Navigating British Columbia Employment Law During
the COVID-19 Pandemic: Dispelling Common Myths
Greg Palm and Rory Morgan
Hamilton Duncan, Surrey, British Columbia
The COVID-19 outbreak has already had a significant impact on British Columbia’s economy. Restrictions have been placed on the sizes of gatherings, we have seen the closure of most public facilities (with private ones now largely following suit) and businesses are finding it increasingly difficult to navigate the stormy waters. Unfortunately, the consequences of the outbreak are expected to worsen before they begin to improve, putting jobs at risk. What do employees and employers in British Columbia need to know when confronted with workforce changes as a result of COVID-19? Let’s dispel some common myths.
Myth #1: Unpaid layoffs are a permissible way to reduce staff temporarily in hard times.
For most employment relationships in B.C, (unlike some other jurisdictions) there is no provision in the law allowing an employer to temporarily layoff an employee when business is slow. Since being permitted to work is an essential component of an employment relationship, an employer who lays off an employee – even temporarily – generally breaches the contract of employment and incurs the same obligations as it would incur in the case of a permanent dismissal. Those obligations include a contractual or common law obligation to give notice of termination (or pay in lieu of notice) and a statutory obligation to pay compensation for the employee’s length of service under the Employment Standards Act.
As with most things in law, there are exceptions. In B.C., temporary layoffs are permitted under the Employment Standards Act if a written employment contract allows for temporary layoffs, if the employment is in an industry where temporary layoffs are the norm (for instance, some seasonal industries) or if the employee agrees to the layoff. However, even if a temporary layoff is permitted, it may not exceed 13 weeks in a 20 consecutive week period or it will be deemed a termination.
If you are an employer facing challenges from COVID-19, before deciding to temporarily layoff employees, be sure to understand the termination implications and exposure that may flow from taking such a step, which may be more disadvantageous than continued employment. And if you are an employee that has been “laid off”, you may wish to seek legal advice about whether you have effectively been dismissed and are entitled to compensation as a result.
Myth #2: Reduced work for all employees is a solution to the temporary layoff problem.
After reviewing Myth #1 above, an employer might be inclined to think, “Well if I can’t temporarily layoff a few people, then I will just have to reduce work for everyone.” The difficulty with such a strategy is that it may actually increase, rather than decrease, the employer’s overall liability.
At common law, a unilateral and material change by the employer of the employee’s working conditions can amount to a fundamental breach of the employment contract and may entitle the employee to assert that he or she has been “constructively dismissed”. The consequences to an employer of a constructive dismissal (if proved, of course) are no different than a termination of employment without notice.
The situation is a little different by reference to the Employment Standards Act, but the problem still exists. Under that statute, an employee is considered laid off as soon as his or her weekly wages fall below 50 percent of their average weekly wages over the previous eight weeks. Where a temporary layoff is not permitted or exceeds the maximum permitted period (see Myth #1 above), the employee may well be deemed dismissed and entitled to the associated compensation.
Thus, an employer struggling through the COVID-19 downturn who attempts to avoid the termination-related liability that would result from laying off a few employees entirely by reducing work across the board might well find itself in a position where it is deemed to have dismissed many employees, thereby creating a far greater liability.
The message for employers here is to take caution before simply cutting work for a large number of employees, whether in an attempt to limit your liability or in an attempt to fairly spare as many jobs as possible. For employees experiencing a unilateral and significant decrease in hours as a result of COVID-19, taking advice from a lawyer about your options would also be advisable.
Myth #3: The Employment Standards Act sets the employer’s liability on termination.
The Employment Standards Act does contain provisions for the compensation due to an employee on termination (termed “liability resulting from length of service”). Those provisions provide for the payment to an employee on termination of:
- one week’s wages after three consecutive months of employment;
- two weeks’ wages after 12 consecutive months of employment;
- three weeks’ wages after two consecutive years of employment; and
- an additional one week’s wages for each additional consecutive year of employment, to a maximum of eight total weeks’ wages.
However, it is important to remember that the Employment Standards Act merely sets out minimum obligations. In the absence of a valid employment contract limiting an employee’s entitlement to those minimums, a dismissed employee may be entitled to more. For instance, termination of a fixed-term contract may result in an entitlement to damages for wrongful dismissal through the end of the specified term or a contract may make express provision for a higher amount on termination. Where an indefinite employment contract is silent about the amount of notice or severance due to an employee on termination, the law implies a requirement to provide “reasonable notice”, which is determined based on several circumstances – including the employee’s age, the nature of the employment, the employee’s length of service and the availability of comparable work – and in many cases exceeds the Employment Standards Act minimums, often significantly so.
If you are an employer contemplating a workforce reduction due to COVID-19, you would be wise to review your employment contracts carefully and to seek legal advice about your actual obligations on termination before deciding on the timing and extent of those reductions. Similarly, if you are an employee who has lost your job in these trying times with only a payment of the statutory minimum, you may wish to seek advice about whether that amount is the limit of your entitlement.
Myth #4: An employer must always pay “severance” when terminating employment.
Employment relationships are, fundamentally, a matter of contract (even if the contract is not in writing). Usually, employment contracts do not provide for a payment on termination. Rather, most indefinite employment contracts either (1) specify the amount of notice of termination that an employer must give an employee, or (2) are silent as to termination and therefore come with an implied obligation that the employer will provide “reasonable notice” of termination.
Often, an employer will decide to terminate an employee’s employment effective immediately rather than providing the specified or reasonable notice required by the contract, and will choose to pay the employee for the notice period. However, such a payment – which is frequently called “severance pay” – is no more than a payment on account of the damages to which an employee is entitled for the breach of the requirement to give notice. Accordingly, an employer may very well choose to give advanced notice of termination, which (assuming the notice is sufficient) avoids a breach of the employment contract altogether and eliminates any need to make a further monetary payment to the employee. That does not change if the employee chooses to resign during that “working notice” period (for instance to commence new employment elsewhere).
Likewise, while the obligation to compensate an employee for length of service under the Employment Standards Act appears, at first glance, to be a monetary one, the statute also provides it may be satisfied by the provision of working notice of the same duration.
Importantly, then, employers who are just starting to feel the effects of COVID-19 but who are projecting a more significant downturn necessitating a future workforce reduction may wish to consider whether providing working notice to some of its employees is an option. Please remember that the notice required for any particular employee is fact-specific and will often exceed the Employment Standards Act minimums (see Myth #3 above).
Myth #5: Economic hardship affects (or eliminates) termination obligations.
Many employers believe that a significant economic downturn or the failure of a business that necessitates layoffs means that the obligations to the affected employees are reduced or eliminated. Except in the most rare of cases, that is not so. Generally, a termination due to economic downturn is still a termination, and the liability of the employer to give the notice called for by an employment contract (or to make payment in lieu of such notice) and the obligations under the Employment Standards Act are not affected by the employer’s economic circumstances. So, if you are an employer who needs to reduce staff for economic reasons associated with COVID-19, do not assume that you are free from those obligations, and if you are an employee, do not assume your entitlement is reduced or eliminated merely because your employer ended your employment because its business was negatively affected by the outbreak.
The “most rare of cases” where an employer may be relieved from termination-related obligations may include a situation where the employment contract has become impossible for the employer to perform due to an unforeseeable event or circumstance beyond its control. Such a situation (aside from a receivership or insolvency proceedings) can eliminate the obligation to pay compensation for length of service under the Employment Standards Act [see section 65(1)(d)], but an economic downturn, by itself, has been held insufficient for that purpose. In a similar way, the common law has developed so as to relieve parties from performing a contract where performance has become impossible as a result of unforeseen circumstances beyond the control of either party (a concept known as “frustration”), but the law is equally clear that “impossible” means just that (and not, for example, merely “more onerous”) and economic downturn has, therefore, generally not qualified. An employer contemplating whether the concept of frustration applies to some COVID-19 cause that has made it impossible to continue an employee’s employment should consult a lawyer on that very technical matter in its specific circumstances.
Myth #6: Laying off a large number of staff is just multiple individual dismissals.
If a large workforce is being reduced or eliminated in a short time, additional obligations may apply under the Employment Standards Act. It requires that if the employment of 50 or more employees at a single location is to be terminated within any two-month period, the employer must give notice to all affected employees, the Minister of Labour and any union representing the employees. The notice must specify the number of employees affected, the effective date(s) of termination and the reason for it. More importantly, the notice must be given between 8 and 16 weeks prior to the date of the first termination (depending on the total number of employees affected) and is in addition to any compensation for length of service. A failure to provide the required notice obligates the employer to pay termination pay for the shortfall. Given these obligations, employers must be careful with large-scale reductions, even in the face of COVID-19, especially since “single location” does not necessarily mean one physical site and since the employer’s obligations can increase retroactively if the employer finds later that it has to layoff more employees than originally anticipated, potentially increasing the required amount of notice for previously dismissed staff.
Myth #7: A short article can completely address most of the employment law issues arising from circumstances such as a pandemic.
This should be an obvious myth. We are here to help you through this trying time, and encourage you to contact us for information on any employment law issues, whether covered here or not.
The Authors: Greg Palm is a partner at Hamilton Duncan and the leader of the firm’s commercial litigation group, which includes employment law matters for employers. Rory Morgan is a partner at Hamilton Duncan and leads its employment law practice group for employees.
Notice: This article is for general information purposes only, and is not legal advice. Readers should not act based only on general information or neglect to seek legal advice because of it. Proper legal advice is highly dependent on the facts of each particular case, and the lawyers at Hamilton Duncan would be pleased to discuss your situation with you and to provide you with advice specific to it.