Temporary Layoff — Ontario Employment Law

Many Ontario workers and employers mistakenly believe that a temporary layoff is an employer's automatic right when business slows down. However, the reality under Ontario law is far more complex. A temporary layoff is a period where an employee is not working and not being paid, but the employment relationship is not formally terminated. The rules governing these situations are found in two parallel systems: the minimum standards of the Employment Standards Act, 2000 (ESA) and the principles of common law.

The ESA defines a temporary layoff and sets maximum durations. Generally, a layoff is 'temporary' if it lasts no more than 13 weeks in any consecutive 20-week period. This can be extended up to 35 weeks in any 52-week period if the employer continues to make substantial benefit plan payments. If a layoff exceeds these limits, the ESA deems the employment terminated, and the employee is owed statutory termination and severance pay.

Crucially, however, the common law provides a different and often more protective standard. At common law, an employer has no right to temporarily lay off an employee unless that right is explicitly stated in a clear and enforceable employment contract. If there is no such contractual term, any unilateral layoff by the employer is a substantial breach of the employment agreement. This breach can be treated by the employee as a constructive dismissal, entitling them to resign and sue for wrongful dismissal damages, which are typically far greater than ESA minimums. The COVID-19 pandemic introduced a temporary exception through the Infectious Disease Emergency Leave (IDEL) regulation, which deemed certain pandemic-related layoffs not to be a constructive dismissal under the ESA, but this was a specific and unusual measure. Because your rights depend heavily on your contract and the specific facts, having a legal professional review your layoff notice can be a critical first step in protecting your interests.