drill, but for layoffs. If you needed to lay off employees soon, what would you do? How would managers and employees react? Simulations help HR professionals proactively uncover potential weaknesses and implement targeted solutions, ensuring a more robust and effective strategy.
Plan for uncertainty today!
Temporary layoffs are an inevitable aspect of running businesses in some industries. Often, they’re driven by seasonal factors, economic downturns, trade disruptions, or unpredictable global crises. The key to navigating these challenges lies in preparation. By adopting proactive strategies, maintaining clear and transparent communication, and ensuring legislative compliance, your business can achieve the flexibility it needs while mitigating risks.
Need help navigating temporary layoffs?
Citation Canada’s HR experts are here to guide you through the legal and practical complexities of workforce management. Book a personalized demo at a time that works for you to see how our HR software and policy templates can help. Navigate layoffs with trusted HR solutions designed to support your organization and its people.
Citation Canada has helped hundreds of organizations manage workforce changes effectively while staying ahead of developing legislation. Access the latest HR content, award-winning HR software, and assign immersive training courses through our secure, user-friendly HRIS. With HR and health and safety online training, expert-led monthly webinars, and conveniently priced plans, we make it easy to empower your team and prioritize compliance.