Layoff - Forte Law

Employment Law, Layoff, Wrongful Dismissal

BC Court Awards Punitive Damages to Employee based on Errors in Employer’s Termination Letter

The fine print matters in termination letters, even in mass layoffs. The wrongful dismissal case of Moffatt v. Prospera Credit Union, 2021 BCSC 2463 is a cautionary tale for employers in British Columbia. In Moffatt, the Court took the highly unusual step of ordering the employer to pay punitive damages for mistakes in its termination letter. In doing so, the Court recognized the vulnerability of recently terminated employees:

This is a situation concerning recently terminated employees who are potentially significantly vulnerable, and in distress. The Defendant’s lack of attention to detail in the termination letter, especially where the errors fall so clearly in their favour, is unacceptable, and draws an award of punitive damages.

The errors in the termination letter included: (1) an offer of two weeks pay pursuant to the Employment Standards Act which was less than the three months the employee was entitled to receive based on her employment contract, and (2) a doubling of the non-solicitation period of the employee’s contract. The Court also noted that the employer instructed the employee to sign a release of claims within one week.

Punitive damages are rarely awarded in wrongful dismissal cases. The Supreme Court of Canada has stated that “conduct meriting punitive damages awards must be ‘harsh, vindictive, reprehensible and malicious’, as well as ‘extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment.’” Honda Canada Inc. v. Keays, 2008 SCC 39.

In Moffatt, the employer argued that the errors were not intentional, harsh, vindictive, reprehensible or malicious, but were an oversight that occurred while preparing over 100 termination letters as part of a reorganization. Basically, the argument was that it was just a mistake. In rejecting this argument, the Court stated:

[T]here is an obligation on an employer terminating an employee in such circumstances to act in good faith and reasonably. A ‘cookie cutter’ termination letter drafted without regarding to the individual circumstances of each employee falls short of the standard required.

* * *

The volume of termination letters an employer issues does not lessen the obligation to ensure they are correct. There is no volume discount on correctness for termination letters.

The employer also argued that it was willing to correct the errors when the employee’s lawyer pointed them out. The Court refused to let the employer off the hook:

The Defendant’s argument highlights the crux of the problem. In this instance, the Plaintiff hired a lawyer. Had she not, these errors may not have been discovered and corrected. Given the circumstances of a termination, and its highly emotionally charged nature, it is equally as likely that the plaintiff, or others in her position, could have simply signed the termination letter.

The Court acknowledged the test for punitive damages from Honda but noted that punitive damages may also promote the goals of deterrence and denunciation. The Court went on to award punitive damages for the “purposes of deterrence and denunciation” in the amount equivalent to two-and-a-half months’ salary which was the amount the employee would have lost if she had signed the termination letter. While not calculated in the decision, this appears to be around $7,500 in punitive damages. The punitive damages were in addition to an award of 3 months’ pay in lieu of notice.

Lesson for Employers: Termination letters should be prepared meticulously with careful reference to the employee’s employment agreement and the requirements of the Employment Standards Act. Even innocent mistakes can be costly.

Lessons for Employees: Do not take an employer’s termination letter at face value. Refer to your employment contract and the Employment Standards Act before signing a termination letter or release and have your termination package reviewed by an experienced employment lawyer.

This blog is not intended to serve as legal advice, and only provides general information. Every situation must be considered on its own facts. Need legal advice? Contact us by phone at 604 535-7063 or email [email protected].

Employment Law, Layoff

Layoff in the News

Layoffs in the News – What are the Rules?

With recession in the headlines and daily reports of companies in the tech sector laying off large numbers of employees, many people are wondering what the difference is between a layoff and a termination and what their rights are in either circumstance. Here are some frequently asked questions, answered for non-unionized employees in British Columbia.

My employer told me I have been laid off. What does that mean?

A layoff in most cases is the same thing as being terminated or fired. Once an employer is no longer providing work to be done or paying an employee, employment has ended. Since layoffs are driven by the financial circumstances or strategic decisions of the employer, and not employee misconduct or poor performance, notice or severance pay is owed.

Employers can only lay off an employee without effectively terminating their employment if:

The employment contract expressly allows for temporary layoffs;
Layoffs are a well-known and longstanding industry-wide practice (like in logging where work cannot be performed at certain times of the year); or
The employee agrees to the layoff.

Even if one of these conditions apply, the layoff must be short-term and temporary under the BC Employment Standards Act. Unless one of these conditions exists, then a layoff is the same as a termination of employment.

If I am laid off because my company is having financial trouble, do I still get severance pay?

Yes, in most cases you are still entitled to reasonable advance notice of termination or severance pay. The employer’s financial situation generally does not impact your entitlement to severance pay. Unless there is a bankruptcy or other similar legal proceeding underway, the financial situation of the employer does not impact the requirement to pay employees severance or provide notice.

What if I am part of a large group of employees being laid off?

If 50 or more employees are terminated from the same location within a 2-month period, as a minimum standard, the employer is required to give specific notice, or pay in lieu of notice as set out by the BC Employment Standards Act. The amount of notice depends on how many employees are being laid off but can range from 8 weeks to 16 weeks.

Over and above the Employment Standards Act minimum requirements, employees are often entitled to common law severance. In determining how much severance pay is required, judges will consider availability of alternative employment. In an industry downtown or recession, this may mean that more severance is owed than in a job seekers market.

Do I need to hire a lawyer if I am laid off?

An employment lawyer can assess your severance pay entitlements taking into consideration your contract, legislation, and legal precedents, so you know whether what you have been offered is fair and reasonable. If the offer is not reasonable, our lawyers will build a gameplan with you to negotiate for something fair. In most cases this can be done in a single meeting, for a flat fee. We don’t take a percentage of your severance pay. Contact us at [email protected] or 604-535-7063 for more information.

Covid-19, Layoff

Covid Layoffs are Ending in BC, Now What?

Covid Layoffs are Ending in BC, Now What?

For workers and businesses in BC, ongoing changes to the temporary layoffs allowed by the Employment Standards Act (“ESA”) have been hard to track. Pre-pandemic, temporary layoffs could not be longer than 13 weeks. During the pandemic, our provincial government extended the allowed layoff length a few times and we are now coming to the end of the latest extended layoff period.

At the time of writing this blog, temporary layoffs due to Covid that started before June 1, 2020 are to a maximum length of 24 weeks, or must end on or before August 30, 2020, whichever is sooner. Assuming there are no more changes, what does this mean for businesses or workers covered by BC Employment Standards with temporary layoffs that started before June 1, 2020?

Deemed Termination

If nothing happens, and a worker remains on temporary layoff as of August 30, 2020, their employment is deemed to be terminated by the ESA. That means that their employment relationship ends and they are generally owed severance pay of at least the minimum amounts under Section 63 the ESA of 0-8 weeks, depending on length of service. Severance could be much more than these minimums if there is a group termination of more than 50 workers at a single location, or if common-law severance is owed.

There is an exception to severance pay requirements were an employer can prove that Covid-19 made the employment contract impossible to perform (see Section 65(1)(d) of the ESA). This is called “frustration of contract” and is assessed on a case-by-case basis. Not every business that has been impacted or had to downside because of Covid-19 will be able to use the frustration defense, and this is a new application of law, so quite unpredictable.

Variance

Employers in BC have the option to apply for a “variance,” to extend the temporary layoff period past August 30, 2020. Employers must submit an application for a variance by August 25, 2020, and it must include the expected recall date, as well as evidence that 50% or more of impacted employees agree with the variance request. The variance application link and information are here.

Return to Work

The final option is for businesses to bring workers back from layoff before August 30, 2020. This may involve a return to the worker’s pre-layoff job and schedule, or there may be changes needed. There is potential for disagreement and possibly constructive dismissal claims based on changes, which are complex legal matters. One thing that is set by the ESA is if wages are reduced by 50% or more, the worker is still considered to be on layoff, and so the deemed termination could still take place.

In this unprecedented time of change to our employment laws, it is important to verify the current status before you make decisions. The best source of up-to-date information is the BC Government’s Employment Standards Act website. Seek advice from an employment lawyer if the ESA does not apply to you, if you are considering a return to work agreement or to get information about severance requirements.

Covid-19, Layoff, Resignation

Work Refusals and Covid-19: Risky Business Indeed

Covid-19 has put workers and employers in a difficult position. Many have lost their jobs, and others find themselves trying to work remotely for the first time, surrounded by their school-aged children. But what about those still going in to work? Some workers are feeling afraid and uncomfortable, watching those around them be told to stay home, while they go out into a minefield.

What happens if a worker refuses to go to work? For this blog, we will assume that the employer has done everything right in terms of complying with WorkSafe BC and Public Health Authority recommendations. But the worker still feels uncomfortable. What happens if that worker refuses to work or walks away from their job?

Refusal to work can be a quit

Repeating our assumption that the employer is complying with all government recommendations and requirements, fear or discomfort alone does not give the worker the right to refuse to come to work. If an employer is willing to continue employment, but the worker refuses to work out of fear or discomfort, then they may be in effect quitting their job. This would mean employment and all benefits come to an end, with no termination or severance pay.

There would be exceptions to this if the worker falls within the new protected leaves under the BC Employment Standards Act. For example, if they are uncomfortable coming to work, AND they have minor school-aged kids at home that need care. In this case the requirement to care for children would be the basis for an unpaid leave from work, and the worker may be eligible for CERB.

CERB can be lost due to work refusal

Today, applications for CERB opened, to the great relief of many. Under the current legilsation, Canada Emergency Response Benefit (“CERB”) is payable to workers who have “ceased working for reasons related to COVID-19” for at least 14 straight days.

When considering refusing to work due to fear or discomfort, workers need to understand that CERB may be denied or clawed back. The legislation specifically states that quitting a job voluntarily does not meet the requirement of “ceased working for reasons related to COVID-19.”

EI can be lost due to work refusal

For many workers, Employment Insurance (“EI”) would be available if they were laid off due to lack of work or went on a medical leave. EI is generally not available to a worker who quits. The exception to this is a worker may quit and still get EI if they are able to prove that they had “just cause” to leave that job. What is “just cause” to quit your job and still get EI? To paraphrase a Federal Court of Appeal judge, just cause means convincing the Canadian taxpayers that they should pay you money for your decision to become jobless. That sounds like a high bar to meet, but it is not impossible.

Under EI law, you may have “just cause” to quit your job if you can prove two things:

Your workplace was a danger to your health and/or safety; and
You had exhausted all reasonable avenues before quitting.

A work refusal due to fear and discomfort, rather than an objective safety risk, is not likely to be “just cause.”

Work refusals are risky for workers and employers

The stakes are very high for workers and business for work refusals. We recommend that any worker considering a refusal to work get good legal advice before taking that step. A loss of access to 16 weeks of CERB is $8,000, not to mention loss of potential severance pay.

For employers faced with a work refusal, there is also risk. With the changing workplace safety requirements, it can be hard to know if you are compliant. Any negative treatment of a worker after they make a safety complaint could be a Discriminatory Action, and get you in hot water with WorkSafe BC. If you are aware that the worker could be entitled to a protected leave and ignore that, there is risk of an Employment Standards complaint.

Need help navigating work refusals? We advise both workers and employers with proactive advice to avoid large losses down the road.

Layoff

Layoffs in a Unionized Workplace

There has been a massive amount of information circulating online about layoffs, much of it focused exclusively on non-union employees and their rights under the Employment Standards Act. Unionized businesses are not immune to slowdowns in our current economic crisis, with labour cost reduction measures announced daily.

What are the rules about layoffs of unionized employees? Here are some things to keep in mind.

1. Layoff Rights Determined by the Collective Agreement

If the employer has the right to lay off employees due to a lack of work, the procedures will be outlined in the Collective Agreement (CA). Have a look at your CA and see if it contains layoff provisions. Even if you don’t see a section in the Table of Contents called “Layoffs” keep reading reading through the CA. You might find information on layoffs in a section on “Seniority”, “Hours of Work (Reduction)”, or “Displacement”.

2. Notice Provisions

The notice period required will likely be outlined in the layoff provisions of the CA. Where no notice is specified, we recommend that the employer and union discuss the situation and work collaboratively in rolling out layoffs in a manner that will minimize the negative impact on the business and workers.

3. Bumping Rights

Normally, the CA will specify that layoffs must take place in order of seniority (last hired—first laid off) in each job classification. However, some CAs allow more senior members to “bump” more junior members from other job classifications if the employee has the ability to perform the job, or to perform the job of the more junior person with minimal (specified) training. Employees who are bumped can then in turn bump others with less seniority, and so on. These situations can become quite complicated with a larger unionized workforce with many job classifications, and this is another reason for the employer and the union to work closely together to try to rollout the desired layoffs without the need for grievances.

4. Recall Rights

Some CAs may allow employees to choose severance if they are laid off and do not want to be recalled to their job. Other CAs trade off severance payments for recall rights (the right to return to their job when the work returns). Recall rights are an alternative to severance pay. Recall rights are usually managed in order of seniority, just like the layoffs—the person with the most seniority is the first recalled when there is enough work. Recall rights will usually last a specific period of time as specified in the CA.

5. Union-Management Communications are Critical

In difficult situations where layoffs are necessary, it is very important to maintain open communication between union and management ensure that both parties have a common understanding of how things will proceed pursuant to the language in the CA. Since layoffs are uncommon in many unionized workplaces, the language in the CA may never have been used. Good communication can help everyone focus on recovery efforts to get the business back to full capacity and full employment. If the union and management are not on the same page, grievances regarding the process distract from these recovery efforts.

We act for both businesses and unions and can help navigate the process of layoffs of unionized workers. If you would like a lawyer to review your CA, or to assist you in working together on a plan for layoffs of unionized workers, we can help.

If you are a unionized worker, we encourage you to contact your union representative as a first step if you have questions about layoffs.

Covid-19, Layoff

So you have been laid off, what are your options?

News broke last week that more than 500,000 Canadians applied for EI within a few days. With layoffs rolling out widely as a result of the economic impact of Covid-19, we are writing this blog to provide some basic information on workers’ rights and options.

(The blog is relevant only to non-union workers in provincially regulated industries in professions/occupations/industries covered by the Employment Standards Act. This information will apply to most non-union workers in BC.)

You may not have to accept a temporary layoff

This might seem like a ridiculous statement. You cannot insist on keeping your job or getting paid, so by refusing a temporary layoff, what that likely means is your employment will end permanently. The upside to a permanent termination of employment is you may be entitled to severance pay, which can range from very little or nothing (if you have worked a short time in an entry level position) to up to 24 months’ pay (in exceptional circumstances). Talk to an employment lawyer to understand how much you might be owed, as it is fact specific and depends on the Employment Standards Act, your employment contract, and your age, length of service, nature of your job and availability of alternative employment.

There are some real downside risks to refusing a temporary layoff and hoping for severance pay.

Your job is over permanently, and you will not have a job to return to when your employer rebuilds capacity or reopens.
If your employer can prove that Covid-19 has been an unforeseen circumstance that has made continuing your employment “impossible,” it may be found that no severance pay is owed under Section 65(1)(d) of the Employment Standards Act.
Severance could be difficult or impossible for your employer to fund and if many employees refuse layoffs and insist on severance, this could be the last straw that makes them go under.
If your employer does not agree to pay, enforcing severance pay rights beyond the Employment Standards Act minimums will be slow and difficult in the coming months, with courts largely shut down.

If you accept the temporary layoff, apply for regular EI right away

There is a huge demand on our Employment Insurance system right now, so make sure you get your application in ASAP. While expansions of coverage have been announced, based on the EI system that has always been in place, you likely currently qualify for EI if you:

have been laid off due to shortage of work;
have at least 700 hours of insurable earnings in the last 52 weeks (700 hours is for the Vancouver region and the number of hours to qualify varies across the Province); and
have experienced an “interruption of earnings” which means no work and no pay for 7 days.

You can work to supplement EI after 7 calendar days of no work and no earnings

Once your EI begins, you can take on work to supplement EI. Remember, you must have 7 days of no work and no pay to be eligible for EI, so wait this out before taking on any work. Jim Wu of our office wrote a detailed article on LinkedIn about how working while EI impacts your claim here: https://lnkd.in/gYXbv7D. We will be posting this article on our website shortly.

If you accept a temporary layoff, it ends after 16 weeks

The BC Employment Standards Act limits temporary layoffs as a result of Covid-19 to 16 weeks maximum (extended from 13 to 16 weeks, effective May 4, 2020). At that point, employers will need to provide termination pay unless they have returned you to work. As discussed above, it is possible that Section 65(1)(d) of the Act will apply to mean no termination pay is owed if there is an “unforeseen circumstance” that has made continuing your employment “impossible.” This exception could also potentially apply at the end of the 16 week layoff period.

We have written a few other blogs on Covid-19 layoffs which you may also find helpful, available at https://fortelaw.ca/blog/

Covid-19, Employment Insurance (EI), Layoff

E.I. and Covid-19 Layoffs

E.I. and Covid-19 Layoffs - 5 Tips for Workers and Businesses

*This blog post is current to 8:00 AM on March 17, 2020. Forte Law is offering virtual legal services, including zoom video meetings or telephone consultations, so you can get legal advice from your home or office. *

As many workers and businesses are facing the idea of layoffs for the very first time, understanding the basics of Employment Insurance (E.I.) can be helpful.

Employees may be eligible for Employment Insurance (“E.I.”) benefits if they meet the following:

They have experienced an IOE. An Interruption of Earnings or IOE is where an employee has had 7-straight days of no work and no pay with an employer.
They have worked at least 700* hours in the last 52 weeks (about 5-straight months of full-time work)

*This is the amount needed in Metro-Vancouver. For other regions please check here.

As we each do our part to flatten the curve, we offer employees and employers the following 5 tips to help each other navigate through these difficult times.

Employees

If you have experienced an IOE or believe you will, apply for EI ASAP.

It takes time for your EI claim to be processed. You can apply even if you don’t have your ROE, click on this link, scroll down to the very end and click "apply online". There will be a huge demand for EI, so get your application in early.

That said, if your hours are reduced or you have been out of work for less than 7 days, you should think twice before applying, since you have not met the qualifying conditions and may not be eligible for E.I.

Create a MyServiceCanada account

You can create your MyServiceCanada account once you have submitted your application and received your 4-digit access code in the mail. MyServiceCanada account lets you see your ROE, the status of your claim, how much EI you get paid, and how long you can get paid.

Stay on top of your EI Reports

You must continue to complete your EI Reports in order to get paid. You can complete them online

Look for work while you are collecting EI

You have a legal requirement to do so if you wish to continue collecting E.I.

You are allowed to work part-time and still be paid E.I. in some circumstances

See explanation here.

Employers

ROEs can only be issued after an IOE

If you are laying off an employee because of a temporary closure, the employee will need to have gone through 7 days without work or pay before you can issue the employee an ROE. ROEs that are issued before an interruption of earnings has occurred may require verification from an E.I. Agent and can delay an employee’s E.I.

Consider issuing web ROEs

This is a stressful time for your employee to be out of a job and the last thing they want is to have their EI delayed because of a missing ROE - submit the ROE online - that way everyone (the employee, yourself, and Service Canada gets a copy).

Complete the ROE correctly

If you are laying off employees, complete Block 16 with code "A" and check off either “unknown” or a specific date in Block 14. Make sure you don't check off "not returning" as this can be seen as a termination of employment.

Issue the ROE on time

You have 5 days after the employee experiences an “interruption of earnings” to issue an ROE, so this means you would issue them between 7 and 12 days after the layoffs.

Consider offering some work for employees who are a few hours short of the insurable hours minimum

At present, the law is clear: if an employee does not have enough hours, they will not get E.I. even if they are one hour short. While employers are under no obligation to do so, offering an employee a few more hours of work so that they have enough insurable hours to qualify for EI can go a long way in helping out an employee. Generally speaking, a happy employee is less inclined to sue their employer.

Covid-19, Layoff, Reasonable Notice

Covid19 Layoffs What are the Rules

Covid-19 Layoffs in BC – What are the Rules?

*This blog was revised effective May 7, 2020*

We have seen the economic impact of Covid-19 in BC, with industries like travel and many others in crisis. Layoffs have been happening in many sectors, and more could be coming. What are the rules? The rules about temporary layoffs have been well-established in BC for many years. The BC government has recently provided some guidance on how these rules should be applied during the Covid-19 pandemic. With our courts closed, it will be some time before we will be able to predict how judges will view this issue, taking into account Covid-19’s health and economic impacts.

Layoffs (permanent or temporary) generally trigger severance pay

In almost all employment relationships, it has long been the law that a temporary or permanent layoff triggers a worker’s right to severance pay and so is the same as termination, being “let go”, or “getting fired.” The primary exceptions to this have been temporary layoffs in industries where temporary layoffs are the norm, if you have a written employment contract that includes the right to temporary layoffs, or if the employee agrees to the temporary layoff. If permitted, 16 weeks (extended from 13 to 16 weeks, effective May 4, 2020) is the longest a “temporary layoff” can be per the Employment Standards Act before termination pay must be provided.

But what if Covid-19 has made the contract of employment “impossible to perform”? Read on.

Economics or financial circumstances of the business are not relevant, unless the employment contract is “impossible to perform” or the contract has been “frustrated”

To date, economic circumstances of the business have not generally been taken into account in determining whether or how much termination notice or pay is owed. Even if a business was closing, termination notice or pay was required, and the amount was not impacted. Now there is a question of whether a little-used section of the Employment Standards Act might apply to relieve the requirement for termination notice or pay for some businesses impacted by Covid-19. Section 65(1)(d) of the Act states that notice of termination or pay in lieu is not required when the employment contract is “impossible to perform due to an unforeseeable event or circumstance.”

The BC government has issued a statement saying that decisions about whether section 65(1)(d) applies during the Covid-19 pandemic will be made on a case-by-case basis. The exception may apply where a business closure or staffing reduction is directly related to Covid-19 and there is no way for employees to perform work in a different way (for example, by working from home). The exception will not apply if an employer terminates an employee for reasons that are not directly related to Covid-19 or if the employee’s work could still be done in another way (perhaps by working remotely). This means that in order for section 65(1)(d) to apply, the employer will still have to prove that the contract was “impossible to perform.” Impossibility is a high standard, and while it could be met for a business ordered to shut down, it may not apply where a business still has work and is rolling out layoffs in anticipation of future work slowing.

Section 65(1)(d) of the Act only applies to determine whether the minimum termination notice or pay of up to 8 weeks is owed under the Act. It is difficult to predict whether our courts will also find a way to relieve businesses from common law severance pay obligations.

There is speculation about whether Covid-19 may cause a “frustration of contract”. Frustration occurs in employment contracts where through no fault of the employee or the employer, the essence of employment (work in exchange for pay) is impossible. Prior to Covid-19, uncertain economic conditions or employer finances were not considered a “frustration of contract” to justify dismissal of an employee without notice or severance, but it is hard to predict what our courts will do in future with this.

How much notice of termination or severance pay is owed?

For most non-unionized workers, the amount of notice of termination or severance pay owed is based on the Employment Standards Act minimums, plus an additional amount for common law notice (unless limited by a valid contract). If an employer can prove it is impossible for the employment contract to be performed due to unforeseen circumstances, we may see the Employment Standards Branch, and even possibly our courts, finding no termination or severance pay is owed. If the “impossibility” standard is not met, then we expect the usual rules for calculating how much the employee gets will apply, which are summarized below.

Section 63 of the Employment Standards Act applies to set the minimums for notice of termination/severance pay, ranging from zero for workers who have been employed less than 3 months, to 8 weeks for those with 8 years or more of employment. Section 65 of the Employment Standards Act has higher notice requirements for group terminations of 50 workers or more.

Written employment contracts can put a cap on the amount of notice of termination or severance pay, but many contracts are invalid. Some common reasons for contracts failing are (1) if the contract was not signed before the employee started and nothing new was provided in exchange for signing the contract, (2) if the termination clause is vague or poorly worded, or (3) if the termination clause could fall below the Employment Standards Act minimums at any point.

If there is no valid employment contract, common-law notice/severance pay is applicable. The amount is determined based on the worker’s age, length of service, nature of their job and availability of alternative employment. As explained above, the financial circumstances of the business are not generally considered in determining the amount owed. In the event of an extreme industry downturn, there actually may be more notice or severance pay owed since the availability of alternative employment is considered.

Employees who are laid off have a duty to mitigate. That means they have to take reasonable steps to look for a new job, and whatever they are owed in common-law severance would be reduced by earnings from new employment during that severance period. Most of these cases never get to court, but mitigation is a key factor in negotiating packages.

What about working notice?

Employers are allowed to give working notice, which is a notice of termination at a specific future date. If they give enough advance notice, or the worker quits before their last day, no further severance pay is owed. This can be a cost-effective way for businesses to roll-out layoffs, as the workers continue to perform work and add value during the working notice period.

Economic circumstances may impact severance pay negotiations

While there is some uncertainty in whether the economic circumstances of the business will be taken into account in determining whether severance is owed, the practical reality is that businesses and workers may be able to agree to a severance package that is fair in the circumstances. If the business is truly unable to pay the amount of severance that might be owed, workers may decide to accept this and agree to less so that they at least get paid something.

Layoff, Severance Package, Wrongful Dismissal

Layoffs, Restructuring, Terminations, Oh My

When is Employment Terminated?

I answer many questions from employee and employer clients about what happens to the employment relationship when someone has been laid off, or let go due to a restructuring or shortage of work. This is never a happy time for businesses or workers. Employees want to know, have I been fired if the letter says it is a lay off? Employers ask, do we need to provide notice or severance pay if we are in financial hardship? The answer to both questions is in most cases, yes. This blog post applies only to non-unionized employees in British Columbia.

The letter says laid off. Have I been fired?

The answer to this question, in most cases, is yes. The essence of a job is that the employer provides work to be done and pay, and the employee does the work. In a lay off, the employer is no longer providing work to be done or pay, so in most cases, employment has ended.

Employers can lay off an employee, without effectively terminating employment, if:

the employment contract expressly allows for temporary layoffs;
layoffs are a well-known and longstanding industry-wide practice (for example, logging where work cannot be performed during a "break up"); or
the employee agrees to the lay off.

Even if one of these conditions apply, the layoff must be short-term and temporary. In the non-union context, Section 1 of the BC Employment Standards Act limits the length of temporary lay offs of a maximum of 13 weeks in any period of 20 weeks.

If you don't fit into one of these conditions, a lay off of any length is the same as a termination of employment.

We are laying off an employee because we need to downsize to stay afloat, do we still have to give notice or severance pay?

The answer to this, in most cases, is yes. Unless you fit into one of the three categories above, a lay off is the same as termination of employment "without cause." This means that reasonable notice of termination, or pay in lieu of that notice (aka severance pay), must be provided. Unless there is a bankruptcy or similar legal process underway, the financial situation of the employer does not impact the requirement to provide notice or pay severance.