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COVID-19 has dramatically impacted the business environment. While some businesses are doing well as a result of the shifting market demand, the harsh reality is that most businesses are suffering economically.

Employers are responding quickly by reducing labour costs through a range of measures including but not limited to reducing schedules, hours, implementing layoffs, or a combination of these.

While the federal government implemented the Canada Emergency Wage Subsidy (“CEWS”) to create incentives for employers to keep employees, the reality is that employers are still laying off employees as the business environment may not justify keeping employees on payroll (and due to the slow implementation of government support programs).

As we have explained in earlier posts, a layoff is fundamentally different from termination of employment. Specifically, layoffs are intended to be temporary in nature (ending with a recall to the employee’s previous role), whereas termination of employment is a permanent severing of the employer-employee relationship.

For this reason, employers will soon have to decide what to do with employees who were recently laid off. This is important because employees should not expect that they will be reinstated to their jobs if, in fact, it is highly unlikely that all will be either reinstated to their previous role (and wage levels) or brought back in a different capacity.

The following accordingly addresses the top 3 questions we have received in relation to layoffs, particularly in relation to COVID-19.

1. Must I reinstate the employee to their previous role?

It is highly likely that many employers will find that when they re-open they are doing so in a dramatically different business environment than before COVID-19. This means that certain functions may not be needed, while new ones may have been created.

Does this mean an employer can assign a reinstated employee a new role? The short answer is no, and the following explains why.

The risk:

When an employee is laid off, the expectation in law is that they will be returned to their previous role when called back to work. If they are assigned a new and/or different role, whether that be in relation to a change in expectations, a change in hours, or a change in function, the employee may have a legal right to compensation for constructive dismissal.

How employers can reduce the risk:

If the previous role of the reinstated employee no longer exists or the employee is asked to return to a modified role, while it does not guarantee removal of liability, employers should at least attempt to secure the employee’s consent as soon as possible. Failing to do so would be an important factor in determining whether a court will determine that the employee has been constructively dismissed.

To reduce the chance of any potential conflict following a role change, employers should consider limiting any changes to those which can be argued as reasonably connected to COVID-19.

2. Can I recall employees and introduce a reduction in their wages while the company recovers?

The financial pain as a result of a closure of business is undoubtedly severe. While employers will seek to reinstate employees, they may find that they are unable to maintain the employee’s previous rate of pay. In response, employers may consider reinstating the employee at a reduced schedule and/or wage rate.

The risk:

As with a change to an employee’s role, a significant reduction in wages could trigger a claim for constructive dismissal. In other cases, where the reduction is not significant enough to trigger a constructive dismissal, an employee may still be able to recover the difference in their wages.

How employers can reduce the risk:

To help reduce the chance of a finding of constructive dismissal, or alternatively a successful claim for the difference in wages, an employer would be wise to at least attempt to seek the consent of the impacted employee(s) before implementing the change.

We also recommend the following steps be taken in obtaining consent:

  • Be honest with your employees and explain why you are introducing a wage reduction;
  • Set a timeframe for how long you expect the reduction to be in place; and
  • Consider or even introduce other options that may be available instead of a wage reduction, for example, alternating shifts or reduced hours.

Employers should also consider securing consent in writing before proceeding with a wage reduction.

Keep in mind however that securing consent (in writing or otherwise) will likely be insufficient in and of itself to avoid any associated liability, simply because an employee (likely reasonably so), may later argue that they only consented under duress since they felt the alternative was to lose their job in a labour market with little to no opportunity for re-employment.

3. Can I extend the layoff period for some employees while recalling others?

For some employers, the layoff period may run longer than originally anticipated. Following an evaluation of available work, a business may decide to extend their closure completely or recall only part of their workforce resulting in termination of employment for others.

The risk:

If an end date is outlined in a layoff notice that employees agreed to, then unilaterally extending the layoff date beyond that could trigger a dismissal and an employee’s entitlements to termination and/or severance pay.

How employers can reduce the risk:

If an employer is extending the layoff period, they should notify their employees of their intention and obtain their employees’ agreement to the extension.

Finally, if an employer is recalling some employees while keeping others on layoff, they should ensure they are using an objective criterion to establish who to recall and who to keep on layoff. Doing so will assist in any potential conflict with respect to bias or discrimination down the line.

If you have any questions relating to constructive dismissal claims, or terminations of employment in the workplace during COVID-19, whether you have had to layoff, if you are an employee who has had been laid off, had the terms of your employment changed, or had your employment terminated or otherwise, please contact Toronto employment lawyers Sultan Lawyers at 416-214-5111 or via email at malhert@sultanlawyers.com.


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