Temporary Layoffs in Ontario, Canada and the Impact of Changing Tariffs on Jobs

Temporary layoffs are a legal tool employers can use to temporarily suspend work without terminating the employment relationship. In Ontario, the Employment Standards Act, 2000 (ESA) outlines strict criteria under Section 56(2) that must be followed for a temporary layoff to be valid. If these criteria are not met, the layoff may be considered a termination of employment, potentially entitling the employee to severance or other compensation.

Economic shifts, including changing tariffs on goods, can also impact job stability, particularly in industries reliant on imports and exports. This article explains the rules governing temporary layoffs and how tariff changes may affect employment.

Definition and Legal Requirements of a Temporary Layoff

According to Section 56(2) of the Employment Standards Act, 2000 (ESA), a layoff is temporary if it meets one of the following conditions:

1. Short-Term Layoff:

• A layoff lasting no more than 13 weeks within a 20-week period.

2 . Extended Layoff:

• A layoff of more than 13 weeks, but less than 35 weeks in any 52-week period, provided one or more of the following conditions are met:
• The employee continues to receive substantial payments from the employer.
• The employer continues contributions to the employee’s retirement or pension plan or group insurance plan.
• The employee receives supplementary unemployment benefits.
• The employee is employed elsewhere but would be eligible for supplementary unemployment benefits if they were not working.
• The employer recalls the employee within a period approved by the Director of Employment Standards.
• The employee, if not represented by a union, is recalled within a period set by an agreement between the employer and the employee.

3. Unionized Employee Layoff:

• For unionized employees, a longer layoff may be permitted if the employer recalls the employee within the period specified in the collective agreement.
• If these criteria are not met, the layoff may be deemed a termination of employment under the ESA, requiring the employer to provide notice or severance pay.

Employee Rights During Temporary Layoffs

Temporary layoffs can have serious implications for employees, including financial uncertainty and job insecurity. Employees are entitled to several rights under the ESA:

1. Right to Recall: Employees must be recalled within the timeframe specified in Section 56(2) to avoid the layoff being classified as a termination.
2. Notice or Severance: If a layoff exceeds legal time limits or does not meet the ESA conditions, it may convert to a termination. The employee may then be entitled to:

• Termination notice or pay in lieu of notice.
• Severance pay, if applicable, based on length of service and employer payroll size.

3. Employment Insurance (EI): Laid-off employees may qualify for EI benefits to provide temporary income support during the layoff period.

Employees may also file complaints with the Ontario Ministry of Labour or pursue legal action if they believe the layoff violates the ESA.

Temporary Layoffs and Constructive Dismissal

If an employment contract does not explicitly allow for temporary layoffs, the layoff may be considered a constructive dismissal in Ontario. Constructive dismissal occurs when an employer makes significant, unilateral changes to the terms of employment without the employee’s consent. In such cases, the employee may resign and claim termination, potentially seeking compensation through a wrongful dismissal claim.

The Impact of Changing Tariffs on Employment

Tariffs are taxes imposed on imports or exports and are often used to regulate trade or protect domestic industries. Changes in tariffs can have widespread effects on jobs in Ontario, particularly in industries dependent on cross-border supply chains and international trade.

How do Tariffs Affect Employers and Jobs?

1. Increased Costs for Imported Goods:

Higher tariffs on raw materials or components can raise production costs for Ontario businesses. To manage these increased costs, employers may reduce staffing levels, resulting in temporary layoffs or terminations.

2 . Reduced Demand for Exports:

If foreign countries impose tariffs on Canadian goods, Ontario exporters may face reduced demand for their products. This can impact industries such as automotive, agriculture, and manufacturing, potentially leading to layoffs.

3. Supply Chain Disruptions:

Tariffs can create delays and shortages in key materials, disrupting production timelines and reducing the need for workers.

4 . Opportunities for Domestic Growth:

In some cases, tariffs on foreign goods may encourage consumers to buy locally produced alternatives, potentially leading to job creation in domestic industries. However, this often depends on the ability of local businesses to scale up production.

Industries Most Affected by Tariff Changes

Certain industries in Ontario are particularly vulnerable to tariff changes:

• Automotive Industry: Ontario’s auto sector relies heavily on imported components. Tariffs on auto parts can disrupt supply chains, leading to job losses and production delays.
• Steel and Aluminum: Tariffs imposed by foreign governments have caused temporary layoffs and uncertainty in Ontario’s steel and aluminum industries.
• Agriculture: Tariffs on agricultural exports, such as dairy, beef, and grains, can reduce demand for Ontario’s products, affecting farm workers and processors.

Preparing for Economic and Regulatory Challenges

Both employers and employees can take steps to mitigate the effects of temporary layoffs and tariff changes:

For Employers:

Ensure Compliance: Follow the ESA’s requirements for temporary layoffs to avoid legal claims.

• Review Employment Agreements: Have your employment agreements reviewed to ensure they include provisions that allow for temporary layoffs and comply with the ESA.
• Diversify Supply Chains: Reducing dependence on foreign suppliers can minimize the impact of tariffs.
• Employee Communication: Maintain open communication about the reasons for layoffs and recall timelines to build trust.

For Employees:

• Know Your Rights: Understand the conditions under which a layoff is considered temporary or a termination under the ESA.
• Apply for Employment Insurance (EI): If eligible, EI benefits can provide financial support during a layoff.
• Seek Legal Advice: Consult a lawyer if you believe the layoff violates your rights under the ESA or Employment Contract in Ontario.

How We Can Help?

Navigating the complexities of temporary layoffs and economic volatility can be challenging for employers. Our team of experienced legal professionals is here to guide you through these uncertain times. We provide comprehensive support, including:

• Reviewing and updating your employment agreements to ensure compliance with the Employment Standards Act.
• Advising on temporary layoffs and termination procedures to minimize legal risks.
• Helping you develop strategies to manage the impact of changing tariffs on your business and workforce.

Let us help you protect your business and employees. Contact us today to schedule a consultation and learn more about how we can assist you in navigating these challenges effectively.

The information provided in this article is for general informational purposes only and is not intended as legal advice. Readers should consult with a qualified legal professional to obtain Employment Legal Advice customized to their specific circumstances. The authors and publishers of this article disclaim any liability for actions taken based on its content.

For expert guidance on managing temporary layoffs and navigating economic challenges, contact HR Enable Inc. at 905-483-5115 today.