Weighing Pandemic Impacts on Human Capital

Across Canada, the conversation about COVID-19 rages.  We all understand our public safety obligations:

  • Social distance of 2 meters
  • Wear a mask
  • Sanitize your hands
  • Meet outdoors, when possible
  • Stay at home.

Accordingly, this causes us to reassess our view of businesses that are operating or not at all.  We know there are strict regimens required for businesses that are allowed to be open, and it is crystal clear that various occupational health and safety acts are being enforced.

Employees who are legitimately absent for reasons related to COVID-19 are free of any reprisal from employers.  Nevertheless here is the problem, some businesses have been closed since the middle of March.  Further, others have had sporadic business, but for most businesses there are current and pending layoffs or terminations due to lack of work.  What is deemed “permanent layoffs” as defined under each provincial statute?

What should a business prepare to do?  Frankly, all businesses need to consider their best guess for their 2020/2021/2022 operations.  Questions that need to be answered include:

  1. Do your employees fit into one of three categories?  Each holds unique challenges, but the construction of organization-wide solutions can be established based upon:
  2. Those who are working in the workplace or from home,
  3. Those who are laid off but will be recalled at some point,
  4. Those who will be permanently laid off.
  5. How long can you forestall permanent layoffs due to cash flow obligations?  A permanent layoff does not constitute “cause” and will not immunize the employer from paying notice/severance pay or exposure to a common law challenge.


There is a unique solution that was crafted by the Government of Ontario to buy some time for employers.  The period from March 1, 2020 to January 2, 2021 is considered a leave of absence for all non-union employees under the Infectious Disease Emergency Leave – a regulation under the Employment Standards Act.

It is now essential to plan for January 3, 2021, and to do a risk assessment based on the previously mentioned categories of employees.  In all cases, the values of the organization will be put to the test.  As an example, will all or some benefits continue to be provided for laid off employees?

Non-union Employees

The Temporary Layoff provisions of the Employment Standards Act are reset for January 3, 2021.  The decision to place all employees not working, on additional weeks (up to 13 out of 20 weeks or 35 out of 52 weeks) subject to appropriate rules is an option.  However, this will not prevent a potential common law challenge arguing constructive dismissal.

Is now the time to consider the cost of permanent layoffs?   This determination would be offset by savings in benefit costs, especially if you consider benefit continuation. 

Insuring provisions require employee eligibility based on being “actively at work” and performing minimum required hours on a regular basis. The exceptions to these insuring provisions relate to extensions during a temporary lay-off, extensions during a legislated leave, during a disability, and required statutory notice periods upon termination.  These contracts are not designed for pandemic responses and new fluid regulatory environments.

Employment benefits are a key component in extending the employment deal as recognized in the employment standards legislation across Canada.  All insurers in March were treating these as “temporary layoffs” starting March 17th as “last day worked” and allowed coverage to continue up to 120 days or 180 days maximum duration.  However, these temporary lay off contract wordings do not align with Employment Standards Act wording.  For example, no Insurer has a temporary lay off provision that would extend benefits for a 35-week period mentioned in the ESA. If this extension period was provided to laid off employees, it extends the “termination clock” from 13 weeks to 35 weeks, allowing a much longer re-call period before termination is triggered defined in the ESA.  Employment lawyers have confirmed this legal strategy.

The passing of the Ontario IDEL legislation May 29th changed this coverage extension period from a temporary lay off contract provision to their legislated leave provision.  All Insurers covered the IDEL period as a legislated leave, just like a maternity leave. However, they created a pandemic benefit coverage cliff with benefits ending either September 4th, the end of the IDEL period, or Sept 17th, a 180-day period from the last day worked.  In short, they were not recognizing the “stop the clock” principle in the legislation for the temporary lay-off.

With effective lobbying efforts, the extended Covid-19 Period will be covered by all Insurers, however stacking a temporary leave provision on top of the January 3rd date remains an important question for some carriers and most employers. Many are taking a case by case approach and approving further extensions based on MOAs or “memorandums of agreement” which are outside their normal contractual provisions and require lists of all employees on a temporary lay-off.

If you do not have consideration such as benefits continuation, the temporary layoff protection under the Employment Standards act will end on March 3, 2021.   Please also note:

Lay-off, regular work week (Employment Standards Act)

An employee who has a regular work week is laid off for a week if,

(a) in that week, the employee earns less than one-half the amount he or she would earn at his or her regular rate in a regular work week;

To be in full compliance, the reduced hours of work will potentially impact the calculation of the period of temporary layoff.

Unionized Employees

Apart from bona fide leaves such as contracted COVID-19, the layoff provisions of the collective agreements will guide the appropriate protocols along with recall provisions.  The latter matter of recall deserves a very careful review, as collective agreement language has anticipated the normal process of the ups and downs of business and never really contemplated our current crisis.

As an example, caution should be used, if you are attempting to recall a 40-hour employee to an 8-hour workweek and treating a refusal as a trigger for a “deemed termination” under your Loss of Seniority provision of the collective agreement.  The failure to return to work has customarily meant a return to the prior job as it was at time of layoff.

As most collective agreements have recall language and given that most hotels shut down in mid-March, 2020, the Loss of Seniority provision, which speaks to recall may be ending in 12 months from date of recall but specifically addressed in your collective agreement.  This will require a payout for a permanent layoff, unless there is an undertaking with the union to extend the recall period.

The time is now to anticipate the approach for each of your employee categories and weigh the costs of permanent lay-offs in your organization.