COVID-19, Layoffs and Group Terminations

Last Updated March 20, 2020.

Sometimes fluctuations in your business require temporary reductions in staffing levels. Such reductions may or may not become permanent in nature. Where a layoff involves a number of employees, it may evolve into a group termination. In any event, a keen understanding of the layoff and group termination provisions in the Employment Standards Act is essential to your ability to manage your human resources efficiently.

The present worldwide crisis that is the COVID-19 pandemic has raised significant and unforeseen hurdles for private businesses around the world.  Businesses that have operated gainfully for decades are now looking at the prospect of taking extreme steps – including broad layoffs – or the prospect that a failure to take steps will close their doors forever.

LAYOFFS GENERALLY

An employee who is laid off cannot claim termination pay under the act until the layoff exceeds 13 weeks in a 20-week period or — where a collective agreement is in place and includes recall provisions — until the layoff exceeds the period of recall under a collective agreement.  The termination date, should the layoff reach this point, is deemed to be the date upon which the employee commenced the layoff.

It is important to note that a layoff due to lack of work does not amount to termination for just cause.

It is also important to note that a layoff can be considered termination of employment if done without the proper contractual authority or for a period that exceeds the applicable maximum duration.  BC’s Employment Standards Branch has a bulletin on this topic HERE.

LAYOFFS AND COVID-19

On March 17, 2020, the British Columbia government declared a state of emergency. This announcement, in addition to the various public health recommendations, government mandated restrictions on events and gatherings, the need for social distancing, and the impact of COVID-19 generally, has made it very difficult for many businesses to continue to operate, provide work and/or pay employees.

The problem is that employers do not want to terminate their employees but might end up inadvertently doing so if they run afoul of the strict requirements for layoffs in the Employment Standards Act and end up liable for pay in lieu of notice and/or other damages.  This is a bit of a ‘catch 22’ for employers looking to temporarily lay off employees that they will undoubtedly want to retain long term.

The Employment Standards Act allows for an exemption from its requirements for payments on termination (even group terminations, discussed below) when an employment contract becomes “impossible to perform due to an unforeseen event or circumstance”.  Although the pandemic presents a new situation in the context of employment standards (and in virtually all things, really) this provision may apply to permit employers to avoid statutory liability arising from temporary layoffs that would ordinarily cause issues.

GROUP TERMINATIONS

If an employer intends to terminate 50 or more employees at a single location within a two-month period, additional notice of termination is required. In these circumstances, Section 64 requires that notice be provided to each of the employees who will be terminated, the trade union representing the employees (if applicable), and the Minister of Labour. The notice provided must specify the number of employees to be affected, the effective date or dates of the termination, and the reasons for the termination.

In certain situations, an employer may lay off a group of 50 or more employees without immediately terminating them. However, as explained, a layoff is deemed to be a termination if it exceeds 13 weeks in a 20-week period or exceeds the period of recall under a collective agreement. Therefore, in situations where the prospect of re-employment is slim, it may be advisable to provide advance notice of termination pursuant to Section 64 in order to reduce any future liability for termination pay.

The group notice requirements are as follows:

NUMBER OF EMPLOYEES NOTICE REQUIRED
50 to 100 employees 8 weeks before effective date of first termination
101 to 300 employees 12 weeks before effective date of first termination
301 or more employees 16 weeks before effective date of first termination

An employer may provide either working notice, payment in lieu of notice of termination, or a combination of both, provided that the sum is equal to the amounts set out in the above table.

INEFFECTIVE NOTICE

The notice required under the act will not be effective if the employee is on annual vacation, approved leave of absence, or temporary layoff. In addition, notice is not effective if it coincides with a period during which an employee is absent from work due to a strike or lockout, or because of medical reasons (including short-term sick leave, long-term disability or workers’ compensation leave).

If an employee continues to work past the end of the notice period, prior notice of termination is deemed void and the employment relationship continues. In order to meet your legal obligations, you would have to provide new notice or payment in lieu of notice to terminate an employee who has worked beyond a prior notice period.

Finally, once proper working notice is provided, it is not advisable to make changes to the employee’s wage or any other term or condition of employment without the written consent of the employee.  You may even need the consent of the trade union representing the employee if the employment is governed by a collective agreement. Changes to employment that may be prohibited may include a change in duties or responsibilities, limiting of authority, or a reduction of hours.

EXCEPTIONS

The act provides for several exceptions to the notice. Employees hired under certain arrangements, such as under a definite term contract, are not entitled to notice of termination, or payment in lieu of notice. Similarly, the Employment Standards Act exempts employers from termination pay and group termination pay in the context of some unforeseeable events and circumstances.

For more information about these exceptions, visit Employment Standards Act – Exceptions.

For more information regarding temporary layoff and group terminations, visit the Termination of Employment Factsheet, as well as:

Interpretation Manual – Section 62 – Definition of layoff

Interpretation Manual – Section 64 – Group Terminations

Interpretation Manual – Section 65 – Exceptions

Interpretation Manual – Section 66 – When layoff becomes termination

go2HR JOB BOARD

go2HR is pleased to partner with the healthcare sector to allow healthcare employers (including private care homes and retirement residences) to use the go2HR Job Board for their hiring needs. This will help displaced tourism and hospitality employees find temporary work, to ensure their livelihood is not disrupted.

Information provided by Ryan Anderson AND Cameron R. Wardell, employment lawyers with Mathews Dinsdale & Clark LLP. The information provided in this article is necessarily of a general nature and must not be regarded as legal advice. For more information about Mathews Dinsdale & Clark LLP, please visit mathewsdinsdale.com.