Employment Standards Act layoffs, terminations and severance pay

The Employment Standards Act says that if you lay an employee off and keep their benefits going, so long as you call them back within 35 weeks, no termination has occurred. This does not apply to employees where the possibility of a layoff is not an accepted part of their terms of employment.
If the employee is not called back in time, a termination has occurred and they are owed at least the minimum termination and perhaps severance payments required by the Employment Standards Act. They may also be entitled to the maximum entitlements that the courts award which is referred to as reasonable notice.
You get the Employment Standards Act minimums even if you find a job the next day. The reasonable notice awarded by the courts is only an entitlement if you look for work and can’t find it.
A man we will call Joe was hired as a labourer for a company in 1983. They were big enough that if they terminated somebody of Joe’s seniority, they would owe both termination and severance pay under the Employment Standards Act.
In May of 2010, 27 years after Joe started the job, he was laid off. He had been laid off for short periods throughout his employment so he couldn’t claim it was a termination right off the bat.
The employer kept his benefits going but did not call him back within 35 weeks so  Joe’s lawyer sent a letter demanding immediate payment of the eight weeks’ termination pay and 26 weeks’ severance pay owed to Joe pursuant to Act.
The employer called Joe directly the next and invited him back to work. The HR manager tried to talk to Joe about the demand letter from his lawyer and Joe would not. He did agree, however, to return to work and he did. After 27 years, Joe’s minimum payment under the Act was a combined 34 weeks but his pay in lieu of notice could have been as high as 18 to 20 months.  By bringing Joe back to work, the employer had avoided the possibility of the larger claim because Joe could not get it twice. You can’t claim for more than the 34-week minimum if you have replaced the income.
A few weeks after Joe came back to work, his lawyer wrote the employer again demanding payment of the termination and severance pay. Joe had, after all, been terminated as a result of the wording of the Employment Standards Act. He was laid off for more than 35 weeks. That’s all there was to discuss.
You can imagine that the employer was somewhat peeved with Joe who was working in their facility when this second lawyer’s letter arrived. Problem was, if they terminated Joe again, they would have to deal with a large severance package of up to 20 months. In addition, Joe could complain that he suffered a reprisal for enforcing his Employment Standards Act rights and probably get an order from a Ministry of Labour officer reinstating him with back pay. They left Joe alone.
The employer claimed that by Joe accepting the offer of a return to work he had waived his right to termination and severance pay. The judge did not agree. Joe had simply agreed to come back to work and had made no comment with respect to his entitlement to Employment Standards Act minimums.
The judge knew that the only reason they offered Joe his job back was for damage control so that they didn’t have to pay out up to 20 months’ pay in lieu of notice. So, Joe got his 34 weeks’ pay, which actually didn’t even cover his loss during the layoff, and continued working.
If Joe had never been laid off for 27 years and there was not a written policy alerting employees that they could be laid off without notice, the layoff would have been a termination on the very first day, regardless of the wording of the Employment Standards Act. The Court of Appeal said so about ten years ago.
Few employees are brave or strong enough to sue their employer while they are going into work every day. Joe was. His situation happens every day across this province but few are actually willing to disturb the harmony, if there is any, of the workplace, to sue their boss.
Ed Canning
Ed Canning
P: 905.572.5809