Backgrounder: Extension of lay-off periods - Temporary measures under Part III of the Canada Labour Code

Backgrounder

Due to the COVID-19 pandemic, and the subsequent economic crisis, many employers in the federally regulated private sector have temporarily laid off their employees. While employers may have every intention of bringing employees back to work once the economy starts to pick up again, they may not know exactly when, and it may not be within the next few months.

Prior to the amendments, section 30 of the Canada Labour Standards Regulations (Regulations) provided that a temporary layoff would not be deemed a termination of employment for the purposes of the Canada Labour Code (Code) in certain circumstances. These circumstances included where the term of a layoff was for less than three months (paragraph 30(1)(c)) and where the term of the layoff was for six months or less and the employer notifies the employee in writing of the date or period within which they would be recalled to work (paragraph 30(1)(d)). However, once this time period expired, or if the employer had not recalled the employee by the specified date, the employee’s employment would be deemed terminated.

As per the Regulations, some employees who were laid off in March or April 2020 as a result of the COVID-19 pandemic would have seen their employment deemed terminated as early as June or July 2020 for layoffs that are three months or less. Other employees would have seen their employment deemed terminated within the next few months for layoffs that are longer than three months, but not longer than six months, where the employer provides an expected recall date.

When a layoff becomes a termination of employment, employees who meet eligibility requirements under the Code are entitled to severance pay, termination pay (if notice of termination of employment was not provided) and any accumulated vacation pay. This financial requirement for employers could put additional pressures on the viability of businesses. This is particularly problematic when many employers see these layoffs as a temporary measure and they intend to recall these employees once the economic situation improves.

For employees who have been temporarily laid off, although termination could entitle them to severance pay and/or termination pay, the prospect of having their employment terminated could further aggravate their precarious situation by cutting their ties to employment.

The amendments, which are now in force, temporarily extend certain time periods set out in the Regulations to give employers more time to recall employees who have been laid off. Specifically,

  • The period of three months or less set out in paragraph 30(1)(c) is extended:
    • by six months for employees laid off prior to March 31, 2020; and
    • to December 30, 2020 for employees laid off between the period of March 31, 2020 and September 30, 2020.
  • The fixed date or fixed period in the written notice given under subparagraph 30(1)(d)(i) is extended:
    • by six months or until December 30, 2020, whichever occurs first, for employees laid off prior to March 31, 2020; and
    • to December 30, 2020 for employees laid off between the period of March 31, 2020 and September 30, 2020, and where the fixed date or fixed period specified in the written notice occurs before December 30, 2020. If the fixed date or fixed period specified in the written notice occurs on or after December 30, employers will have until that date to recall their employees.

The amendments to the Regulations are only extending the period of time a temporary layoff is permitted, or, in other words, the length of time an employer may recall a laid off employee before their employment is deemed terminated. At any point, if an employee’s employment is terminated by the employer, the employer is required to pay the employee eligible termination pay, severance pay and vacation pay as outlined in the Code.

In addition, the time that an employee is laid off will continue to count towards their continuity of employment and will thus be factored into the calculations for termination pay and severance pay if their employment is eventually terminated. The amendments do not impact an employee’s right to eligible termination, severance and vacation pay upon termination.

The amendments do not apply to employees whose employment has already been terminated prior to the coming into force of the amendments, nor do they apply to employees who are covered by a collective agreement that contains recall rights.

This is a temporary measure and these amendments have no impact on layoffs beginning after September 30, 2020.


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