Recent changes to Ontario’s Employment Standards Act, 2000 (ESA) have introduced an extended temporary layoff framework. The changes are now in effect and are relevant for employers managing restructuring or economic challenges.
Layoff vs. termination — why the distinction matters
While a temporary layoff is not a termination, the difference can be easy to overlook.
Under the ESA, a temporary layoff allows an employer to pause an employee’s work without ending the employment relationship, as long as the layoff stays within specific time limits and statutory conditions. A termination, by contrast, ends the employment relationship and triggers obligations such as notice of termination, severance pay (where applicable), and benefit continuation.
Reminder:
• If a layoff exceeds ESA time limits or fails to meet required conditions, it is deemed a termination
• Even if ESA rules are met, a layoff may still constitute constructive dismissal unless the employment contract expressly allows layoffs
Employers must assess temporary layoffs for both ESA compliance and contractual risk.
Extended temporary layoffs (beyond 35 weeks)
Employers may now implement layoffs lasting up to 52 weeks in a 78-week period, but only if strict conditions are met:
- A written agreement with the employee
- A defined recall date disclosed in advance
- Approval from the Director of Employment Standards
- Record retention for at least three years
Failure to meet any of these requirements can result in the layoff being deemed a termination, triggering notice and severance obligations.
Why this matters for employers:
While these changes provide greater flexibility, they also increase complexity and risk:
- A non‑compliant layoff may be deemed a termination under the ESA
- Even compliant layoffs may trigger constructive dismissal claims if not expressly permitted by contract
- Poor documentation can lead to unexpected severance obligations
Ontario’s expanded rules offer more flexibility—but only if applied carefully. Employers should clearly distinguish between layoffs and terminations and ensure their contracts, policies, and processes are aligned to manage risk.
If your organization is reviewing workforce strategies or updating employment agreements, please don’t hesitate to reach out to speak to an e2r® Advisor.