Canadian Employment Law Today

Canadian HR Reporter, 2020 4 The COVID-19 layoff: statutory and common law risks The legal framework around temporary layoffs has changed during the pandemic BY RISHI BANDHU COVID-19 has forced many businesses to suspend operations. Work-from-home ar- rangements are possible for some businesses but unfeasible for others. Temporary layoffs have been the only option for many em- ployers, which has caused a change in how many people view them and how the laws in some jurisdictions treat them. Legislative requirements create significant obligations for employers in relation to lay- offs. Accordingly, employers seeking to lay off employees must understand the appli- cable minimum standards in the particular jurisdiction in which they operate. In addi- tion, though, the common law concept of constructive dismissal and its application to employee layoffs must be understood in or- der to manage risk — or at least anticipate it. Some standards have changed Every jurisdiction in Canada has minimum standards relating to temporary layoffs, but they vary significantly in terms of the details. With the exception of Alberta, British Co- lumbia, Manitoba, Ontario and Quebec, all jurisdictions require some form of notice of layoff. Except for New Brunswick and Prince Edward Island, every Canadian jurisdiction restricts the duration of a temporary layoff. When the maximum temporary layoff pe- riod duration lifts, a deemed termination results and termination pay is owed. Sever- ance pay may also be required depending on legislation and the employee's length of service. Various provinces have amended their legislation in response to COVID-19, thus altering employer liability in relation to layoffs. The approach in some provinces has been to simply extend the duration of a temporary layoff to delay the trigger for a deemed termination. In British Colum- bia, the duration of a temporary layoff was extended to 16 from 13 weeks. As the new deadline approaches and unless a further extension is legislated or extensions granted on a case-by-case basis, employers in that province are likely bracing for significant termination and severance pay liabilities. Ontario's approach was unique, deem- ing all layoffs — including reduced-hour arrangements — to be protected leaves of absence until six weeks after the provincial emergency order in relation to COVID-19 lifts. Ontario thus avoids having to revisit the duration of a temporary layoff but in- definitely suspends the right of employees to collect their entitlement to termination pay and severance pay. Courts have consistently held that em- ployers do not have an implied right to lay off employees. Failing evidence of such a right, a laid-off employee may claim that they have been constructively dismissed and thus entitled to compensation in lieu of no- tice of termination. No statutory right to layoff There is some case law in Ontario (Trites v. Renin Corp.) and Alberta (Vrana v. Procor Ltd.) to suggest that the existence of a statutory regime with detailed provisions regarding the timing and manner of layoffs forecloses court actions for constructive dismissal. The reasoning in those cases was rejected in later decisions (Chea v. CIMA Canada Inc. and Turner v. Uniglobe Custom Travel Ltd.), but the argument is likely to arise again, particularly in Ontario. Ontario's newly implemented regulation deeming all layoffs and hour reductions to be protected leaves of absence also provides that a temporary reduction or elimination of hours (a layoff) does not constitute a constructive dismissal. Some will undoubtedly argue that the provi- sion removes the right to sue for construc- tive dismissal in court, but the amendments do not appear to go that far. The consensus appears to be that employ- ment standards rules concerning layoffs do not afford employers the right to lay off. That right must, therefore, be found directly in the contract of employment, but it may also be established in the policies and prac- tices of the employer. Courts have found the right to lay off where the employer has established clear workplace policies reflecting a right to lay- off (Greene v. Chrysler Canada Ltd.), where layoffs are common in the industry (Petras v. Construction and General Workers' Union, Local 602) and where the employee knows that employment is cyclical and subject to slowdowns (Hefkey v. Blanchfield). Frustration of contract For many employers, operating at full or even limited capacity was impossible given the mandatory closure of operations. There was, therefore, no choice but to lay off. Given the unprecedented nature of the situation, em- ployers will undoubtedly argue that it would be unfair to find them liable for constructive dismissal. Employers may raise the defence of "frus- tration of contract" in response to claims of constructive dismissal. As a principle of contract law, frustration applies where an unforeseen event prevents an employment relationship from continuing or renders the relationship radically different from expec- tations. Changes in laws, natural disasters and, most frequently, disability can result in frustration. A frustration defence has never been ap- plied in the context of a temporary cessation of work. It has always been applied where the relationship cannot continue at all or where it transforms the relationship into something radically different from what the parties anticipated. Nevertheless, given the exceptional nature of the pandemic and the historic economic damage it has caused, courts are likely to be receptive to arguments of frustration, although acceptance of it is far from certain. Changing reasonable expectations The employer's best defence may lie directly in the analytical framework identified by the Supreme Court of Canada for assessing con- structive dismissal claims. Potter v. New Brunswick Legal Aid Services requires all constructive dismissal cases to be analyzed in two distinct branches. Cases addressing an employer's unilateral changes CASE IN POINT: EMPLOYMENT STANDARDS In employment law, certain technical terms tend to be used in informal or colloquial ways. "Layoff " is a good example of such a term insofar as it is used to refer to any cessation of employment, whether temporary or permanent. However, under the law, a layoff always means a temporary pause in the employment relationship with an expectation to resume the relationship in the near future. Employment lawyer Rishi Bandhu looks at the legal requirements around layoffs and how the pandemic-related economic shutdown has changed the legal landscape around them. BACKGROUND

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