Layoff vs. Termination: What’s the difference?

 

While most people use the terms “laid off” and “terminated” interchangeably to describe dismissal from employment, there is in fact a legal difference between the two.

Termination occurs when an employer irrevocably breaks its contract of employment with an employee. An employer may terminate the employee for cause, in which case the employer may dismiss the employee summarily, or, if no cause or reason is alleged, then the employer must provide the employee with reasonable notice of the termination or payment in lieu.

A layoff, on the other hand, is merely a temporary cessation of work, which occurs when an employer reduces or stops an employee’s work without terminating their agreement. Layoffs typically occur due to a shortage of work or seasonal employment, with the employee expected to be called back to work again in the future.

In Ontario, layoffs are governed by the Employment Standards Act, 2000. According to section 56(2) of the ESA, a temporary layoff occurs when:

• the employee is laid off for not more than 13 weeks in any period of 20 consecutive weeks;
• the employee is laid off for more than 13 weeks in any period of more than 20 consecutive weeks if the layoff is less than 35 weeks in any period of 52 consecutive weeks and (i) the employee continues to receive substantial payments from the employer, (ii) the employer continues to make payments for the benefit of the employment under a retirement or pension plan or a group employee insurance plan, (iii) the employee receives supplementary unemployment benefits, (iv) the employee is employed elsewhere during the layoff and would be entitled to receive supplementary unemployment benefits if that were not so, (v) the employer recalls the employee within the time approved, or (vi) in the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee; or
• in the case of an employee represented by a trade union, a layoff longer than a layoff described in clause (b) where the employer recalls the employee within the time set out in an agreement between the employer and the trade union.

An employer is not required to provide a recall date to laid-off employees unless contractual provisions state that such a date is required.

If an employer lays off an employee without proper contractual authorization or if the lay-off exceeds the time allowed under the above provision, then the lay-off may be deemed constructive dismissal, with the employer liable to provide reasonable notice at common law.

Minken Employment Lawyers is your source for expert advice and advocacy on today’s employment law issues. Whether you are an employer or an employee, we can help. Contact us to see how.