Employment and Layoff Issues Related to COVID-19

The Employment Law Practice Group at McCuaig Desrochers LLP recognizes that many employers are currently being forced to make difficult staffing decisions, and likely have questions regarding the potential legal implications of those decisions. In this update, we outline a few of the options available to employers.

Please note that this document is intended to be an outline of information only, and is not legal advice. Every employment situation is unique and it is impossible to provide one-size-fits-all advice. If you have any questions or if you would like advice, we encourage you to contact any of our Edmonton Employment lawyers, who will be happy to answer questions related to the information set out below, or any other employment concerns you may have.

Temporary Layoffs

Employers may temporarily lay off an employee for lack of work due to COVID-19, but employers should be aware that even a temporary layoff can potentially result in a constructive dismissal or wrongful dismissal claim. This means that an employee could potentially make a claim that they have been dismissed (i.e. their employment terminated) and that they are entitled to severance pay. Whether it makes sense for an employee to take this position will vary from situation to situation. Moreover, given the extraordinary nature of the current pandemic, it is not clear how courts will treat constructive dismissal claims arising out of Coronavirus-related temporary layoffs.

Temporary layoffs are governed by the Employment Standards Code, which sets out specific requirements, including that a written layoff notice must be given to an employee within a certain amount of time before the layoff is set to begin. The amount of notice required depends upon the employee’s length of service and the urgency of the situation. The Employment Standards Code additionally sets out numerous specific requirements regarding the content of a temporary layoff notice.

Under ordinary circumstances, an employee is deemed to be terminated if he or she is laid off for more than 60 days within any 120 day period (for most employers, the layoff period involves consecutive days). However, as of Monday, April 6, 2020, the Government of Alberta has announced that it is increasing the maximum temporary layoff period from 60 days to 120 days, and that this change will retroactively apply to Coronavirus-related temporary layoffs that occurred on or after March 17, 2020. Furthermore, the Employment Standards Code allows employers and employees to extend the temporary layoff period ever longer, by agreement, provided that certain conditions are met.

Prior to the current pandemic, employees who were temporarily laid off were usually entitled to Employment Insurance (EI) benefits, which were capped at 55% of the employees’ wage up to a maximum of $573 per week. However, due to the COVID-19 pandemic, the Federal Government has instituted changes to the EI program as follows:

  • Applications for EI submitted after March 15, 2020 will be automatically processed through the Canada Emergency Response Benefit (“CERB”) program. Accordingly, employees laid off after March 15, 2020 will receive the CERB, which is a weekly benefit of $500 for up to 16 weeks.
  • If a laid off employee remains entitled to EI benefits after the expiry of the CERB, he or she may obtain regular EI benefits after the CERB expires.

One option available to employers in conjunction with temporary layoffs is to participate in the Supplementary Unemployment Benefit Plan (the SUB Plan), discussed below.
If temporary layoffs are not a usual practice for your business, or if your standard offer letters or employment contracts do not specifically contemplate temporary layoffs (most do not), we invite you to contact our Employment law group regarding potential litigation risks before temporarily laying off any employees.

Supplementary Unemployment Benefit Plan (“SUB Plans”)

A SUB Plan is essentially a plan that allows employers to “top up” employees’ EI benefits up to a maximum of 95% of the employees’ regular weekly earnings.

A SUB Plan must be registered with Service Canada, otherwise top up payments may be treated as income by Service Canada, which could impact the employees’ EI entitlements. The registration process is relatively simple and straightforward. Once an employer registers a SUB Plan (by email or fax) and the employees begin receiving EI, the top up payments can begin.
Note that there is no requirement to top up to the maximum of 95% – any amount of top up can be provided, so long as the total amount an employee receives (i.e. EI + top up) does not exceed 95% of what is normally paid.

The top up cannot be paid in a lump sum. It must be paid periodically (i.e. weekly or bi-weekly). These top up payments must also be reported by both the employer and employee.
If you have any questions about this program and how to register, we encourage you to contact one of our lawyers for more information and legal advice.

Employment Insurance Work Sharing Program

This option allows employees to collectively reduce their normal hours of work (and pay), and receive Employment Insurance (EI) benefits in addition to their salary/wages. The goal of the program is to avoid layoffs by providing income support to eligible employees who agree to work a temporarily reduced schedule while their employer recovers economically. The program contemplates that groups of workers who perform similar duties will have their hours equally reduced (at least 10% to a maximum of 60%).

Generally, the program provides an opportunity for employers to retain qualified and experienced workers while also allowing employees to retain their employment, maintain their work skills, and collect EI benefits for lost hours.

The Work Sharing Program is attractive to both employers and employees for self-evident reasons. The main challenge with the Work Sharing Program is that it requires employers to apply and be approved before implementation of the plan. Prior to the COVID-19 pandemic, the application processing period was 30 days. However, the Federal Government has recently announced that it is expediting Work Sharing Program applications and that it is attempting to process applications within approximately 10 days. This approximate 10 day period is a goal and not a guarantee.

Some of the other notable changes that have been made to this program to support employers and workers affected by COVID-19 are as follows:

  • extending maximum possible duration from 38 weeks up to 76 weeks
  • waiving the mandatory cooling off period if you have previously used the program
  • simplifying the application process
  • easing eligibility requirements

Our employment law lawyers can assist you in determining if you are an eligible employer, which of your employees are eligible for this program, what your obligations are within this program, and how to prepare and submit an application for a Work Sharing Agreement.

Temporary Wage/Salary Reductions

Some employers are putting temporary wage/salary reductions into effect. Pursuing this route can potentially result in constructive dismissal claims being advanced by affected employees. Whether it makes sense for an affected employee to assert a constructive dismissal will vary from situation to situation. If you are considering unilateral wage/salary rollbacks or reductions, we strongly recommend that you first obtain independent legal advice.

Contact Information

If you wish to consult with a lawyer from the McCuaig Desrochers LLP Employment Law Practice Group to best assess your situation, please refer here for our contact information:

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