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How do layoffs work in the context of COVID-19?

COVID-19 | April 2, 2020

The recent and extensive spread of COVID-19 has led to a number of questions concerning the rights and obligations of employers and employees when facing the realities of temporary layoffs due to the COVID-19 pandemic.

Temporary Layoffs: Rights and Obligations

In the past couple of weeks, the provincial government has responded to the COVID-19 pandemic in various ways from a legislative standpoint including recent changes to the Employment Standards Act in British Columbia (the “Act”). The changes, however, did not affect any provisions pertaining to the temporary layoff of employees by employers.

The Act contains provisions which restrict the rights of employers to impose temporary layoffs. In most cases, a temporary layoff results in an employee’s entitlement to severance pay, unless one of the following circumstances applies:

  1. The employee’s employment contract expressly permits a temporary layoff;
  2. The employer is in a business in which temporary layoffs are a common industry-wide practice (e.g. logging where work cannot be performed all year); or
  3. The employee agrees to a temporary layoff.

If one of the above exceptions applies and an employee is temporarily laid off, the temporary layoff cannot exceed 13 weeks in a consecutive 20 week period. If a layoff exceeds 13 weeks in a consecutive 20 week period, a layoff becomes a termination and gives rise to an employee’s entitlement to severance pay based on the employee’s employment contract and factors related to their employment.

Temporary Layoffs during the COVID-19 Pandemic

As we are in unprecedented times with the unique nature of COVID-19, the law is unclear on what happens when an employee does not agree to a temporary layoff in the context of a pandemic. While temporary layoffs seem to be the common response chosen by employers; from a legal perspective, the unilateral decision to layoff an employee during the COVID-19 pandemic may ultimately lead to employers facing claims of constructive dismissal and an obligation to pay employees’ severance pay.

For most employees, the amount of severance pay owed will be based on the employment contract and the minimums provided for under the Act. Additional common law severance may be owed where an employment contract does not adequately adopt the termination provisions of the Act or where the employment contract is invalid. Common law severance is determined on a case-by-case basis where the amount owed is based on the employee’s age, length of service, character of employment, and availability of employment in order to determine what is reasonable in the circumstances.

That being said, where an employee fails to accept a temporary layoff given the current economic issues faced by an employer, such factors could significantly affect an employee’s claim for damages, should one be made in the future.

What Next?

Prior to the COVID-19 pandemic, courts did not consider the financial circumstances or economic well-being of businesses relevant when determining the amount of severance pay owed to an employee. In light of the very unique issues faced by employers and employees during the outbreak of COVID-19, it is impossible to know whether courts will continue to maintain this position when dealing with temporary layoffs and terminations should these issues result in litigation in the coming months and years.

If you are an employee facing a temporary layoff or an employer considering temporarily laying off your employees, we recommend that you contact Natasha Nair of our office for specific legal advice based on your current situation.

 


© Natasha Nair, Linley Welwood LLP

The contents of this article do not constitute legal advice, and any reader should seek legal advice in relation to their specific circumstances.


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