Employment Standards Severance May Not be Required as a Result of COVID-19
The British Columbia government recently announced that employees may not be entitled to notice of termination or termination pay pursuant to the British Columbia Employment Standards Act (“ESA”) if their employment is terminated as a result of COVID-19.
There are three general sources of an employer’s obligation to provide notice of termination or severance to an employee: employment standards legislation, the common law and an employment contract. The amount of notice or “severance” (known as termination pay) owed pursuant to employment standards legislation is set out in is set out in sections 63 and 64 of the ESA. Section 65 of the ESA contains a list of exceptions to an employer’s obligation to provide notice or termination pay. It includes an exception where an employment contract is impossible to perform due to an unforeseeable event or circumstance.
The Employment Standards Branch confirmed that this exception applies to terminations resulting from COVID-19, and provided the following guidance:
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.
The section 65 exception will likely be interpreted narrowly. It requires an employer to demonstrate that the employee’s work could not be done as a result of COVID-19.
While this is good news for employers, the exception only applies to severance obligations that arise as a result of the ESA. Common law and contractual severance obligations remain. However, it is possible that the courts will apply a similar test when determining whether an employment agreement has been frustrated.