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Are Layoffs Legal In Ontario?

Although a layoff seems to be similar to a permanent dismissal, the two concepts are actually quite different. While a dismissal implies a permanent cessation of employment, a layoff in Ontario is typically intended to be temporary in nature. When an employer places an employee on layoff, it is with the intention to recall that employee back to work once the layoff concludes.

As we have seen with the emergence of the COVID-19 pandemic beginning last March 2020, many employers across Ontario have had to lay off their employees due to economic trouble and other difficulties created by the pandemic. 

Below is a brief look into layoffs and how the law treats laid-off employees whose employment is governed by a verbal employment contract.

What Is A Layoff in Ontario?

A layoff allows the employer to temporarily end an employee’s employment, with the promise of calling the employee back to work. Under the Employment Standards Act, 2000, employers are allowed to layoff employees for 13 weeks within a 20-week period, or for 35 weeks within a 52-week period, if they continue the employee’s benefits. 

Where the employee is recalled within the above time periods, there is no violation of the Employment Standards Act, 2000. However, where the employer continues to lay the employee off past the time allotted by the legislation, the employee can treat his or her employment as terminated. 

Because employment law encompasses the legislation and the common law, employers will want to ensure that their right to layoff an employee is included in the employment contract. A layoff can be permitted under the legislation but can still violate common law principles. 

But what happens when an employee does not have an ironclad written contract?

Employees With No Employment Contract

Where an employee is employed under a verbal employment contract, a layoff is not permitted since the employer has no express right to layoff the employee. 

If the employer places the employee on a layoff, the employee can immediately treat his or her employment as terminated, and claim constructive dismissal for the termination. In such cases, the employee can then claim his or her termination pay, including but not limited to pay in lieu of notice, severance pay, possible benefits coverage, and other compensation based on the employee’s verbal contract. 

The safest solution is often to ensure that the employee’s employment is governed by a written contract with a clear layoff clause. Otherwise, a layoff, even one made necessary by harsh economic conditions, can be illegal and entitle the employee to compensation.

Contact Us

If you are an employer facing a wrongful or constructive dismissal claim, or an employee who believes you’ve been constructively dismissed, our team of experienced workplace lawyers at Achkar Law can help. Contact us by phone toll-free at 1-800-771-7882 or email us at [email protected] and we would be happy to assist.

If you are a small or medium-sized company looking for full-service support with a same-day response, visit our CLO Program page for our strategic solutions.

Disclaimer: This blog is not intended to serve as or should be construed as legal advice and is only to provide general information. It is in no way particular to your case and should not be relied on in any way. No portion or use of this blog will establish a lawyer-client relationship with the author or any related party. Should you require legal advice for your particular situation, fill out the contact form, call (800) 771-7882 or email [email protected]