Recent court ruling underscores importance of employment contracts, timelines, benefits and communications
Temporary layoffs are often seen by employers as a practical response to fluctuating business needs — especially during economic downturns or seasonal slowdowns.
However, many Canadian employers are unclear about when and how these layoffs can be legally implemented. The confusion stems largely from the misperception that employment standards legislation itself grants the authority to temporarily lay off staff.
“Even though the legislation sets out that you can perform temporary layoffs, it needs to be provided for in the employment agreement, or else it's not allowed,” says Julia Dale, a senior associate at Dentons in Ottawa.
It’s a nuanced area of employment law, but it’s also a helpful tool for employers, she says: “It just has to be done properly.”
The challenge is that law is not always clear and can be “misleading” for employers, says Shafik Bhalloo, senior counsel at Kornfeld in Vancouver.
In the absence of clear contractual language, courts will often side with the employee, treating the layoff as a termination and entitling the worker to significant compensation.
“Neither statute in British Columbia nor Ontario... independently grant employers the right to impose layoffs,” he says. “They do assume the existence of such a right under employment contracts.”
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