Layoffs, Recalls and Terminations – The Aftermath of COVID-19

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On March 17, 2020, Dr. Bonnie Henry, B.C.’s Provincial Health Officer, declared a public health emergency.  The following day, March 18, 2020, Mike Farnworth, Minister of Public Safety and Solicitor General, declared a provincial state of emergency to support a province wide response to the COVID-19 pandemic.  This signaled the closing of many BC business and the resulting layoff of employees.

In an effort to ease the financial hardship on businesses and to keep employees connected with their jobs during the COVID-19 pandemic, the BC government extended the temporary layoff period to 16 weeks for COVID-19 related reasons.

Under the Employment Standards Act (ESA) a temporary layoff longer than 16 weeks in any 20-week period is considered a permanent layoff.  With a permanent layoff, employers are required to provide employees with written working notice of termination and/or pay severance to qualifying employees, based on their length of service.

With many employees being laid off as of March 18, 2020 this brings us to Wednesday July 8, 2020 – 16 weeks after the provincial state of emergency was declared.  On this date, many BC employees will be deemed terminated triggering an employer’s obligation to pay out ESA termination pay based on length of service.  In addition, if 50 or more employees were laid off from one location, this will trigger the ESA group termination pay provisions requiring the employer to pay each employee their regular termination pay based on their length of service, plus group termination pay.

There is a potential exemption from paying termination pay in s. 65(1) (d) of the ESA where an employment contract “is impossible to perform due to an unforeseeable event or circumstance”, (See our article Employment Standards Severance May Not be Required as a Result of COVID-19.  However, with the easing of COVID-19 restrictions, many BC businesses are reopening and recalling some employees therefore this exemption may not apply.  Furthermore, the exemption only applies to severance obligations that arise as a result of the ESA.  Common law and contractual severance obligations may remain.  However, employers may be able to argue frustration of contract if COVID-19 has resulted in curtailment or closure of their operations.

It is also important to note that officers and directors of a corporation need to be aware that s. 96 of the ESA makes each of them personally liable for up to two months’ wages for each employee in connection with individual and group termination pay entitlements. The only way to avoid this potential liability is if the Employer is subjected to insolvency proceedings.

As of June 23, 2020, the province is standing firm on not extending the temporary layoff period beyond the original 16-week stretch that will end in July, but added it is open to discuss possible solutions with business stakeholders.  Other jurisdictions have looked at or already extended the length of permissible temporary layoffs.

Employers should consult with legal advisors if they have layoffs that are approaching 16 weeks in length.

UPDATE – JUNE 25, 2020:  The Province of British Columbia has decided to extend the temporary layoff time period through August after outcry from businesses around the province, including multiple chambers of commerce in the Okanagan.  The 16-week period has been extended to 24 weeks.

Should you have any questions or require legal support, please contact any one of our Employment Team.