So You're Not an Essential Workplace in Ontario: Considerations for Managing Your Obligations to Employees During the COVID-19 Pandemic
Ontario’s emergency Order to close all non-essential workplaces took effect at 11:59 pm on March 24, 2020. All non-essential workplaces were given 36 hours to comply. At present, the emergency Order is to remain in effect until April 7, 2020, with the possibility it could extend as the situation evolves.
Non-essential employers affected by the economic downturn and measures introduced by municipal, provincial and federal governments in response to COVID-19, are increasingly looking at ways to reduce their payroll obligations by implementing one or more of the following measures: (i) wage reductions, (ii) work-sharing agreements, (iii) forced vacation scheduling, (iv) supplementary unemployment benefit (SUB) plans, (v) temporary layoffs, and/or terminations. Employers may also take advantage of the new wage subsidy introduced by the federal government.
Employers should consult with legal counsel before implementing any of the measures discussed in this Update, to assess the appropriateness and risks of the particular measure described herein.
Wage and Hour Reductions
Employers looking for an alternative to terminations or layoffs, or having reduced demand for an employee’s services, may consider requiring employees to temporarily work reduced hours in an effort to lower payroll obligations during the economic slowdown caused by COVID-19. A significant unilateral reduction in hours and wages of this nature may expose the employer to a claim by the employee for constructive dismissal. Employers considering a wage reduction should attempt to mitigate the risk of a constructive dismissal by (i) effectively communicating with employees about the situation the workplace is facing, and (ii) encouraging employees to agree to a wage and/or hours reduction.
Work Sharing
Another option that may be available for employers to avoid layoffs and terminations is to enter into a work-sharing agreement with employees and Service Canada. Under the federal work sharing program, eligible employers can enter into an agreement with their employees and Service Canada to reduce the hours of available work. Employees under a work-sharing program will be remunerated for the reduced work they perform and employment insurance (EI) will top up their salary. An employer will be eligible for a work-sharing program if (i) the employer has been in a year-round business in Canada for at least two years, (ii) the employer can demonstrate a recent decrease in business activity of at least 10%, and (iii) the employer can demonstrate that the shortage of work is temporary and beyond the employer’s control, and is not a cyclical/recurring slowdown.
The federal government introduced work sharing and other temporary special measures for employers affected by the downturn in business due to COVID-19 and for the forestry, steel and aluminum sector. The measures extend the duration of existing work-sharing agreements by an additional 38 weeks, for a total of 76 weeks, and waive the mandatory waiting period for employers with recently expired agreements to enable them to immediately apply for a new work-sharing agreement and ease recovery plan obligations.
As of the date of this Update, there is a 30-day processing time required to apply to the work-share program. Accordingly, the work-share program may not be a feasible option for employers looking to take immediate action to reduce their payroll obligations.
Forced Vacation Scheduling
Another measure employers may look to implement to avoid or delay layoffs or terminations, is the mandatory scheduling of vacation. An employer is generally permitted to schedule employee vacation, provided it is within the timeframe for vacation carryover and the vacation scheduling does not conflict with provisions to the contrary in the employee’s employment contract or the employer’s vacation policy. Most employers have the flexibility to revise their human resources (HR) policies from time to time and can amend their vacation policy as needed, to mandate using vacation time during the COVID-19 pandemic.
Supplementary Unemployment Benefit Plans
Employers who cannot provide continued employment for employees, but who want to provide additional support for their employees , may consider implementing a SUB plan. Employers can use a SUB plan to supplement their employees’ weekly EI earnings when they are unemployed due to, amongst other things, a temporary stoppage of work, illness or quarantine. Compensation paid to employees under SUB plans that are registered with Service Canada, are not considered as earnings and are not deducted from EI benefits. Accordingly, employees receiving EI benefits as a result of a temporary stoppage of work, illness or quarantine, can receive up to 95% of their normal weekly earnings if the SUB plan is registered with Service Canada, depending on the amount of top-up the employer wishes to provide.
The Government of Canada has issued guidance on the implementation of SUB plans.
Temporary Layoffs
Employers may also consider temporary layoffs. In Ontario, subject to the limitations in the Employment Standards Act (ESA), an employer may be permitted to temporarily layoff non-unionized employees without triggering a termination. Provided an employer has a contractual right to do so, or the employee(s) in question are subject to a binding HR policy allowing for temporary layoffs or consents to the temporary layoff, this may be a valid option.
There is no requirement in Ontario to provide employees with any notice of layoff or continue an employee’s compensation or benefits during a temporary layoff, except to the extent required by an employee’s employment agreement or enforceable HR policy.
Employers considering this option need to remain mindful that the temporary layoff is not to exceed 13 weeks in any period of 20 consecutive weeks, with certain exceptions. In particular, if an employer continues to provide some form of continuing compensation, including the continuing payment of employee benefits or legitimate employer sponsored retirement or pension plan or payments under a SUB plan, the temporary layoff may continue for more than 13 weeks in any period of 20 consecutive weeks provided it remains less than 35 total weeks within any 52-week period.
To the extent the layoff exceeds the maximum length prescribed by the ESA, the layoff will be deemed a termination, triggering the employer’s termination notice, severance pay, and mass-termination obligations, as applicable.
If an employer temporarily lays off employees in the absence of an employer’s right to do so, or in the absence of the consent of the affected employees, there is a risk of claims for constructive dismissal and liability for wrongful dismissal damages. In light of the unprecedented nature of the COVID-19 pandemic and its impact on businesses, courts may be reluctant to consider layoffs a constructive dismissal. However, to mitigate the risk of a constructive dismissal claim, employers should consider following the steps discussed above.
Employer’s should note that they are not be permitted to lay off an employee who has elected to take an unpaid job-protected leave under the ESA, including the new unpaid job-protected infectious disease emergency leave that was recently introduced in response to the COVID-19 pandemic. Employer’s are required to continue to make benefit plan contributions to the benefit plans of employee’s who elect to take a job protected leave under the ESA.
Following recent changes to the EI eligibility criteria in response to COVID-19, employees subject to a layoff may be eligible to receive EI for the duration of the layoff. For those employees who are ineligible to receive EI, they may benefit from legislation proposed by the federal government on March 25 to establish the Canada Emergency Response Benefit (CERB). CERB is a taxable benefit of $2,000 a month for up to four months, that will be available to workers who lose their income as a result of the COVID-19 pandemic, and who do not otherwise qualify for EI.
Termination of Employment
For employers considering the possibility of permanently terminating employees, it is important they remain mindful of all of their termination obligations. Termination obligations stem from statute, common law and contract, as applicable, and may include notice of termination (or pay-in-lieu), severance and payment of accrued but unused vacation pay.
Additionally, employers who are considering the termination of more than fifty employees should be mindful of their mass termination obligations under the ESA.
Before proceeding with any terminations, employers should seek legal advice.
Wage Subsidy
In an effort to prevent terminations and layoffs, the federal government introduced a wage subsidy that will allow eligible small employers, registered charities and non-profit organizations to temporarily reduce the amount of payroll deductions required to be remitted to the Canada Revenue Agency. The subsidy is equal to 10% of remuneration paid by an employer between March 18, 2020 and June 20, 2020, up to $1,375 per employee and to a maximum of $25,000 per employer.
Authors
Insights
-
Employment, Pensions and Executive Compensation
Ontario's Working for Workers Five Act; It May be Time to Review Your Employment Policies
Make it a Priority to Review and Update Your Employment Agreements, Policies and HandbooksEmployment law has been evolving rapidly over the past few years making it critical for employers to review… -
Employment, Pensions and Executive Compensation
Key Court Rulings Shaping the Enforceability of Employment Agreements
Employment law has been evolving rapidly over the past few years making it critical for employers to keep up to date with new case law. We suggest that employers make it a priority to review and… -
Employment, Pensions and Executive Compensation
Consideration of Government of Canada’s proposal to remove 30% rule for pension funds, Lexpert
In a recent article for Lexpert.ca, author Brian Sweigman explores how the context has changed both for Canadian pension funds, as global investment leaders seeking to maximize returns for… -
Employment, Pensions and Executive Compensation
Understanding Cyber Risks for Pension Plan Administrators, ACPM
Brian Sweigman published an article in The Observer, ACPM. Excerpt from "Understanding Cyber Risks for Pension Plan Administrators": As pension plans are increasingly relying on technology… -
Employment, Pensions and Executive Compensation
Pensions & Retirement Plans 2023 - Canada Chapter
Brian Sweigman authored the Canada Chapter of Lexology's Pensions & Retirement Plans 2023 Guide. The Pensions & Retirement Plans Guide offers a side-by-side comparison of local insights… -
Employment, Pensions and Executive Compensation
Bill C-228: The Pension Protection Act – It’s Time to Prepare
Bill C-228, An Act to amend the Bankruptcy and Insolvency Act, the Companies’ Creditors Arrangement Act and the Pension Benefits Standards Act, 1985, or the Pension Protection Act (PPA) in short…
Featured Work
-
Mining
Newmont Corporation to sell Musselwhite Gold Mine to Orla Mining for $850 million
Goodmans LLP is advising Newmont Corporation in its agreement to sell the Musselwhite Gold Mine to Orla Mining for $850 million… -
Mining
Newmont Corporation to sell its Éléonore operation to Dhilmar Ltd for $795 million
Goodmans LLP is advising Newmont Corporation in its agreement to sell its Éléonore operation to Dhilmar Ltd for $795 million in cash consideration… -
Mining
Coeur Mining, Inc. to acquire SilverCrest Metals Inc. at an implied equity value of approximately US$1.7 billion
Goodmans LLP acted as Canadian counsel to Coeur Mining, Inc. in connection with entering into a definitive agreement with SilverCrest Metals Inc., whereby pursuant to a plan of arrangement Coeur will… -
Mergers and Acquisitions
Apotex Inc. acquires Searchlight Pharma Inc.
Goodmans LLP advised Apotex Inc. in connection with its acquisition of Searchlight Pharma Inc… -
Mergers and Acquisitions
Chord Energy and Enerplus combine in $11 billion transaction
Goodmans LLP acted as Canadian counsel for Chord Energy Corporation in connection with its acquisition of Enerplus Corporation for US$3.7 billion in stock and cash, creating a leading producer in the… -
Mergers and Acquisitions
Group led by Michael Andlauer buys Ottawa Senators
Goodmans LLP acted for an entity controlled by Michael Andlauer in its purchase of the Ottawa Senators Hockey Club from the Melnyk Estate…
News & Events
-
Banking and Financial Services
Goodmans Recognized in the Inaugural Edition of Best Law Firms - Canada 2025
Goodmans is delighted to share we are featured in the inaugural edition of Best Law Firms - Canada 2025, recognizing us as one of the country’s exceptional law firms across 40 industries and practices… -
Banking and Financial Services
The Canadian Legal Lexpert Directory 2024 Continues to Recognize Goodmans
We are proud to announce Goodmans LLP has once again been recognized in the 2024 edition of The Canadian Legal Lexpert Directory.91 Goodmans lawyers have been recognized as top-tier in their… -
- 03:30 PM Technology
Brian Sweigman at EVOLVE: Benefits and Workforce Strategies Summit
Join Brian Sweigman on May 10, 2023 at 2:45 PM for The Greatest Cybersecurity Threats You Don’t Know You’re Facing session at EVOLVE: Benefits and Workforce Strategies Summit at…