Economic shifts, seasonal slowdowns, and unexpected business challenges can sometimes force employers to reduce work hours or pause operations temporarily. In situations like these, employers may consider implementing a temporary layoff. However, under Ontario employment law, there are important rules that employers must understand before taking this step.
At Norbram Group Insurance Benefits, we work closely with small businesses across Acton, Halton Hills, the GTA, and surrounding communities, and we know how important it is for employers to stay informed about employment regulations that affect both their workforce and their benefit plans.
What is a Temporary Layoff?
A temporary layoff occurs when an employer temporarily reduces or stops an employee’s work and pay without ending the employment relationship. The intention is that the employee will return to work once business conditions improve.
Temporary layoffs often occur due to factors such as:
- A shortage of work
- Seasonal fluctuations
- Operational restructuring
- Economic downturns
Although the employee is not actively working during a layoff, the employment relationship is expected to continue in the future.
Can an Employer Temporarily Lay Off an Employee?
In many cases, employers cannot legally place an employee on a temporary layoff unless the employment contract allows it or the employee agrees to it.
Most employment contracts in Ontario do not contain specific layoff provisions. Because of this, temporary layoffs are more commonly seen in unionized workplaces, where collective agreements often include detailed layoff language.
If an employer does have the contractual right to temporarily lay off employees, they must still follow the minimum standards set out in Ontario’s Employment Standards Act, 2000 (ESA).
Under the ESA, employers generally do not need to provide a specific recall date, unless the employment contract or collective agreement requires one.
What Happens if Layoff Rules Are Not Followed?
If an employer places an employee on a temporary layoff without contractual authorization or employee consent, it may be considered a significant change to the employment agreement.
In these cases, the layoff could be treated as constructive dismissal, meaning the employee may be entitled to:
- Reasonable notice of termination
- Termination pay
- Potential severance obligations depending on the situation
Employers should therefore approach temporary layoffs carefully and ensure they are compliant with employment legislation before proceeding.
How Long Can a Temporary Layoff Last?
The Employment Standards Act, 2000 outlines specific limits on how long a temporary layoff may last.
A layoff may be considered temporary if it meets one of the following conditions:
1. Up to 13 weeks in any period of 20 consecutive weeks.
2. More than 13 weeks in a 20 week period, but less than 35 weeks in a 52 week period if certain conditions are met, including situations where:
- The employer continues paying wages to the employee
- The employer continues contributions to a legitimate pension plan
- The employer maintains contributions to a group insurance or employee benefits plan
- The employee receives supplementary unemployment benefits
- The employee works elsewhere temporarily but would otherwise qualify for supplementary unemployment benefits
- The employee is recalled within a timeline approved by the Ministry of Labour
- There is a written agreement between the employer and employee outlining the recall period
Unionized employees may also be subject to different timelines depending on the collective agreement between the employer and the union.
If a layoff exceeds the allowable timelines under the ESA, it may be treated as a termination of employment, which may trigger termination and severance obligations.
How Temporary Layoffs Can Impact Employee Benefits
Temporary layoffs can also affect group insurance coverage, including health, dental, disability, and retirement plans. In some cases, employers may continue benefits coverage during the layoff period, while in other cases coverage may be paused depending on the plan structure.
Employers should review their benefits policy carefully before implementing layoffs to ensure compliance and to communicate clearly with employees about what happens to their coverage during this time.
At Norbram Group Insurance Benefits, we help employers understand how layoffs can affect their benefits plans and assist in coordinating coverage options when workforce changes occur.
Staying Compliant and Supporting Your Team
Temporary layoffs can be a useful tool for businesses facing short term economic challenges, but they must be handled carefully to avoid legal risks and maintain trust with employees.
Employers should consider seeking guidance before implementing layoffs to ensure they comply with employment legislation and that employees are informed about their rights and benefits coverage.
If you have questions about how layoffs may impact your group benefits plan or employee coverage, the team at Norbram Group Insurance Benefits is here to help.
Need Guidance?
If you are a business owner in Acton, Halton Hills, the GTA, or surrounding communities, and you would like to better understand how workforce changes affect your employee benefits program, we would be happy to assist.
Contact Norbram Group Insurance Benefits today to learn more about protecting your employees and keeping your benefits plan running smoothly.
