This post is a summary of our COVID-19 & employment law in British Columbia webinar, part of the Fernandez Young Survive & Reboot series.
On Friday, April 17, our Audit Partner, Jim Fernandez hosted special guest Christie Gilmour, Employment & Workplace Human Rights Lawyer from Forte Law. Christie shared details about terminations, layoffs and rehiring in the COVID-19 landscape and what options are available to businesses.
This information 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.
What are the risks with layoffs for businesses?
According to Christie, employers in general to do not have the right to layoff employees. However, there are exceptions. These exceptions are:
- If the contract of employment states layoffs will be permitted
- If the employee agrees to a layoff
- You are an employer in an industry where layoffs are common, such as seasonal work
These guidelines do not prevent employers from laying off employees. However if an employer does layoff an employee and one of these conditions is not met, the employee could be eligible for a constructive dismissal legal claim. This can result in the employee being owed severance. Constructive dismissals are defined as:
A unilateral, fundamental change to employment
- Reduction in compensation > 20%
- Removal from work/suspension/temporary layoff
Businesses should carefully consider this if they plan on laying off employees due to COVID-19.
How much severance could an employee be owed in a "constructive dismissal" claim?
This depends on what governs the:
- Legislation (B.C. Employment Standards Act, Canada Labour Code)
- Contract of employment
- Common law
The Employment Standards Act outlines what pay in lieu of notice is owed based on how long the employee has worked for the business. The amount owed ranges from nothing for very short service employees to 8 weeks wages for employees with 8 or more years of service.
An employment contract cannot provide less than the Employment Standards Act (unless the employee is exempt from the protections of the Employment Standards Act, such as certain professionals), but the Employment Standards Act just outlines the minimum amount that must be paid.
If the employees’ contract does not validly limit how much the employee is owed, the employee could get common law reasonable notice, which can be as much as 24 months severance for a veteran employee.
Under the Employment Standards Act, temporary layoffs can last a maximum of 13 weeks. After 13 weeks, the layoff is considered a termination.
The Employment Standards Act has one provision where an employer would not owe severance, however. If the contract becomes impossible to perform due to an "unforeseeable event or circumstance."
"Unforeseeable event or circumstance" must be severe, according to Christie. The government has said that COVID-19 may be considered one of these circumstances and has established strict guidelines about this including that the termination must be directly related to COVID-19 to qualify.
There is also a common law argument that severance may not be owed if the contract has been “frustrated”. This means that through no fault of the employer or the employee, the essence of employment (work for pay) is impossible. Prior to COVID-19 economic conditions or business’ finances were not considered a “frustration of contract” to justify dismissal without severance, but Christie says it is difficult to predict what the courts will do with this in the future.
Note that certain professions or industries are subject to different legislation. For example, banks are regulated federally and thus governed by the Canada Labour Code, instead of the B.C. Employment Standards Act.
What can businesses do if they need to layoff employees because of COVID-19?
If you must layoff employees, a good option is to have them agree to the layoff in writing.
Many businesses have been offering retention bonuses to employees facing layoffs. It's important to communicate to your employees. Remind them that they are valued members of your team, and you want them back as soon as conditions improve.
If employees can't agree to layoffs, perhaps they could agree to negotiate reduced hours.
One cost savings option is to see if you are able to temporarily reduce fringe benefits that employees cannot access due to COVID-19. For example, dental, car allowance, or group benefits may not currently be accessible due to social distancing requirements.
Alternatively, you could take advantage of the Canada Emergency Wage Subsidy. Although the subsidy covers 75% of payroll, it is capped at employee earnings below $58,700 and requires the employer to continue paying the remaining 25%. Information on all benefits can be found on our COVID-19 kit page.
When considering who to layoff, is it OK to ask who wants to be laid off, to take into account skills needed, and to consider who has enough hours to claim Employment Insurance (EI).
It is NOT OK to consider layoffs based on WorkSafeBC complaints or discriminatory grounds under the Human Rights Code.
This post is not intended to serve as legal advice, and only provides general information.
If you are unsure, Christie recommends speaking to a professional for advice.
Forte Law advises businesses, workers, and unions on all issues related to employment law and workplace human rights. Christie and her team have written numerous articles on COVID-19 related employment law issues.
Fernandez Young LLP can help your business navigate the financial challenges of COVID-19 and make sure you get the right government benefits.