temporary layoffsTo say the COVID-19 crisis is fast moving and ever-changing is quite an understatement. We have been inundated with calls the past few weeks from clients with questions on how to manage their employees during these difficult times. What started as basic questions on how to communicate safe hygiene practices, has evolved to questions on self-isolation, working from home, payroll issues, helping employees with Employment Insurance and, most recently, temporary layoffs and other measures that can be taken to reduce payroll expenses.

Here is a round-up of the most common questions we have been recently asked about temporary layoffs and other options to reduce payroll costs:

1) How do we do temporary layoffs? Are they allowed?

Employers cannot just stop paying employees (i.e. layoffs) because circumstances require it. Temporary layoffs, per the BC Employment Standards Act (“BC ESA”), can occur only if it is expressly provided for in the employment agreement, it is a well-known industry-wide practice, or it is agreed to by the employee. For the majority of our clients, agreement by the employee is required because layoffs are not usually a term of the employment agreement nor are they an industry-wide practice.

If an employee agrees, preferably in writing, an employer in BC can temporarily layoff an employee for 13 weeks in any consecutive 20-week period. If the employee is recalled during this period, they come back to work. If the employee is not recalled within the 13 weeks, then a termination of employment would occur at the end of the 13 weeks. At that time, the employer owes the employee termination/severance pay per the terms of their employment agreement which, at a minimum, must meet the requirements of the BC ESA. Severance pay in excess of the minimum BC ESA requirements may be required if the BC ESA requirements are not specifically referenced in your employment agreement.

If an employee does not agree to the temporary layoff, your choices would be to continue to employ them as normal or to terminate employment, at which point termination pay would be owed.

Implementing temporary layoffs gives the employer some time to turn the business around, in hopes that normal business activities will resume during the 13 weeks. During the period of temporary layoff, employees can receive EI if they are eligible.

Each province, as well as federally-regulated employers, have different definitions and requirements for what a temporary layoff entails so please check with the appropriate regulatory body for the definitions in your jurisdiction. Rules around layoffs for unionized employees would be covered by the collective agreement.

Please also note that any fundamental change in the terms and conditions of employment by the employer (including pay, benefits, hours of work, etc.) could lead to a constructive dismissal complaint, which could result in additional financial obligations to the employee.

 

2) I know lots of employers who aren’t following the process you recommend and have just laid people off. How did they do it?

With the quickly-changing restrictions that we are experiencing, some employers have had to shut down operations with little to no notice. Many employers also cannot afford to continue paying employees when their business is severely impacted by the COVID-19 crisis.

In these desperate times, employers are likely doing what they can to survive, hoping that the immediate measures they take will allow them to weather the storm until the restrictions are lifted and the crisis passes. With that in mind, we are hearing from a number of clients that other companies are imposing layoffs without asking for agreement, or they are simply terminating employment without notice or pay in lieu of notice with a promise to bring employees back when things turn around, or a myriad of other scenarios.

These employers are likely acting out of compliance with legislation. They are hoping that employees won’t file a complaint or will go along with the change because they have limited other options. In many cases, they may be able to implement the changes with no challenges from employees. Their intentions are well-meaning and their employees understand that without these changes, the business may be in serious jeopardy. In other cases, those employers may face legal challenges (e.g. constructive dismissal or wrongful dismissal claims), employment standards complaints, human rights complaints, or any number of other challenges.

Our advice is to understand your rights and obligations as an employer. Then, make an educated choice on what approach you will take, weighing the pros/cons, potential consequences and financial risk.

 

3) Do I need to continue benefits while employees are on temporary layoff?

We’d strongly suggest continuing benefits, if possible, during a period of temporary layoff. As benefits could be considered a fundamental term of employment, eliminating them could be cause for a constructive dismissal complaint from the employee.

Also, at a time of health crisis, that is when employees need their benefits the most. By discontinuing benefits unilaterally, the company could be exposed to significant risk if the employee needs the benefits but the benefits are not available to them.

Imagine a scenario where an employee has their life insurance or long-term disability benefits discontinued, and during their period of temporary layoff, they suffer a fatal accident or get critically injured. If they need LTD benefits after recovery, or their beneficiary would have been entitled to life insurance should the employee still have been covered, it could be that the employer becomes liable to cover those expenses.

Employers should check with their benefits broker or insurance company to confirm coverage eligibility during a period of temporary layoff.

 

4) What other options should I be considering besides temporary layoffs?

For many employers, it is a time to tighten the purse strings and look for ways to reduce expenses, to ensure their company’s survival post-COVID-19. In addition to the new financial options available to businesses through the federal and provincial governments, other payroll cost savings measures that can be considered include:

  • Wage reductions – Employers can consider a short-term wage reduction, usually with a corresponding reduction in hours, to reduce payroll costs.
  • Suspend extraordinary payments or perks – Cut back on transit passes, RRSP contributions, vehicle allowances, wellness accounts, etc.
  • EI Work Sharing – If multiple employees can share work, consider a Work Sharing program which allows employees to work reduced hours and collect EI.
  • Supplemental Unemployment Benefit Plan – Rather than paying full salary to employees, they can be temporarily laid off to apply for EI and the employer can top up EI benefits up to 95% of the employee’s regular earnings.

Ideally, before implementing any of the above, you would communicate to employees why such measures are required and how their agreement would help ensure the company’s survival. As mentioned earlier, you require the employee’s agreement or else you risk potential legal challenges.

One creative measure that employers can consider is partnering with other employers who are experiencing a labour shortage during this time so see if they would temporarily hire your employees. Meal delivery services, grocery stores, delivery companies, medical manufacturers, telecommunications companies and IT companies are all hiring in large numbers at the moment to meet increased demand for their services.

 

5) I’ve made job offers to candidates and they’re about to start work with us. Can we revoke or postpone their job offer?

Revoking a job offer is not something we’d recommend lightly, considering the amount of time and effort it took to fill the vacancy. If you revoke the offer now, it is likely the candidate will not be available when you need them later, not to mention the potential legal ramifications of revoking an accepted offer.

Consider whether there is onboarding and other training the candidate can undertake until business returns to normal. If employees are working remotely, can the candidate do their initial training remotely as well? If work needs to take place onsite, is there a way for them to start onboarding while maintaining social distance?

It may be that the employee starts work for a short period of time and then gets laid off with other staff.

Our suggestion is to contact the candidate and discuss options with them. It is possible that, given their personal circumstances, they would like to postpone their employment start or they can no longer accept the offer. Reiterate that you would like to employ them, but that given the current circumstances, you may need to consider other options until business resumes as normal.

 

We all need to do our part by practicing social distancing to help control the spread of COVID-19, to keep our communities safe, to protect the elderly and those who are particularly vulnerable, and to #PlankTheCurve. In the words of Prime Minister Justin Trudeau, “Enough is enough. Go home and stay home.” Take care of yourself and your families.

While we’re working from home as well, it’s business as usual for us at Clear HR Consulting. We’re here to help you however we can.

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