Employee Layoffs and Constructive Dismissal
Updated: Jul 31
Employee layoffs are an important part of employment law and an area that is commonly misunderstood by both employees and employers.
The current global COVID-19 health crisis has resulted in millions of Canadians being either unemployed, temporarily laid-off or working reduced hours and, as a result, there is a heightened attention on employee layoffs. While the re-opening of some businesses, services and facilities in BC over the past week will come as a huge relief to some who are resuming operations and bringing employees safely back to their workplaces, the economic fallout from COVID-19 will undoubtedly mean that many employees are not invited back to work for the foreseeable future, if at all.
LAYOFFS ARE CONSTRUCTIVE DISMISSAL AT COMMON LAW
It is crucial to understand that at common law, there is no such thing as an employee layoff or temporary layoff. Technically any discontinuance of an employee's work constitutes a constructive dismissal which can trigger an employer’s obligation to provide notice of termination or payment in lieu of notice. If there is no valid written employment agreement in place between an employer and employee that explicitly provides the employer the right to temporarily layoff that employee, that employment relationship is governed by the common law.
An employer may only layoff an employee, and only on a temporary basis, if there is a valid written employment agreement in place that provides the employer an explicit right to temporarily layoff that employee. If such a right exists, the duration of that temporary layoff must not exceed up to 13 weeks in any period of 20 consecutive weeks (for non-unionized employees) otherwise that employee is deemed terminated under the Employment Standards Act (the “Act”). For the purpose of determining the termination date in such a scenario, the employment of an employee who is laid off for more than 13 weeks in any period of 20 consecutive weeks is deemed to have been terminated at the beginning of the layoff.
STATUTORY NOTICE OF TERMINATION OR PAYMENT IN LIEU
Constructive dismissal under the common law or deemed termination of employment under the Act triggers an employer’s obligations to that employee to provide notice of termination or payment in lieu of notice. How much notice or payment in lieu of notice an employee is entitled to will depend on if there is a valid written employment in place limiting the employer’s obligations to the statutory minimums set-out in the Act or if no valid written employment agreement exists and the common law applies.
Currently the Act provides for the following minimum amount of notice, pay in lieu, or a combination of both if an employee is dismissed without cause (i.e. constructive dismissal or deemed termination under the Act). The length of notice correlates to the employee’s length of service:
employees who have worked for less than three consecutive months are not entitled to any notice;
after three consecutive months of employment, an employer becomes liable to provide an employee with one weeks’ working notice or pay an employee an amount equal to one weeks’ wages;
after 12 consecutive months of employment, an employer becomes liable to provide an employee with two weeks’ working notice or pay an employee an amount equal to two weeks’ wages; and
after three consecutive years of employment, an employer becomes liable to provide an employee with three weeks’ working notice, plus on additional weeks’ notice for each additional year of employment, to a maximum of eight weeks, or pay an employee an amount equal to three weeks’ wages, plus one additional weeks’ wages for each additional year of employment, to a maximum of eight weeks.
Under the Act, a week of pay is calculated by totalling the wages, commissions, etc. earned by the employee in the last eight weeks that he or she worked normal hours at the regular wage, and dividing that figure by eight.
COMMON LAW NOTICE OF TERMINATION OR PAYMENT IN LIEU
If there is no valid written employment agreement in place limiting an employer’s notice obligations, an employer is required to provide an employee with reasonable notice (or payment in lieu) as determined by the common law. What constitutes reasonable notice under the common law depends on the facts of each case including:
employee’s age; older employees are typically entitled to more notice;
employee’s length of service; employees who have worked for a longer period of time are typically entitled to more notice.
availability of similar employment (considering the employee’s experience, training, and qualifications); and
character of the employment (managerial or non-managerial).
Generally speaking, employees who are older, who have worked for a longer period of time, who have difficulty finding a comparable replacement job, or held a managerial position will be entitled to more notice. In Canadian Courts, 24 months’ notice has typically served as a high water mark but there have been outlier cases in which a Court has awarded more.
As an employer, providing an appropriate amount of notice, or payment in lieu of notice, to an employee who may claim constructive dismissal or whose temporary layoff will exceed 13 weeks in any period of 20 consecutive weeks can help avoid a costly and time consuming wrongful dismissal lawsuit.
As an employee, it is critical to understand that if your employment has been terminated, you have a positive duty to mitigate any damages you may experience by finding comparable new employment and there may be a host of other factors to consider before starting a wrongful dismissal lawsuit, especially amidst the national and global economic uncertainty brought on by the current COVID-19 pandemic.
If you have any questions or concerns about employee layoffs and/or constructive dismissal, please feel free to contact us. Our team of lawyers would be happy to help you navigate your matter.
Call us at (604) 736 9791, or email firstname.lastname@example.org and we would be happy to assist.
Disclaimer: This article is not intended to serve as, or should be construed as legal advice, and is only to provide general information. No portion or use of this article will establish a lawyer-client relationship with the author or any related party. Should you require legal advice for your particular situation, please get in touch with us.