So You’ve Never Implemented a Temporary Layoff: 7 Tips for Employers During COVID-19
Update: On May 29th, the Ontario government passed Ontario Regulation 228/20 - Infectious Disease Emergency Leave, which means that COVID-19 layoffs in Ontario are now leaves of absence. Read Patrizia Piccolo’s blog for more information.
Temporary layoffs are not common outside of the manufacturing setting. Employers in the professional services industry, that have office employees, or that have sales staff are implementing layoffs for the first time in their existence.
We outlined the basics and answered some of employers’ most frequently asked questions in our related blog post, “COVID-19 and Temporary Layoffs: A Short Guide and Some FAQs.” Below, we provide some practical tips for employers who are considering implementing temporary layoffs for the first time.
1. Sit tight – there’s an anticipated 75% Wage Subsidy
The federal government has already announced that it will be offering a 75% wage subsidy with respect to the first $58,700 of an employee’s wages.
Assuming that the employer has some work for its employees, or wishes to provide a payment to employees as part of a retention/recovery plan, an employer may be able to avoid a layoff and receive a substantial subsidy from the government.
We’ll update our website after the anticipated April 1, 2020 announcement from the Minister of Finance and Minister of Small Business, Export Promotion and International Trade, but the wage subsidy appears to be a quicker, less risky, and more lucrative way for employers to minimize payroll costs in the short-run than a temporary layoff, or a temporary layoff with a SUB Plan
Update: Additional details were released later in the day on April 1, 2020. Cindy Ingram has outlined the finer points of the Canada Emergency Wage Subsidy in her blog, “Canada Emergency Wage Subsidy Details Announced – What it Means for Employers and Their Employees if they Choose the CEWS”.
2. Consider Supplemental Unemployment Benefits (SUB) Plans
Employers who foresee laying off employees should consider whether they can implement a SUB Plan if the wage subsidy is not workable.
SUB Plans “top up” any EI payments received by laid off employees, and the payments are not set off against EI earnings.
Employees must be in receipt of EI in order to receive payments under the SUB Plan (so this may not be as useful for independent contractors, short-term employees, or employees who have already used up their EI entitlement).
SUB Plans must be registered with Service Canada, or any payments could be clawed back out of EI received.
3. Continue benefits coverage during a temporary layoff, if possible.
While we recognize the economic realities of this pandemic, if possible we recommend employers continue benefit coverage for employees even if the layoff is intended to last less than 13 weeks.
This gives employers the flexibility to extend the layoff beyond 13 weeks without triggering a deemed termination under the ESA.
Continuing benefits coverage helps employees, promotes health and wellbeing (which is critically important right now!), enhances goodwill, and may improve employee retention.
Further, this is another sign of a genuine intention to recall employees, which will help to thwart a constructive dismissal claim.
Address how benefit premiums will be paid or calculated depending on the employee’s usual share, if any.
4. Plan for how the business will continue with a skeleton staff
Ensure that you have coverage for any tasks that would normally be done by employees on temporary layoff. If you need certain employees, then you can’t lay them off (and may want to consider an agreed reduction in hours).
Have a plan for monitoring and responding to correspondence, email, and phone calls directed to employees who are on temporary layoff. Employees who are on layoff should not be expected to monitor their work accounts for communications. Employees are entitled to pay for hours worked, and you could be facing an unpaid wages claim post-layoff if they are working.
In a unionized environment, be cognizant of any limits under the collective agreement on the employer’s right to reassign work.
5. What about company equipment, non-standard compensation and other perks?
Consider whether you want employees to return any company property in their possession, such as company cell phones or laptops. If so, remind them that the items will be returned to them when they are recalled.
If they use some of these items for personal matters, consider permitting them to retain them but set out restrictions or limits on their use or the associated charges during the period of layoff.
Employees who receive expense reimbursements should be reminded to submit their expenses at the start of the temporary layoff. You should confirm whether you’ll be reimbursing certain expenses (e.g. car allowance) during the layoff.
Check your commission and bonus plans to see whether you need to accrue or pay commissions or bonuses during the layoff or with respect to the layoff period.
Remind your employees to set out-of-office notifications on all their work accounts.
6. Get consent to a temporary layoff, if possible.
If the employment contract or collective agreement does not reserve temporary layoff rights, employers should consider seeking employee consent to a temporary layoff.
Consent can mitigate the risk of a constructive dismissal claim down the road.
Employees may be motivated to consent to a temporary layoff rather than a reduction in hours or a termination, so that they:
o Can apply for EI or the CERB.
o Retain benefits during the layoff (provided the employer opts to continue benefits).
o Have a job to return to when this is all over.
The trade-off for consent could be participation in the SUB plan or ongoing payments (if permitted by any new legislation).
7. Diarize important dates.
Stay organized to stay onside the ESA time limits for temporary layoffs. Temporary layoffs that exceed ESA time limits constitute deemed terminations.
Diarize and set reminder notifications for each of the following dates:
o The start of the temporary layoff.
o The anticipated recall date, if one was provided.
o The 13-week mark, with a reminder two weeks beforehand.
o The 35-week mark, with a reminder two weeks beforehand.
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We understand decisions about temporary layoffs often have to be made quickly, but it’s important to get it right. There are lots of issues for employers to think through before moving ahead
To keep things moving at the workplace, we recommend thinking through on a practical and detailed level, how day-to-day functions will continue after the layoff is implemented. We also recommend giving consideration to measures that can help mitigate the impact of layoffs. Government programs may help forestall layoffs or lessen the financial impact.
And remember – this is new terrain for many employers and employees who are confronting the prospect of a layoff for the first time.
We strongly recommend that employers who decide to implement temporary layoffs seek legal advice. For additional background, some basic information and answers to FAQs can be found at our related blog post, “COVID-19 and Temporary Layoffs: A Short Guide and Some FAQs.”
