Information Bulletin: COVID-19: Temporary Layoff Update

The pandemic with its resulting economic fallout continues and many employers in Canada have implemented temporary layoffs. As a result, employers and employees face the risk of deemed terminations. These are triggered when a temporary layoff exceeds the maximum period of time permissible under employment standards legislation, resulting in the permanent end of employment. Terminations can be costly for employers as they create obligations related to statutory notice, common law notice and, in some cases, severance payments. In many jurisdictions, and most recently in Ontario, the government has stepped in to ease the financial burden faced by employers who have implemented temporary layoffs for reasons related to COVID-19.

A new regulation (O. Reg 228/20: Infectious Disease Emergency Leave) made under Ontario’s Employment Standards Act, 2000 (Ontario) (“ESA”), affects non-unionized employees who have had their hours reduced or eliminated, including those on temporary layoff, because of the pandemic. These workers will be deemed to be on an Infectious Disease Emergency Leave under the ESA. This unpaid leave provides job-protection for employees unable to work for reasons related to COVID-19. The newest measure, introduced on May 29, 2020, provides a means for Ontario employers to avoid terminating their employees after the maximum ESA temporary layoff period has expired. Workers currently on temporary layoff will transition to the leave of absence. They will remain employed with legal protections and be eligible for federal emergency income support programs. This measure applies retroactively to March 1, 2020 and will expire six weeks after the current state of “declared emergency” ends in Ontario. Note that these new rules do not apply to employees represented by a trade union.

One consequence of O. Reg 228/20 that is particularly noteworthy for benefit plan sponsors is the adaptation of the existing rules associated with statutory leaves under the ESA. For an Ontario employer not making benefit plan contributions for employees on temporary layoff on or before May 29, 2020, the status quo is maintained – there is no obligation to begin making contributions once the employee transitions to the Infectious Disease Emergency Leave. However, for a COVID related layoff occurring on or after May 29, 2020, an employer must follow the typical rules with respect to benefits during a leave of absence, which means continuing to make contributions to benefits protected under the ESA unless the employee provides written notice that they do not intend to pay their employee contribution, if any. Protected benefit plans include, pension, life insurance, accidental death, extended health and dental. Up to this point, a temporary layoff in Ontario did not require an employer to continue any employee benefit, though some may have chosen to do so voluntarily.

Many other jurisdictions have enacted COVID layoff measures, though unlike the Ontario ESA, benefits continuation is not addressed.

Which jurisdictions have introduced special temporary layoff measures in respect of COVID-19?

Speak to Your Advisor

Workplace issues continue to evolve in the COVID-19 context. Reach out to your Aon advisor to discuss questions you have about how pandemic decision making in your organization affects the group benefits you provide or any other risk issues that may be of concern.

For information on broader business continuity risk, please refer to COVID-19 Business Recovery and Return-to-Work Resources.