During the COVID-19 pandemic, businesses in Canada and worldwide are facing many daunting challenges, from revenue declines to employment issues and possible layoffs. Here are some important aspects that employers need to understand about layoffs under Canadian law.
An employer’s guide to temporary layoffs in Canada during the COVID-19 pandemic
What constitutes a layoff?
A layoff is when an employer stops providing work to employees and (in most cases) the employees are compensated for this time off. Temporary layoffs (which are common during the COVID-19 pandemic) are intended for short periods, and during temporary layoffs, the employment relationship is considered to be ongoing with work to resume at a future date. Temporary layoffs should be provided for in the employment contract if they are to be permitted.
How long can a temporary layoff last?
If you need to introduce temporary layoffs, it can only last for a specific period. The maximum period is 13 weeks in a consecutive 20-week period. If a layoff needs to exceed the maximum 13-week period, it will qualify as termination, and in such cases, employees are entitled to termination pay.
The Employment Standards Act (ESA) makes provisions for extension of temporary layoffs that may last up to 35 weeks, including circumstances where the employee receives substantial payments if the employer makes payments for the employee under a retirement or pension plan or other legitimate group insurance plans and more.
How this affects payroll
Due to the reduction in work hours in the case of temporary layoffs, employees’ compensation and benefits may differ from the norm. If the employment agreement allows for temporary layoffs and reduced hours, your payroll administrators need to keep a meticulous record of the hours worked by each employee as well as the period of temporary layoff as it affects each employee. This information should be made available upon request from the employee and government departments when the employee applies for wage subsidies and other support initiatives.
Contact PSI for professional payroll assistance and advice on record-keeping during temporary layoffs in COVID-19.