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By Alex Whalen
and Niels Veldhuis
The Fraser Institute

Aside from the enormous health-related challenges due to the COVID-19 virus, employers and workers are feeling major economic pain with job loss, reduced income and revenue.

Alex Whalen Fraser

Alex Whalen

The ability of businesses to adjust quickly will be key to stabilizing the economy and laying the foundation for recovery.

As the federal government’s massive emergency aid package became law on Wednesday, many of the policy responses from governments across Canada seek to stabilize income. That’s an appropriate response to the economic downturn.

However, other gaps in policy exist, including the body of law relating to job layoffs, if even temporary.

Employment standards legislation in Canada varies by province and at the federal level. In general, temporary layoffs are allowed, though they’re subject to varying notice requirements and maximum timelines when the employee is laid off.

Niels Veldhuis


Some provinces allow layoffs without notice in “exceptional circumstances” but there’s uncertainty whether the COVID-19 crisis will be considered “exceptional.” There’s also uncertainty around how government-ordered shutdowns affect layoffs.

While no one wants working Canadians to become unemployed, employers must be able to quickly adjust to today’s rapidly changing circumstances to ensure their solvency and viability. Their ability to adjust now, in the face of liquidity and solvency concerns, may determine whether jobs still exist on the other side of this pandemic.

While it may seem counterintuitive to some, strengthening the ability of employers to temporarily lay off employees may ultimately save jobs.

So because the ability to quickly reduce workforces where necessary is key, some of the rules – provincial and federal – may need to be adjusted in this time of crisis.

For example, in a 2016 ruling, the Ontario Court of Appeal stated that (absent an agreement to the contrary) employers have no right to temporarily lay off employees. Even in normal circumstances, this decision severely hampers an employer’s ability to make workforce adjustments.

However, in today’s wildly uncertain environment, it could stand as a major roadblock to necessary changes. Governments must consider both employers and employees when reacting to COVID-19 and its impact.

Fortunately, some jurisdictions have already recognized this and are taking steps to provide employers more flexibility.

New Brunswick, for example, has suspended the requirement for employers to give notice if layoffs are due to COVID-19.

And California has suspended elements of its legislation that require 60-day notice for layoffs, citing extraordinary circumstances that have necessitated “rapid changes in workforce needs.”

While these temporary suspensions are a step in the right direction, governments in Canada should specifically legislate on the layoff issue, to update employment legislation in the context of COVID-19. This will overrule common law decisions (including the Ontario Court of Appeal decision) currently holding up temporary layoffs.

Moreover, provinces could amend provincial employment standards legislation to specifically allow temporary layoffs due to COVID-19. Amendments could also explicitly empower employers to make necessary adjustments to their workforces and expand maximum timelines for temporary layoffs.

Employers need a clear, straightforward process. These policy reforms would be consistent with the government initiatives already announced that aim to provide businesses with flexibility and ease cash flow demands. (These changes could also happen at the federal level, although the Canada Labour Code only applies to a relatively small number of workers, meaning individual provincial action is required.)

Ensuring the stability of income for workers is also a critical goal in stabilizing the economy and setting the stage for recovery. Recent expansions to employment insurance have increased benefits and eligibility for workers, helping to ensure those who face job loss or reduction in work receive proper income support.

Allowing employers to adjust quickly will help with solvency concerns and improve the chances those jobs will be there for returning workers when the crisis subsides.

In this extraordinary time of uncertainty, high regulatory and severance costs alongside legislative uncertainty will exacerbate an already bad situation.

Amending provincial and federal labour laws to provide businesses with more flexibility to adjust to rapidly changing circumstances is essential to protect against insolvencies and bankruptcies during this crisis.

Such moves will benefit employers and employees alike.

Alex Whalen and Niels Veldhuis are analysts at the Fraser Institute.

Alex and Niels are Troy Media contributors. Why aren’t you?

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