How Your Business Can Survive COVID-19: Lay-offs and Terminations

Kevin Marshall

April 14, 2020

Is it possible to avoid some or all lay-offs and terminations during these unprecedented times?

Yes.  Federal government initiatives to assist business during the COVID-19 pandemic were designed with that objective in mind.  Familiarize yourself with these programs, along with provincial and municipal initiatives, the details of which are referenced here.

Focus more, not less, on your employees, especially those you most wish to retain.  Be transparent about the financial hardship your business is experiencing.  Fully appreciate that your employees also are encountering difficult times - enquire about the same.  Be kind in all of your communications.

Consider creative options that retain employment of your workers, including revised duties, reduced hours or even reduced wages. By law, such fundamental changes to the employment relationship between employer and employee require the consent of both parties.  Obtain that consent in writing wherever possible, including consideration.  If you are unsure how to do so properly, do contact me directly for assistance with that process, at or 416-383-0550.

If it is still necessary to reduce your workforce, reserve terminations for only those workers you would least regret retaining.  In most instances, you will need to provide them with a severance package.

Like a termination, a Temporary Lay-Off ("TLO") also carries the risk that the worker will find a job with another firm before you are able to bring them back to work.  Nonetheless, a TLO is usually the better option.  

If you must lay-off employees, convey the news with kindness, and do inform your workers about the option to apply for the Canada Emergency Response Benefit.  If possible, pay any outstanding wages and vacation pay immediately and issue their Records of Employment promptly.  Be sure to keep in touch with them, thereby reinforcing your message that they remain part of your team.

Please note that under the Employment Standards Act, 2000, a TLO automatically becomes a termination if it extends beyond 13 weeks in any period of 20 consecutive weeks.  This can be extended up to 35 weeks in any period of 52 consecutive weeks.  However, under the common law, a TLO of any duration may be deemed a constructive dismissal, and hence a termination.

There are three exceptions to this rule:  

First, if the employment agreement expressly permits TLOs;

Second, if the industry standard widely accepts TLOs - for example, in construction, factories, or manufacturing; and

Third, if the employee expressly consents in writing to the TLO.

I suggest you contact me to consider which options carries the fewest risks in your particular situation and greatest likelihood that you will be able to call your laid-off employee(s) back to active duty.

You cannot completely eliminate the risks that come with proceeding with a TLO.  However, you can minimize those risks by treating your laid-off workers with respect, both when the news is first communicated, and in the days that follow.  Strive to convey the confidence - and instil that in your laid-off staff - that fortunes will improve in your business, and they will be called back to active duty in the near future.