Temporary Layoff — Ontario Employment Law
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About Temporary Layoff
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.
Frequently Asked Questions
How long can a temporary layoff last in Ontario under the ESA?
Under Ontario's Employment Standards Act, 2000, a temporary layoff can last up to 13 weeks in any 20-week period. It can be extended to 35 weeks in a 52-week period if the employer continues substantial payments for benefits like health or pension plans.
My employer laid me off but my contract doesn't mention layoffs. What can I do?
If your employment contract does not give your employer the explicit right to lay you off, the layoff is likely a constructive dismissal at common law. You may have the right to treat your employment as terminated and pursue a claim for wrongful dismissal damages, including a notice period.
What happens if my temporary layoff lasts longer than the legal limit?
If a temporary layoff exceeds the time limits set by the ESA (e.g., 13 weeks without benefits continuation), your employment is considered terminated on the first day of the layoff. Your employer would then owe you statutory termination and potentially severance pay.
Do I have to accept a temporary layoff from my employer?
No, you do not have to accept it if your contract doesn't allow for it. You have a choice: you can either accept the layoff and wait to be recalled, or you can treat it as a constructive dismissal and seek compensation. Accepting it may prevent you from making a claim later.
Does my employer have to continue my health benefits during a layoff?
Not necessarily for a short layoff (under 13 weeks), but they must continue them to extend a layoff beyond 13 weeks under the ESA. The terms of your employment contract and benefits plan will ultimately determine the specific obligations.
When should I contact an employment lawyer about a temporary layoff?
You should consider contacting an employment lawyer as soon as you receive a layoff notice. They can review your contract, explain your options (accepting the layoff vs. claiming constructive dismissal), and help you understand the deadlines before you take any action that could affect your rights.
Can my employer reduce my pay or hours and call it a temporary layoff?
A significant, non-consensual reduction in hours or pay can also be a constructive dismissal, similar to a full layoff. A temporary layoff under the ESA specifically refers to a period where you are not working at all, not just working reduced hours.
Common Scenarios
- A construction company lays off several labourers for the winter season, which is a well-established and accepted practice in their industry and part of their collective agreement.
- A tech company, facing a funding shortfall, places a software developer on an unpaid 'temporary layoff' for 12 weeks. The developer's employment contract has no clause permitting layoffs.
- A retail store manager is told their hours are being reduced to zero until a new shipment arrives in 'a few weeks', but the employer provides no firm recall date.
- An employee at a manufacturing plant is laid off for 14 weeks. The employer did not continue their benefits, automatically triggering a termination under the ESA on the first day of the layoff.
- An administrative assistant is laid off, and her employment agreement has a vague clause stating the employer 'may implement layoffs as required by business needs'.
What You Should Know
- Immediately locate and carefully review your employment contract. The presence or absence of a clause permitting temporary layoffs is the single most important factor in determining your rights.
- Be cautious about what you sign. If your employer asks you to sign a letter agreeing to the layoff, doing so may waive your right to claim constructive dismissal.
- Document everything. Keep copies of the layoff notice, any emails or letters from your employer, and notes of any verbal conversations about the layoff's duration and terms.
- Understand the deadlines. If you intend to claim constructive dismissal, you must act promptly after the layoff begins. Delaying can be interpreted as acceptance of the new terms.
- Seek a legal consultation before making a decision. An employment lawyer can clarify whether your layoff constitutes a constructive dismissal and help you calculate the potential compensation you could be owed.
Featured Cases
T. v. Salytics Inc.
2026 ONCA 621 (CanLII) · 2026-09-03T. v. Salytics: Constructive Dismissal Appeal
The Court of Appeal for Ontario dismissed an appeal challenging a ruling that a temporary lay-off clause was not a termination clause under the Employment Standards Act, 2000. The court addressed whether the lay-off constituted constructive dismissal at common law and interpreted the employment agreement's substance over form, confirming that the clause incorporated ESA requirements.
T. v. Salytics Inc.
2025 ONSC 3461 (CanLII) · 2025-06-10T. v. Salytics: Constructive Dismissal & Lay-Off Validity
This case involves a dispute over whether a temporary lay-off constituted constructive dismissal and whether the lay-off provision in the employment contract was valid under the Employment Standards Act, 2000. The court analyzed whether the provision qualified as a termination provision and determined that the substance of the provision governed its characterization. The application was dismissed, finding the lay-off provision valid and the temporary lay-off did not amount to constructive dismissal.
F. v Susur Lee Group
2025 CanLII 154498 (ON SCSM) · 2025-05-13Constructive Dismissal: Temporary Lay-off and Condonation
This case addresses whether a unilateral temporary lay-off without a contractual term amounted to constructive dismissal and whether the employee condoned the lay-off by returning to work. The court applied the Potter and Pham framework, finding that the employee's recall within 12 weeks and acceptance of pay constituted condonation rather than mitigation, leading to the dismissal of the constructive dismissal claim.
L. v. St. Laurent Automotive Group Inc.
2025 ONSC 1956 (CanLII) · 2025-03-31Constructive Dismissal: Temporary Layoff & 7 Months Notice
This case addresses whether a temporary layoff without contractual authorization constitutes constructive dismissal, resulting in a finding that the employer breached essential terms of the employment contract. The court awarded seven months' notice to a mechanic, considering factors such as inducement and economic uncertainty, while rejecting claims for bad faith damages due to a lack of malicious conduct.
Taylor v. Hanley Hospitality Inc.
2021 ONSC 3135 (CanLII) · 2021-06-07Constructive Dismissal: COVID-19 Layoffs & ESA
This case addresses whether temporary layoffs due to the COVID-19 pandemic constitute constructive dismissal under common law or are governed by the Employment Standards Act, 2000 (ESA) and Ontario Regulation 228/20. The court determined that the statutory framework for Infectious Disease Emergency Leave (IDEL) displaces the common law doctrine of constructive dismissal for the relevant period. Additionally, the court addressed a procedural issue where the plaintiff's failure to deliver a reply to the statement of defence resulted in an acknowledgment that the layoff was related to COVID-19.
Coutinho v. Ocular Health Centre Ltd.
2021 ONSC 3076 (CanLII) · 2021-04-27Constructive Dismissal: Unpaid Layoff & Mitigation
This is a summary judgment motion in a constructive dismissal case involving an employee terminated via a unilateral, unpaid temporary layoff during the COVID-19 pandemic. The court dismissed the employer's motion, finding no genuine issue requiring a trial regarding the constructive dismissal or mitigation defenses, while noting that statutory termination pay under the ESA is not subject to mitigation. The case proceeds to trial on the remaining issue of cause for dismissal.
P. v Wittman Canada Inc.
2017 ONSC 3252 (CanLII) · 2017-05-26Constructive Dismissal: 8 Weeks ESA Notice Awarded
This case addresses whether a temporary lay-off constituted constructive dismissal where the employment contract was silent on lay-offs. The court also determined that the employment contract incorporated ESA notice provisions, entitling the plaintiff to damages equivalent to eight weeks' notice, and ruled that the claim for these damages was not dismissed despite pleading technicalities.
B. v Gracious Living Corporation
2016 ONSC 4127 (CanLII) · 2016-06-22Constructive Dismissal: Unauthorized Layoff Awarded 3 Months Notice
This is a merits decision regarding constructive dismissal where the employer unilaterally imposed a temporary layoff without contractual authorization. The court found that such a layoff constituted constructive dismissal and determined the appropriate notice period for compensation.
K. v Idera Inc.
2016 ONSC 3799 (CanLII) · 2016-06-09Constructive Dismissal Appeal: Temporary Layoff & Potter Test
This is an appeal to the Divisional Court from a motion judge's decision regarding constructive dismissal and breach of contract. The appellant, an employee placed on an unpaid layoff, challenged the finding that they had acquiesced to the change in terms and argued the motion judge erred in applying the Potter two-step test for constructive dismissal. The appeal also addressed jurisdictional limits under the Courts of Justice Act.
M. v Enablence Canada Inc.
2016 ONSC 923 (CanLII) · 2016-04-07Constructive Dismissal: Temporary Lay-off and Acquiescence
This case addresses whether a temporary lay-off notice issued due to financial difficulties amounted to constructive dismissal. The court found that the lay-off did not constitute constructive dismissal because the plaintiff acquiesced to it by continuing to access benefits, thereby maintaining the employment relationship until a recall to work occurred. Although the employment contract stipulated a six-month notice period, the plaintiff was awarded damages on a common law basis rather than the contractual amount.
M. v Cima Canada Inc.
2016 ONSC 1925 (CanLII) · 2016-03-18Constructive Dismissal: Unauthorized Temporary Layoff
This case addresses whether an employer-imposed temporary layoff without contractual authorization constitutes constructive dismissal and whether compliance with the Employment Standards Act overrides common law requirements. The court determined that such a layoff repudiates a fundamental term of the employment contract, resulting in constructive dismissal, and clarified that statutory ESA payments must be set off against common law damages.
T. v. Renin Corp
2013 ONSC 2715 (CanLII) · 2013-05-07Constructive Dismissal: 33 Weeks Notice for Unilateral Layoff
This case addresses whether a unilateral temporary layoff constitutes constructive dismissal under common law and whether the Employment Standards Act displaces those common law rights. The court found that the layoff was non-compliant with the statutory definition and constituted a fundamental alteration of employment terms, thereby establishing constructive dismissal. The employee was awarded damages based on a notice period of 33 weeks.
S. v. Murt Canada Inc.
2006 CanLII 9983 (ON SC) · 2006-03-31Wrongful Dismissal: Employee on Layoff Awarded 8-Month Notice Period
A wrongful dismissal case involving a plaintiff on temporary layoff at the time of a business sale. The court determined the plaintiff became an employee of the purchaser corporation and was entitled to $6,600.72 under the Employment Standards Act and $5,749.28 in common law damages for an eight-month notice period. Wallace damages were not awarded due to lack of evidence of bad faith.
Sigpro Wireless Inc. v. C.
2005 CanLII 6370 (ON CA) · 2005-03-16Wrongful Dismissal: 5-Month Notice for Temporary Layoff
This appeal from the Court of Appeal for Ontario concerns whether a temporary layoff constituted a termination of employment without notice or cause. The Court upheld the trial judge's finding that the layoff was an unlawful termination and affirmed the five-month notice period awarded, rejecting the employer's argument that economic circumstances or an implied term should reduce the notice.
D. v. Little Employment Group Inc.
2003 CanLII 7172 (ON SC) · 2003-11-10Constructive Dismissal: Temporary Layoff Without Contract Terms
A constructive dismissal case where the plaintiff was subjected to a temporary layoff without any express or implied contractual terms permitting layoffs. The court determined that the layoff constituted constructive dismissal as no policy or practice of layoffs was established. The case also addresses the reasonable notice period for a plaintiff who had been employed for 28 months under a new employment contract and whether a car allowance is payable during the notice period.