Written by Sara Hanson and Melissa VanderHouwen
In response to the COVID-19 pandemic, Canadian society is rapidly taking the idea of social distancing more seriously. From a public health perspective, social distancing is a laudable response to this unprecedented modern health crisis, but the trickle down effects for Canadian workers could be significant.
Starting this week, more and more employers have been encouraging employees who are able to do so to work from home. However, working from home is simply not possible for employees in many industries, especially those working in the service and retail industries that demand daily contact with the public. In those industries, many employers are now opting or being required to close, meaning that many employees are being told they are being laid off indefinitely, or even terminated from their employment.
If you are a unionized employee in BC whose employment is being affected by COVID-19, you need to look at your collective agreement to see what your rights are. In a unionized context, employers can only terminate employees for “just cause”, meaning that the employee has done something to justify being terminated.
Most collective agreements have provisions that allow the employer to lay off employees for lack of work. These provisions often require employers to lay off employees in reverse order of seniority (the least senior employees being laid off first). Collective agreements also generally have recall provisions that provide employees with the right to have their name added to a “recall list”, which the employer will use to recall employees back to work, in order of seniority, once the work picks up again. Collective agreements may also have severance provisions allowing employees to choose severance pay in lieu of adding their name to a recall list, or remaining on that list. If you have specific questions about your entitlements under a collective agreement, you should check with your union representative.
If you are not a member of a union, your rights as an employee in BC, subject to certain exclusions, are set out in the BC Employment Standards Act (“ESA”). Outside the unionized context, an employer can terminate your employment at any time with or without cause. If the employer is able to prove just cause, they don’t have to give you notice or pay you any severance.
However, if your employer terminates you without cause, section 63 of the ESA requires the employer to give you a minimum of 1 week’s pay after you have worked for 3 consecutive months, increasing to a maximum of 8 weeks’ pay after you have worked for 8 or more consecutive years. An employer is entitled to give you written notice of your termination instead of pay, as long as they provide you with the required amount of notice set out in section 63 of the ESA.
If your employer has terminated 50 or more employees at a single location within a short time-frame, specific provisions of the ESA about Group Terminations (section 64) may apply to you. The rules about Group Terminations do not, however, apply to employees who are laid off or terminated as a result of the normal seasonal reduction, suspension or closure of an operation.
However, section 65 of the ESA sets out specific exceptions for when the requirements for employers to provide employees with individual notice of termination or pay in lieu of notice or to provide notice of group terminations do not apply. Most notably, section 65(1)(d) provides that the notice provisions do not apply to an employee “employed under an employment contract that is impossible to perform due to an unforeseeable event or circumstance other than receivership, action under section 427 of the Bank Act (Canada) or a proceeding under an insolvency Act.” This section codifies the common law doctrine known as "frustration" whereby a contract is deemed at an end if an external event, beyond the control of either party, renders the continued performance of the agreement impossible.
In order to rely on section 65(1)(d), an employer must demonstrate “it was both impossible to perform the employment contract and that impossibility of performance was due to an unforeseeable event or circumstance” (see Mato’s Consulting Ltd., BC EST #D105/08). In that case, citing from an earlier decision, the Employment Standards Tribunal noted that
the term ‘impossible’ connotes that something is not capable of occurring or being accomplished or dealt with; or is unable to exist, happen or be achieved. . . . In its ordinary and grammatical sense, unforeseeable means incapable of being anticipated. . . .
And that
The word "unforeseeable" should be interpreted cautiously. It would seriously undermine the minimum protections given employees by the Employment Standards Act to deny them length of service compensation when their employer encounters a difficulty in the marketplace, be it a product market or a real estate market.
The current situation involving COVID-19 is unprecedented, and so it is difficult to determine at this time whether the “frustration” exception in section 65(1)(d) will apply to employees who are terminated if an employer closes or otherwise cannot continue to employ an employee.
It is arguable that this exception will not apply to employers who choose to permanently close their operations instead of coming up with creative solutions to stay open such as permitting employees to work from home. Where working from home is truly not an option, employers who want to rely on section 65(1)(d) will have to establish that it was impossible to continue their operations. Orders from the provincial health officer, such as the one issued on March 21, 2020 ordering all personal service establishments, such as salons, spas and tattoo parlours, to close, may make it impossible for those employers to continue their operations in the future. However, before they can rely on section 65(1)(d), those employers will also have to establish that COVID-19 was an unforeseeable event. Only time will tell whether the term “unforeseeable” is interpreted in such a manner as to include global pandemics.
At this stage, it is important for employees to know that there is no clear answer as to whether an employer that terminates their employment because of the economic effects of COVID-19 will be able to avoid paying compensation for length of service. Employees who are faced with this situation should contact the Employment Standards Branch or seek legal advice.
According to the ESA, termination includes a permanent layoff. A lay off is permanent if it exceeds the period of a right of recall, or lasts more than 13 weeks in a 20-week period.
However, courts in BC have determined that the ESA does not give employers the statutory right to temporarily lay off employees. Instead, courts have said that employers are only allowed to temporarily lay off employees if there is term in a contract permitting the employer to lay off employees, or if the employee agrees to the lay off (see Besse v. Dr. A.S. Machner Inc., 2009 BCSC 1316 (CanLII) at paras. 59 – 81).
That means if there is nothing in your employment contract permitting the employer to lay you off temporarily, the employer will need you to agree to the layoff for it to be lawful. If you do not agree and the employer still tells you not to come to work, then you have effectively been terminated. In these circumstances, the employer becomes liable to pay you compensation, or provide you with the required notice, under the ESA.
If your employment is terminated, you may also be entitled to common law reasonable notice. You should seek advice from a lawyer about how much notice you may be entitled to at common law, and the steps you may take to obtain it.
Keep in mind that if you accept the lay off, you will not be entitled to any compensation unless the employer fails to recall you back to work after 13 weeks. At that point, the lay-off becomes a termination under the ESA.
You should also keep in mind that if you don’t accept the lay off and instead declare that you have been terminated, the employer doesn’t have to recall you to work once their business resumes. In other words, you won’t have the right to return to your job.
Whether you accept the lay off or are terminated, the employer is required to issue your Record of Employment (ROE), within five calendar days of the first day you experience an interruption of your earnings (seven consecutive calendar days with no work and no earnings). For more information about your employer’s obligations to issue a ROE, see the Government of Canada’s website.
You can apply for employment insurance benefits (EI) as soon as you stop working, even before you receive your ROE. If you are laid off or terminated as a result of COVID-19, you will likely be eligible for EI benefits as long as you have worked the required number of insurable hours in the last 52 weeks (which is 700 hours, or 13.5 hours per week, in Vancouver). You can read more about your eligibility for EI benefits on the Government of Canada’s website.
You may also experience an interruption in earnings if your salary falls below 60% of your regular weekly earnings because of illness due to COVID-19 or the need to quarantine. In those circumstances, your employer must issue a ROE and you may qualify for EI sickness benefits. The Government of Canada has issued new guidelines for employees affected by COVID-19 and who are placed in quarantine, which waives the usual one-week waiting period for EI sickness benefits, eliminates the requirement for a medical certificate, and provides priority EI application processing.
Employees and employers both need to know that employees who unable to work due to COVID-19 related reasons are entitled to an unpaid leave of absence from work. For complete details, please see our blog on the amendments to Employment Standards Act enacted on March 23, 2020 by the Employments Standards Amendment Act (No. 2), 2020.
The legal landscape of the effects of COVID-19 for employees is changing rapidly, and all Canadians should watch for updates from the provincial and federal government. We will update this blog as necessary.
This blog is not legal advice, and is intended for general information purposes only. If you need advice about your specific situation, you should speak to a lawyer. The lawyers at Moore Edgar Lyster LLP can be reached here.