VANCOUVER — Any day now, workers who were temporarily laid off due to a state of emergency that shut businesses down will be deemed, by law, to be permanently laid off, whether they or their employers like it or not.
The B.C. government needs to amend the Employment Standards Act, and quickly, or it could put both employers and employees in an untenable position, said Ryan Anderson, a lawyer specializing in employment law at Vancouver’s Matthews, Dinsdale and Clark LLP.
Anderson said if temporarily laid-off employees are deemed, by statute, to be terminated, employers could be forced to pay large severances that they can’t afford, even though they hope to eventually bring their employees back to work. Hefty group severances could bankrupt some businesses.
“Do the math,” Anderson writes in a legal brief. “For example, the termination of 101 employees earning $40,000 per year on average, at a single location within a two-month period, triggers a group termination liability of over $930,000.
“There are few small- or medium-sized businesses that could survive that kind of hit — especially if their doors have been shut for 16 weeks.”
Under the B.C. Employment Standards Act, employees laid off for more than 13 weeks are automatically deemed to be terminated, and eligible for severance. The B.C. government extended that period to 16 weeks, but many businesses, venues and tourist attractions have been shut down nearly that long already, so a wave of statutory terminations could be on the way any day.
Larger employers that have shut down for more than 16 weeks might have to pay group-termination severance.
“These liabilities are automatic,” Anderson said. “So if I’m an employee who’s been laid off for 16 weeks, on the seventeenth week the statute says I am now terminated.
“The employer doesn’t have to issue a termination letter or take any action at all. The act says I am terminated and I am entitled to my individual pay in lieu of notice, and if I’m part of a group of more than 50 employees, I’m entitled to group termination.”
A B.C. employer that dismisses 50 or more employees must pay each employee eight weeks of severance, regardless of length of employment. An employer with more than 100 employees must pay 12 weeks.
Section 65 of the Employment Standards Act allows for unforeseeable circumstances that could let employers avoid paying severance. As Anderson points out, “if the pandemic is not an unforeseeable circumstance, what is?
“The ones that are under direct order to close, we hope that the branch will adjudicate these cases, applying section 65 and relieving them of that liability, but we don’t know.”
But what about businesses — hotels, for example, or retailers — that are allowed to reopen but have seen business cut in half?
If those employers are forced to continue some layoffs for more than 16 weeks, due to reduced business, they might have a harder time arguing that those layoffs are a direct consequence of the pandemic lockdown.
“What our government seems to be saying … is that if terminations occur as a direct result of COVID, then maybe you won’t be responsible for individual termination pay or group termination pay. But if it’s not a direct result, then maybe not.”
Even if an employer is successful in getting an exemption from paying severance, the employee is still deemed terminated.
He cites hotels as an example. It could be months before they are back to normal occupancy. Many of their temporarily laid off employees will have been deemed statutorily terminated by then.
“They’re going to want those same employees back, if they’re available,” Anderson said. “They don’t want to terminate them.”
Those employees might get a few weeks of severance, but when they are eventually rehired, their employer would be under no obligation to rehire them at their previous salaries or seniority levels.
These problems could be avoided, Anderson said, if B.C. followed the lead of Ontario, which has suspended provisions in its employment act that automatically deem temporary layoffs permanent.
“They have said if you are temporarily laid off due to COVID, then it never becomes a termination as long as COVID continues,” said Anderson, noting Ontario treats such laid-off employees similarly to those taking parental leave, who maintain seniority and the right to return to work in the same or similar position.
Alternatively, Alberta has relieved employers of their group-termination liability. “What Alberta has said is that, if terminations occur as a result of COVID, the group-termination provisions don’t apply,” Anderson said.
Employers in B.C. can try to argue that the terminations were the result of unforeseen circumstance.
“If I knew what my liability was, I might be able to make some rational decisions. If I fear that my liability might be $1 million, I might declare bankruptcy,” Anderson said.
Asked if B.C. would consider taking a similar approach to Ontario’s, the Ministry of Labour said it’s not necessary, because B.C.’s Employment Standards Act allows employers to request a variance on the length of the temporary layoff. However, that variance request requires a majority of laid-off workers to support the extension and must be submitted to the director of the Employment Standards Branch.
