On Thursday, December 17, 2020, the Government of Ontario filed Ontario Regulation 764/20[1] and Ontario Regulation 765/20[2], changing the temporary layoff landscape for both unionized and non-unionized employers.

Deemed infectious disease emergency leave extended to July 3, 2021

Ontario Regulation 765/20 extends the job-protected leave for non-unionized employees during the COVID-19 outbreak where the employees’ hours of work are temporarily reduced by their employer due to the pandemic. Employees on this job-protected leave are not consider to be on temporary layoff and therefore the “clock does not run” under the Employment Standards Act, 2000 towards a permanent termination. The IDEL regulation continues to provide that employees whose hours of work or wages were temporarily reduced or eliminated due to the pandemic (that is, employees on deemed IDEL) are not considered to be constructively dismissed under the ESA.

The deemed IDEL was originally supposed to end six weeks after the end of Ontario’s declared State of Emergency; however, on September 4, 2020 the COVID-10 period was extended to January 2, 2021. The December 17 regulation further extends the COVID-19 period to July 3, 2021.

The extension of the COVID-19 period delays the application of the ESA’s temporary layoff and constructive dismissal rules which, unless the COVID-19 period is further extended, will now resume on July 4, 2021. Employers continue to have the flexibility of significantly reducing or eliminating their employees’ hours of work or wages without fear of a constructive dismissal complaint.  However, employers should be mindful of the fact that the deemed IDEL is a leave of absence under the ESA, and the obligations relating to leaves of absence will apply to any employees who are on the deemed leave. In particular, employers have an obligation under the ESA to reinstate an employee to his or her most recently held job when the deemed IDEL ends.

Special industry regulation for hospitality, tourism and certain other hard-hit industries

Through Ontario Regulation 764/20, the Government of Ontario has revised the recall election rights provision of the ESA to allow employers and trade unions to negotiate alternative arrangements for termination and severance pay owed to laid-off employees.  The regulation is restricted in its application to employees (and employers of such employees) in defined industries who are represented by a trade union. At present, defined industries are the hospitality industry, the tourism industry and the convention and trade show industry. The regulation will be in force for one year.

In the normal course, if a unionized employee’s temporary layoff extended beyond 34 weeks, and that employee’s collective agreement provides a temporary layoff period longer than 34 weeks, then at 35 weeks of temporary layoff the employee has the right to make an election between receiving their termination and/or severance pay or retaining their recall rights under the collective agreement. An employee who retains their recall rights also retains their status as an employee until they either renounce their recall rights or their recall rights expire.

Under the regulation, an employer and trade union can agree that the regulation applies instead of the normal rules under the ESA. If such agreement is made, then the trade union may make the election on recall rights on behalf of some of all of the employees it represents. If such an election is made:

• the election is binding on the employee (unless the employee elected to be paid prior to the trade union’s election);
• the employee may not renounce the right to be recalled before the date agreed to by the employer and the trade union; and
• the trade union may not renounce the right to be recalled on behalf of the employee.

Practically, if the employer and trade union agree that the regulation applies, there is no longer a requirement that the termination and severance pay owed to laid-off employees be held in trust. Instead, the employer is only obligated to pay the termination pay and severance pay if no election is made on the employee’s behalf and the employee subsequently elects to be paid, or if the employee renounces their right to be recalled after the date agreed to by the employer and trade union.

The Government of Ontario’s stated intention is to provide trade unions and employers in hard-hit industries with the option to allow employers to put the termination and severance pay toward “keeping business doors open”, rather than into trust for laid-off employees.

Next steps for employers

Employers, both unionized and non-unionized, should assess the impact of these regulations on their workplace.

For non-unionized employers, planned terminations may now be deferred to July 4, 2021 without risk of an automatic termination. Employers should consider providing a letter to employees that remain on the deemed IDEL to advise that they remain on deemed IDEL until July 3, 2021, and explain what that means for their employees. Additionally, employers should consider developing or revising their staffing strategy with the knowledge that the temporary layoff clock continues to be suspended. Employers will also want to start thinking about their strategy for dealing with the reinstatement obligations for employees that continue to be on the deemed IDEL. With COVID-19 vaccinations starting to be distributed across Canada, the Government of Ontario may not extend the deemed IDEL beyond July 3, 2020.

Unionized employers with employees approaching – or already surpassing – 35 weeks of temporary layoff should consider entering into discussions with the trade union before employees made their election on recall rights. If an alternative arrangement can be reached, employers will have the flexibility to put more money toward their business so they will be in a better position to recall their employees within the period prescribed in the collective agreement.

We expect the Ministry of Labour to offer more guidance on these developments in the weeks to come, and we will continue to monitor the situation. The Government’s press release on the above changes is available here.

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[1] https://www.ontario.ca/laws/regulation/r20764

[2] https://www.ontario.ca/laws/regulation/r20765