Howard Levitt: Ontario's latest bailout of companies means laid-off employees may have to wait until 2022 to get severance pay

The most common COVID-19 related employment law issue, from the start of the pandemic to now, has been layoffs

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© Provided by Financial Post As COVID-19 persisted, many employees were never recalled and had stood on their rights too long, implicitly accepting their layoff and reducing the likelihood of a win if they eventually sued.

Employees are asking lawyers whether their employer can place them on a temporary layoff, with no pay to support their family. Or whether they can be forced to take a 25 per cent pay cut.

Employers, for their part, seek legal advice about employees that they can’t afford to pay. If they lay them off, must they pay dismissal damages which they can’t currently afford?

The answers are not always straightforward.

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In the early days of the virus, in March and April, we were able to tell employees, ‘yes, you can absolutely sue for wrongful dismissal if you are laid off — provided you are non-union, the government did not order your company to entirely shut down and your employment contract did not permit layoffs (99 per cent of contracts did not at the time)’.

Employees were optimistic, expecting to be shortly recalled and understandably reluctant to burn their bridges by suing. Despite their legal right, few did.

As it happened, many employees did not get recalled but had stood on their rights too long, implicitly accepting their layoff and reducing the likelihood of a win if they eventually sued.

They became stuck in limbo, hoping that the Employment Standards Act, 2000 — the legislation that governs temporary layoffs — would come to their rescue. The Act only allowed for a temporary layoff of up to 35 weeks (in Ontario and of different lengths in other provinces). This was a long time to wait, but would come eventually if employees scrimped and saved in the meantime.

To be clear, the ESA provisions of most provinces did not prevent laid off employees from suing for wrongful dismissal at the time of the layoff. But what they did do, for those employees who chose not to sue initially, was give them another opportunity to do so when the permissible layoff under legislation expired and converted those layoffs into legal dismissals for all purposes.

Appreciating that employers were headed for a colossal payday when hundreds of thousands of employees’ temporary layoffs under the Act would automatically end after 35 weeks, the Ontario government bailed out companies.

It introduced the ‘Infectious Disease Emergency Leave’ (IDEL) on March 19, deeming temporarily laid off employees to be on a COVID-19 emergency leave and not entitled to severance pay until the government mandated leave ended.

This end date was initially scheduled for January 2, 2021. With this announcement, employees saw their long-anticipated severance packages vanish overnight with a future promise that they would become due after January 2.

However, in another surprise move last week, the Ontario government did this to employees again — moved the COVID-19 emergency leave expiry date to July 3, 2021 and hence the long-awaited promise of severance packages would have to wait for most for at least another 35 weeks after that. That last chance to sue has suddenly become illusory, as employees have to wait till 2022 to get severance pay.

So long as the COVID-19 leave is in effect, non-unionized employees whose wages or hours have been temporarily reduced or eliminated for reasons due to COVID-19 are not considered to be laid off or constructively dismissed under the Ontario ESA.

This is a win for employers who will be protected to a large extent against having to pay severance if they can’t recall laid off employees by July 3, 2021 and 35 weeks thereafter — another six-plus months to hope restrictions lift and business returns.

It’s a loss for employees whose severance packages are now on the other side of the rainbow, nor is there a holiday bonus for many of them.

Ontario companies will see their employees’ “temporary layoff clock” reset on July 3, 2021 and the following timelines will be triggered: Unpaid temporary layoffs lasting 13 weeks or more (during any 20-week period) will be deemed a termination of employment; and paid temporary layoffs or layoffs where benefits continue to be paid lasting 35 weeks or more (during any 52-week period) will be deemed a termination of employment.

Employers whose business has not resumed or who need to keep employees on reduced hours or wages will need to consider how to address these issues.

A raft of lawsuits may yet occur, but it will be very much in the future by which time, employers hope, the employee will find another job and have no damages to sue for. All employees will recover — if they know to claim it — is the employment standards minimums.

Employees who have sat on their rights by not objecting to their layoff or reduction in wages, may have to wait for a long time for any sort of a severance package. If they have only recently been laid off or had their wages reduced, now is the time to sue for constructive dismissal or otherwise attempt to negotiate a severance package, because they cannot rely on the ESA coming to their rescue.

The other opportunity for laid off employees to sue is when other employees are recalled and they are not. At that point, they can claim wrongful dismissal.

If they have not already done so, we strongly encourage companies and employees to obtain sophisticated employment law advice regarding their rights and obligations relating to layoffs — which include reduction of employees’ hours or wages.


MANAGEMENT LAWYER
Howard Levitt is senior partner of LSCS Law, employment and labour lawyers. He practises employment law in eight provinces. He is the author of six books including the Law of Dismissal in Cana