COVID 19 Update: Temporary Layoffs During COVID-19

In March, businesses began to experience downtowns as a result of the economic impacts of COVID-19. As a result, many employers made the difficult decision to temporarily lay off their employees. The parameters of temporary layoffs are set out in the Employment Standards Act (BC) (“ESA”).

An employer is only permitted to temporarily layoff an employee in the following situations:

(a)            The employee’s contract expressly permits it;

(b)            The employer is in a business in which temporary layoffs are a common industry-wide practice; or

(c)             The employee agrees to the temporary layoff.

Under normal circumstances, an employer is permitted to layoff an employee in one of the above scenarios for no longer than 13 weeks in a consecutive 20 week period. However, on May 4, 2020, the Employment Standards Act Regulation, B.C. Reg. 396/95 was amended to extend the temporary layoff provisions due to COVID-19.

The amendment extends the period such that an employee may be temporarily laid off for up to 16 weeks in that same 20 week period where COVID-19 was a contributing cause of the layoff. If an employee’s layoff was not as a result of the COVID-19 pandemic then the extended temporary layoff period does not apply. This COVID-19 temporary layoff provision is an attempt to address the unprecedented economic circumstances surrounding COVID-19 and will be repealed when it is no longer necessary.

What to do after 16 weeks?

We are fast approaching the 16 week mark of the COVID-19 pandemic. It is likely there will remain many employers who continue to feel the economic impacts of the pandemic and will therefore be unable to bring back their temporarily laid off employees. If that’s the case, what should the employer do next?

In the Pre COVID-19 world, if an employee is temporarily laid off for a period longer than the time permitted by the ESA, the employer will be considered to have terminated the employment and the employee will be entitled to severance pay under the ESA or damages for wrongful dismissal at common law, depending on the employee’s contract.

However, as a result of COVID-19, an employer’s obligation to pay severance pay may be minimized or even relieved. If the layoff was caused by COVID-19 then it is likely that no severance pay will be owing under the ESA and the employee may not have a claim for wrongful dismissal damages.

If an employee is not brought back from their temporary layoff caused by COVID-19, it is possible that the severance provisions under section 63 (individual severance) or section 64 (group termination) will not apply as a result of section 65(1)(d) of the ESA which states that no severance is owing if an employee is:

(d) employed under an employment contract that is impossible to perform due to an unforeseeable event or circumstance.

There is an argument to be made that COVID-19 is an unforeseeable event that makes the employment contract impossible to perform. In fact, the Director of Employment Standards recently issued a bulletin outlining when the s. 65(1)(d) exclusion may apply. The Director stated:

“If a business closure or staffing reduction is directly related to COVID-19 and there is no way for employees to perform work in a different way (for example, working from home) the exception may apply to exclude employees from receiving compensation for length of service and/or group termination pay.

This exception is not automatic in all situations during the pandemic. If an employer terminates an employee for reasons that are not directly related to COVID-19 or if the employee’s work could still be done (perhaps in a different way, such as working from home) the exception would not apply. Decisions on whether this exception applies are made by the Director on a case-by-case basis.”

As such, as the 16 week mark begins to approach, and employers become aware that they will not likely be recalling some or all of their temporarily laid off employees, employers will want to carefully consider whether s. 65(1)(d) applies or whether they will be required to pay severance pay to their employees, which may include: (a) minimum standards under the ESA; (b) the right to reasonable notice of termination at common law; (c) termination provisions in an enforceable, written employment contract; or (d) in a unionised workplace the termination provision, if any, contained in a collective agreement.

COVID-19 is a novel and evolving situation and, while there has been some guidance provided by the Director of the Employment Standards, it remains unclear how the Courts will treat COVID-19 in relation to an employee’s termination. If an employer is considering not bringing back its temporarily laid off employees, we strongly suggest that they seek legal advice regarding their potential severance obligations before making any decisions.

Read more EKB Updates about the legal implications of COVID-19 and the impact on B.C. business