Layoff versus Termination

Businesses have struggled during this turbulent COVID-19 era, and many employers have had to implement temporary layoffs of its employees. Despite the intention to layoff and eventually rehire those same employees, however, if the layoff does not comply with the law, the “layoff” could become a termination with legal consequences for the employer.

So, what is a layoff? A layoff is a temporary hold on work, usually due to a decreased or ceased workload. During this period, those laid off are regarded as employees of the business, and they are expected to receive certain benefits and entitlements. According to the Employment Standards Act (BC), a temporary layoff occurs when:

• An employee is laid off for no more than 13 weeks in any period of 20 consecutive weeks; or

• An employee is laid off for more than 13 weeks in any period of more than 20 consecutive weeks if the layoff is less than 35 weeks in any period of 52 consecutive weeks; during this time certain benefits and entitlements continue to accrue and the employee is to be recalled within the time approved.

It is important to know that, under the Employment Standards Act (BC), employers are only permitted to temporarily layoff employees if:

• The employment contract expressly permits temporary layoffs;

• Temporary layoffs are common in the industry in which the business operates, i.e. when the work is seasonal;

• The employee and employer both agree to the layoff.

As a result of the pandemic, the Employment Standards Act (BC) was amended to allow “extended” layoffs if the layoff was related to the “COVID-19 Emergency”. Accordingly, layoffs could be extended up to a maximum of 24 weeks in any 28 week period, ending on or before August 30, 2020. Employers who wished to extend any pre-June 1, 2020 layoffs past August 30, 2020, were required to apply for a variance before the expiry of the extension period.

If an employer fails to meet the maximum length of lay off requirement for an employee who has been laid off, the employee could be considered terminated without cause, which will often trigger notice or severance obligations. An employer’s failure to pay adequate severance pay to an employee upon termination can lead to claims of wrongful dismissal. It is, therefore, important for employers to understand and follow the rules related to the layoff of employees, and, of course, seek legal advice when in doubt.