With the arrival of US tariffs on most Canadian goods, many employers may be concerned about how these tariffs may impact their businesses. Some employers may need to make difficult decisions about their workforces in the coming weeks or months. While the economic uncertainty caused by US tariffs may seem daunting, employers can start considering and evaluating options and proactively prepare for potential challenges ahead. In this article, we discuss a few options available to provincially regulated employers based in BC.
Temporary Layoffs
Employers often use temporary layoffs to manage work slowdowns when they wish to maintain employment relationships with affected employees. A layoff occurs when an employee’s work hours and pay are temporarily reduced by more than 50% of their weekly wages or stopped entirely while the employment relationship is continued. Once business conditions improve, affected employees are returned to work.
Layoffs are a common feature of collective agreements for unionized employees. Collective agreements typically define what constitutes a layoff, including the circumstances under which layoffs can occur, and the process the employer must follow when imposing layoffs, including an obligation to provide notice to, or consult with, the union in advance of implementing a layoff and to advise of the length of the layoff. They may also establish various employee rights that impact layoffs and the recall process, such as seniority, bumping rights and recall rights.
Temporary layoff works differently for non-union employees. Under the BC Employment Standards Act (“ESA”), an employer may only temporarily lay off an employee if the temporary layoff is: (a) expressly provided for in the contract of employment; (b) implied by well-known industry-wide practice; or (c) agreed to by the employee. Any other layoff could constitute a constructive dismissal and result in a wrongful dismissal claim. For this reason, employers considering temporary layoffs for a non-union workforce will want to review their contracts to consider whether they expressly provide for temporary layoffs, or not, and seek legal advice before proceeding.
If an employer has a right to lay off a non-unionized employee, an employer can do so only in accordance with the rules provided in the ESA. In brief, a temporary layoff cannot exceed 13 weeks in any 20 week period. Employees who are not recalled after 13 weeks of temporary layoff are deemed to have been terminated.
Individual and Group Termination
Employers may also need to permanently reduce their workforce. Even if this step is not yet necessary, reviewing your employment contracts and understanding your workforce and the scope of your potential severance liabilities is a prudent first step.
Employers in unionized workplaces must comply with both the ESA and any prescribed obligations under applicable collective agreements. In addition, employers are required to provide at least 60 days notice to the union of any change that affects the terms, conditions or security of employment of a significant number of employees in the bargaining unit, and then meet with the union to develop an adjustment plan, in accordance with section 54 of the BC Labour Relations Code.
In non-unionized workplaces, employee termination entitlements will be governed by individual employment contracts. For this reason, it will be important to know which employees have written employment contracts and whether they deal with the issue of termination expressly. Where the employment contract does not contain a written and enforceable termination clause, an employee’s termination entitlements will generally be determined by the common law.
Some employers may also need to prepare for the possibility of implementing larger-scale workforce reductions. Under the ESA, a group termination occurs when an employer terminates the employment of 50 or more employees at a single location within a two month period.
Group terminations require additional ESA notice requirements. The amount of group termination notice required will depend on the number of employees being terminated and will range from eight to 16 weeks. Group termination notice and termination pay requirements are in addition to the individual written notice and compensation requirements for non-unionized employees or in the collective agreement for unionized employees. If an employer does not provide group termination notice, it must provide termination pay in lieu of notice.
Other Workplace Restructuring Methods
Short of temporary layoff or termination, employers may also consider other changes to help reduce workforce costs temporarily or otherwise. Employers should seek legal advice prior to implementing any mid-employment changes to terms and conditions of employment to avoid and effectively manage the risks associated with any such changes.
If employers have any questions about this article or require any advice or support in navigating this period of uncertainty, please contact your Harris lawyer.
