Employers and employees need clarity and certainty more than ever – will the Government of British Columbia act to provide it?

Before the COVID-19 pandemic struck, the issue of temporary layoffs under provincial employment standards legislation was rarely discussed.  However, since late March, one of the top questions on the minds of employers and employees has been, “What are our rights and responsibilities concerning layoffs during this pandemic?”  We, like all employment lawyers in British Columbia and across Canada, have been providing our best advice while hoping for clear direction from our governments and employment standards authorities. 

Ideally, the matter of employment security during this crisis would not be a political issue.  This is not, after all, a labour dispute or a fight between employers and employees. Unfortunately, it is difficult to avoid the conclusion that the disparate statutory and policy-based approaches adopted in various jurisdictions across Canada are the result, at least in part, of political ideology. This is understandable, to some degree, as governments tend to act in a manner designed to satisfy the constituency that elected them.  However, what we are left with is uncertainty and confusion for many employers and employees.

In this article, I provide a brief overview of how the BC Government has chosen to respond (or not respond, as the case may be) to the COVID-19 pandemic’s immediate and continuing impact on employment security. With reference to the responses of other provincial governments across Canada, I also provide some recommendations that are designed to preserve employment relationships and employment security as businesses in British Columbia struggle to survive this crisis.

This article is not intended to provide a complete dissertation concerning the statutory layoff and termination notice requirements in British Columbia or legal advice in this respect – for that, please do not hesitate to give one of the lawyers in our Vancouver office a call.

Temporary Layoffs

When is a temporary layoff allowed?

Temporary layoffs are contemplated in the express language of the BC Employment Standards Act (the “Act”). However, the Employment Standards Branch (the “Branch”) has published a guideline signalling its view that a temporary layoff is only permissible if the employee agrees or if such layoffs are contemplated in the contract or are customary in the industry. Many employment lawyers disagree with that guideline.  We can argue about the common law and constructive dismissal another time – the fact is that the Act itself includes no requirement for consent or evidence of industry custom. 

In the context of COVID-19, it simply has not been practical for most employers to seek consent from their workforce before implementing temporary layoffs to save their businesses – for now – from the sudden economic impact of the pandemic.  Remarkably, while thousands of employees are on temporary layoff today, and surely few of those layoffs meet the consent criteria espoused by the Branch, we are aware of virtually no complaints or litigation concerning an employee’s objection to a temporary layoff triggered by the COVID-19 crisis.  At least not yet.

This remains an area of uncertainty and confusion. Employers and employees should not be left hoping that clarity will slowly emerge through litigation and precedent.  As discussed further below, there is an obvious and better solution.  All that is required is official confirmation that temporary layoffs due to the impact of COVID-19 are permissible and will not require consent or proof of industry custom. 

For how long can a temporary layoff last?

In the absence of any challenge to the commencement of a temporary layoff, the next concern is the permissible duration of the layoff.

Historically, under the Act, a temporary layoff longer than 13 weeks in any 20-week period has been deemed to be a termination of employment.[1] In early May 2020, the BC Government announced temporary changes to the Act to provide that temporary layoffs relating to the COVID-19 pandemic can be extended to 16 weeks in any 20-week period. 

But what happens after 16 weeks? The Act says the automatic result is termination, forcing the employer to end the employment relationship, permanently.  What if neither the employee nor the employer wants that result? Doesn’t matter – the parties to the employment relationship cannot contract out of the Act, not even to preserve that relationship. 

These rules are in place for a good reason – to protect employees from abuse in the form of “temporary” layoffs that go on forever.  Those rules make sense in normal times.  These are not normal times.

Other provincial governments appear to understand this.

Manitoba was one of the first jurisdictions to address this matter, issuing an Employment Standards Regulation amendment on March 26, 2020. While the Manitoba Employment Standards Act provides thata temporary layoff longer than 8 weeks in a 16-week period becomes a termination (triggering notice or severance requirements in most circumstances), the amendment expressly excludes from the layoff calculation any period of time during which the province has declared a state of emergency as a result of the COVID-19 pandemic, retroactive to March 1, 2020.

Similarly, the Alberta Government issued a Ministerial Order removing the requirement to continue benefits to extend temporary layoffs and has thus permitted 120-day temporary layoffs for all employers, even those that cannot continue benefit plan coverage.

Most recently (on May 29, 2020), the Ontario Government amended its Employment Standards Regulation to retroactively deem temporarily laid off employees (including those working reduced hours), on or after March 1, 2020, to be on “infectious disease emergency leave”. The amendment effectively provides all employees on temporary layoff due to COVID-19 with all of the protections applicable to statutory job-protected leaves, including the right to reinstatement. Importantly, the amendment deems that employees whose hours of work or wages have been temporarily reduced or eliminated due to COVID-19 are not terminated, severed or constructively dismissed for the purposes of the employment standards legislation, even if such conditions continue for a period that exceeds the previously prescribed length of a “temporary layoff” in that province (up to 35 weeks or more if certain criteria are met).

What we have seen from the governments of these provinces simply reflects common sense. Most employers do not want to be forced to terminate their employees. Most employees do not want their employment to be terminated. Most employers and employees want to persevere together and return to work when conditions permit. Accordingly, in the unique circumstances of a global pandemic and an unprecedented economic shutdown, it makes sense to temporarily suspend or amend statutory provisions that compel terminations.

Those that argue in favour of adhering to “deemed termination” provisions of the Act do so because they believe such terminations should trigger entitlements to severance pay. As discussed immediately below, that view is somewhat short-sighted for a few reasons. 

Termination Pay – Potential Liabilities

In the usual circumstances, when a temporary layoff becomes a termination (by virtue of the passage of time – i.e., more than 13 (now 16) weeks in any 20-week period – or because the employer chooses to end employment status sooner), the terminated employee is entitled to compensation for length of service pursuant to s. 63 of the Act, as follows[2]: 

• After three consecutive months of employment – one week’s pay or one week’s written notice;
• After 12 consecutive months of employment – two weeks’ pay or two weeks’ written notice;
• After three consecutive years of employment – three weeks’ pay or three weeks’ written notice, plus one week’s pay or one week’s notice for each additional year of employment to a maximum of eight weeks.

This liability must be paid out – it cannot be avoided by providing “working notice” in the circumstances of a temporary layoff, because the employee is not at work. 

In addition, pursuant to s. 64 of the Act, if an employer terminates 50 or more employees at a single location within any two-month period, the employer must provide written notice (or pay in lieu) of group termination to all affected employees.  The amount of required notice (or pay in lieu) is significant and is as follows:

• at least 8 weeks before the effective date of the first termination, if 50 to 100 employees will be affected;
• at least 12 weeks before the effective date of the first termination, if 101 to 300 employees will be affected;
• at least 16 weeks before the effective date of the first termination, if 301 or more employees will be affected.

This liability is triggered regardless of each employee’s length of service and is in addition to an employee’s entitlement to compensation for length of service pursuant to s. 63 of the Act. Further, it cannot be avoided by providing “working notice” in the circumstances of a temporary layoff.  Thus, this obligation must be met by providing pay in lieu of group termination notice – which can be staggering.

Do the math. For example, the termination of 101 employees earning $40,000 per year on average, at a single location within a two-month period, triggers a group termination liability of over $930,000.  There are few small- or medium-sized businesses that could survive that kind of hit – especially if their doors have been shut for 16 weeks!

Finally, officers and directors of a corporation need to be aware that s. 96 of the Act makes each of them personally liable for up to two months’ wages for each employee in connection with individual and group termination pay entitlements. What’s the only way to avoid this potential liability? Essentially, commence bankruptcy proceedings.

The bottom line is that strict adherence to an interpretation of the Act that triggers individual and group termination pay liabilities after the temporary layoff period expires will not benefit employees. Many will not get paid – you cannot draw blood from a stone. Those that do get paid, will enjoy a few weeks of income and then be unemployed. This approach does not provide greater certainty or income security for employees.

There is another complication.  As set out below, most employers will take the position that the existing provisions of the Act eliminate their liability for individual and group termination pay in light of the “unforeseeable circumstances” presented by the COVID-19 pandemic.

Termination Pay – Potential Exemptions  

While each province’s employment standards legislation imposes individual and group termination notice (or pay in lieu) obligations on employers, most of those statutes also include exemptions for “unforeseeable circumstances” which relieve employers from their notice (or pay in lieu) obligations when confronted with events beyond their control.

In British Columbia, s. 65(1)(d) of the Act provides that notice of termination is not required when the employment contract is “impossible to perform due to an unforeseeable event or circumstance.”  If the impact of COVID-19 is not an unforeseeable event or circumstance, then what is? While there have been widespread threats to public health in Canada before, none in the past century have approached the impact of the current pandemic.

In this context, numerous employers have been told by provincial authorities (often on one or two days’ notice), that their businesses must close. Alternatively, employers have seen demand for their services or products evaporate virtually overnight due to the impact of social-distancing guidelines and orders from the federal and provincial government.  None of this was foreseeable, and the consequences have obviously rendered it impossible to continue regular employment in the short term.

However, at this point, if a temporary layoff becomes a deemed termination under the Act, it remains unclear whether the British Columbia Employment Standards Branch will apply the “unforeseeable event or circumstance” exemption.

The Branch has traditionally explained the application of the exemption as follows:

• If it is impossible for work to be performed due to a change in circumstances that could not have been anticipated, ss.63 and 64 do not apply. An example of such a change would be the destruction of a worksite by fire or flood. Such events are not foreseeable and would exclude affected employees from compensation for length of service and group termination pay.

When terminations occur in these kinds of circumstances, an employer is not required to provide any compensation for length of service (s. 63) or pay in lieu of group termination notice (s. 64).

The Branch recently issued a policy statement intended to clarify the application of s. 65(1)(d) in the context of the COVID-19 crisis, as follows:

• COVID-19
  
  If 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, working from home) the exception may apply to exclude employees from receiving compensation for length of service and/or group termination pay.
  
  This exception is not automatic in all situations during the pandemic. 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 (perhaps in a different way, such as working from home) the exception would not apply. Decisions on whether this exception applies are made by the Director on a case-by-case basis.

We are disappointed that more concrete guidance has not been provided. While it seems reasonably certain that extended layoffs and terminations caused by government-mandated closures (e.g., casino operations, night clubs, sports arenas) would trigger the exception under s. 65(1)(d), this policy statement leaves open the possibility that job loss due to closures necessitated by reduced business volumes might not qualify.

New legislation and guidelines in other provinces have provided better clarity for employers in this area.

New Brunswick appears to have been first out of the gate when its provincial government updated its employment standards guidelines in late March to clarify that when “employment is or has been affected as a result of COVID-19, this notifiable disease is considered an unforeseen event, as such falls within the exemption of the requirement of notice … [and therefore,] employers are not required to provide notice to their employees or pay in lieu thereof.” 

Not long after, Alberta provided unequivocal guidance confirming that group termination notice to employees is not required when terminations are associated with the COVID-19 crisis.

As discussed above, other provinces have addressed the issue by extending the permissible temporary layoff period, so that the matter of deemed terminations due to COVID-19 related layoffs does not arise.

We do not have the luxury of such certainty in British Columbia yet.

If the plan in BC is to wait for employment standards complaints to materialize and then simply defer to adjudicators within the Branch to make these determinations at some point in the future (followed by inevitable appeals), then, respectfully, that is not a good plan.

Where To From Here?

It has been suggested that any legislative or policy amendments that extend temporary layoffs or eliminate individual or group severance pay entitlements will amount to an attack on workers’ rights.  That, respectfully, is an ideologically blinded view.

What is necessary is an approach that is designed to preserve, rather than terminate employment relationships. Employees whose employment is deemed terminated are not, in the long run, better off.  They may, or may not, receive a severance payment, but then what?  They will be unemployed, in a market flooded with others whose employment has been “deemed terminated”. Even if their former employer subsequently re-hires them, they will be new employees – no past service credit for the purposes of vacation pay or future termination notice, back to the starting wage, perhaps a new probationary period. How is this a better outcome than continued employment status?

There has been a suggestion that BC employers should apply to the Branch for a “variance” to the permissible duration of temporary layoffs under s. 72(a) of the Act.  Sound easy?  It’s not. First, an employer must demonstrate that it has secured agreement from a majority of its employees.  That might be achievable, but it’s not the only criteria.  The Branch guidelines also indicate that the employer must have “definite plans to recall the employees by a specific date”, which is likely impossible in the current circumstances.  Finally, does anyone really think that the Branch has the resources to process hundreds, or thousands, of variance applications in a timely fashion?  Section 72 of the Act is not the solution.  

A complaint-driven solution – or one reliant on variance applications – whereby we all wait for the Branch adjudication process and appeal procedures to eventually produce reliable precedents, is the opposite of leadership in a crisis that poses one of the greatest threats to our economy that most of us have ever known.  While a wonderful boon to lawyers, it is an abdication of government’s responsibility to effectively respond to the COVID-19 pandemic.

So what is the solution?  There is more than one way to approach this but, in our view, it is prudent to begin with careful consideration of the following:

• The vast majority of employers and employees in British Columbia do not want their employment relationships to be deemed terminated – surely forced unemployment is not a preferred outcome. 
• It is not practical or realistic to require employers to seek agreement from their employees for temporary layoffs in the face of an unprecedented global health crisis, government-mandated shutdowns, and public health orders that have compelled business closures. 
• Severance pay liabilities associated with individual and, especially, group termination notice obligations will literally kill most small- and medium-sized businesses, leaving thousands of employees reliant upon government support measures for longer than would otherwise be the case.
• Without clarifying legislation, the costs, uncertainty and unintended consequences of the inevitable flood of litigation that follows will surely jeopardize an effective kick-starting of businesses and the BC economy. 

With these considerations in mind, our government does not need to reinvent the wheel. Just look to Alberta, Manitoba and Ontario. Then, issue clarifying legislation and supporting guidelines to confirm that, as long as unilaterally imposed temporary layoffs remain necessary due to the COVID-19 crisis, such layoffs will not be deemed terminations or constructive dismissals for the purposes of the Employment Standards Act.

It is that simple.

Week 17 is approaching fast. If the Government of British Columbia continues to sit on the sidelines, the landslide of “deemed terminations” and the associated consequences will be at its feet.
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With thanks to Paul McLean, Partner, Mathews Dinsdale and others in our Vancouver Office who contributed to this article.

This article is not intended to provide legal advice. As individual circumstances may vary, readers with questions about issues raised by this article or any of any other legal issue are encouraged to contact a Mathews Dinsdale lawyer for specific answers and advice.

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[1]  In a unionized environment, where recall rights – often in the range of 6 to 24 months – are established in a collective agreement, an employer is permitted to temporarily lay-off employees for the duration of the recall period before employment is deemed terminated.

[2]  In a unionized environment, s. 63 of the Act might not apply and an employee’s entitlement to notice of termination or pay in lieu thereof, if any, will be governed by the terms of the collective agreement.