Making sense of layoffs amid a Pandemic
In this episode, Paul and Dave talk to lawyer, Sheridan King of Ramsay Lampman Rhodes. Sheridan outlines constructive dismissal, severance obligations under the Employment Standards Act and provides some general guidance on how to approach your employees when it comes to layoffs. She raises some key concerns related to the Canada Emergency Wage Subsidy (CEWS) and emphasizes the importance of employment agreements and frank discussion between employers and employees.
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Paul: Hello, my name is Paul Holmes and I’m with Smart Dolphins IT Solutions. We just actually recently published a Business Outlook Survey that we had been conducting in the month of April and May 2020, and this is our inaugural podcast on the heels of that, and I’m here with the President of Smart Dolphins, Dave Monahan. Dave, how are you today?
Dave: I’m excellent, thank you, great. I’m excited about this.
Paul: Yeah and this has been a long time coming so very exciting. We’ve actually been members of the Vancouver Island Economic Alliance for five years and recently Sheridan King from RLR gave a presentation online around preparing for layoffs with Covid-19 which was very informative. And so we’ve invited Sheridan to be with us today on our inaugural podcast to elaborate on that a little bit and thanks for joining us today.
Sheridan: Thanks for having me.
Paul: Awesome and just a little bit of a background for those of you who aren’t familiar, Ramsay Lampman Rhodes is based out of Nanaimo, although they serve the entire island. Sheridan was called to the Bar in 2017 and RLR actually offers quite a broad range of legal services and Sheridan in particular is primarily in civil litigation but has experience employment law, administrative law, family law and commercial litigation as well. But obviously today we’re going to be talking mostly in the realm of employment law. And so, why don’t you kick it off and let us know what we should do from this point forward?
Sheridan: Thanks again for having me. I have a growing employment law practice, which is my primary area and I’m a big fan of it, so that means I handle employment litigation matters for both employers and employees, I prepare contracts, workplace policies and I’ve also have a certificate in conducting workplace investigations as well. So, thanks again for having me here today. The topic that I had given for the VIEA presentation was about approaching layoffs and I’m going try and expand a little bit more on that and it seems like now if you had laid off an employee back in March, you’re approaching a determination on whether or not you can recall that employee. So, I’ll start up with a little bit of a background and then I’ll jump into it.
So the Employment Standards Act is your baseline piece of legislation, it sets out all of the minimum requirements that employers and employees abide by, and you can’t contract out of those minimum standards but you can have a contract which details all of the terms and conditions over and above those minimum standards. So, under the Employment Standards Act a temporary layoff is either in the case of an employee who has a right of recall, a layoff that exceeds that specified period within which they have that right to be recalled, or it’s a layoff of up to 13 weeks in any period of 20 consecutive weeks.
So, if the employee is not recalled within either of those time frames depending on which right you have, then they are deemed to have been terminated as at the beginning of the layoff.
So, in British Columbia, there is no automatic right of layoff just because it’s provided for and defined in the Employment Standards Act doesn’t mean that it provides every employer the ability to temporary layoff their employees. It’s only allowed if it is expressly permitted in a written contract of employment or if the employee consents to it or in certain seasonal industries where layoffs are expected. Think about the construction industry in the winter, right?
Dave: Can I just inject a quick question here?
Dave: So if you don’t have that in the agreement it’s essentially a permanent layoff? Is that the idea there?
Sheridan: If you don’t have a written contract of employment allowing you the ability to temporarily layoff your employees, then if you proceed with the layoff in any event, you risk a claim for constructive dismissal. And I’m going to explain how that comes about.
Dave: Thank you.
Sheridan: That actually segues beautifully into the next point about the claim for constructive dismissal. A lot of employers in the light of Covid-19 have had no choice but to try and do a temporary layoff. And a lot of employers I think have actually obtained employees consent to do it. Most employees would like the idea that they are going have a job to return to when the pandemic restrictions start to ease up. That safety of employment is going to be important. But what a constructive dismissal is: it can occur in one of two ways either a unilateral change to a material term of employment, such as you’re reducing pay or you’re reducing hours without adequate notice or the employees consent. The other way that a constructive dismissal can happen which doesn’t really apply to our discussion is where an intolerable work environment is created. But we’re more focused on that change in material term for the purposes of our discussion today because you are changing their pay and you are changing their hours, which are basic fundamental terms of an employment agreement and those employment agreements can still be oral, they don’t have to be written. It’s a baseline presumption that if you’re hiring somebody, you’re going actually have them come in and do a certain amount of work. But a constructive dismissal means that an employer is evincing an unequivocal intention to no longer be bound by the terms of the employment agreement. The change must be substantial and it must be detrimental to the employee. If an employee is constructively dismissed, and it is actually on the employee to make that call. They have to accept the employer’s breach of the employment agreement. So, they are approached with a change and then they get to take the choice: “is my employer constructively terminating me or not?” And then if they are constructively dismissed, and they’re successful in that claim then severance obligations arise.
So if you don’t have a written contract of employment then employees are presumptively entitled to both the notice and severance requirements under the Employment Standards Act as well as common law reasonable notice. The severance entitlements, under the Employment Standards Act are based on years of service with the rough calculation being you’re entitled to one week after three months of service, two weeks after one year of service, three weeks after three years of service and one additional week for each year thereafter up to a maximum of eight weeks. So all told, an eight year employee, the max you are entitled to under the Employment Standards Act is eight weeks.
Paul: You might not know the answer to this one Sheridan but from the employee perspective does the severance affect their benefits and in particular is that different with the CERB? And maybe you don’t know the answer for that.
Sheridan: I’m not sure I have your question. Under the Employment Standards Act there’s no obligation to continue someone’s benefits but under common law we argue that there is. So if your employer pays for certain benefits like a gym membership, or things like that, when you’re calculating the reasonable notice our view at least at common law is that they require either to continue those benefits for the notice period or we make a claim that a lump sum value be provided to the employee. But that application isn’t specifically under the Employment Standards Act.
Paul: But what I meant was, so if somebody has to layoff a staff during this period of time and they either choose to or they’re obligated to pay a severance do you know if that severance affects the employees claims on the CERB?
Sheridan: I think I’ve got your question. If you pay someone severance then their employment is terminated and you’re under no obligation to rehire them or recall them. At least from a baseline EI perspective, which the CERB is a derivative thereof I don’t know whether or not there would be repayment obligations. I know that there’s a litmus test for even applying for the CERB but from an EI perspective, if you receive wages for a time period during which you obtained EI then there is a potential that you would have to repay the portion of EI that you got during your notice period, provided that you actually got that severance from the employer.
Paul: Got it, okay, thank you.
Sheridan: Sure. So when we’re talking about severance obligations, I just ran through the Employment Standards Act but for the common law reasonable notice part of it, the calculation of common law reasonable notice looks at four factors, those factors are: the age of the employee, the length of the service, the job description and the availability of similar employment. The factors which a lot of folks will focus on is: the length of service and the job description. However, I don’t want to discount the age of the employee because there’s a body of law which supports the fact that if an employee is over the age of 50, then it is inherently going to be more difficult for them to compete with younger applicants, so that’s a factor that actually increases the amount of reasonable notice that person would be entitled: their length of service, obviously, the longer the service, the more severance they get, the job description. Higher level employees…so someone in the position of Mr. Monahan would garner a higher level of severance because there are simply fewer positions with his level of employment and job description so that would bump up the reasonable notice he would be entitled to in the circumstance.
Dave: It’s going to be hard to get rid of me.
Sheridan: It probably is.
Paul: It would be hard to replace you too Dave.
Sheridan: Priceless. There’s a rough and ready baseline for managerial employees, and they’re entitled to approximately one month per year of service. And the factors that I just mentioned, they give us a range. It’s an inexact science. The best we can do is look at prior case law and think of an employee in the similar circumstance of this employee looking at those four factors. And you get a range within a couple of ones. So, if you contrast the one-month career of service versus the approximate one week per year of service under the Employment Standards Act there is a big difference between the two of those. So if you don’t have a written contract of employment and you lay someone off, and they take the view that they’ve been constructively dismissed, then severance obligations are potentially quite high depending on the employee and the specific factors relating to their job.
So the language that you have to have in a contract in order to limit the amount of severance that they’re entitled to only to the amount under the Employment Standards Act has to be very clear. It has to specifically exclude the application of common law reasonable notice and I would highly recommend that everyone have their contracts reviewed, get legal advice about these terms in your employment agreements or your workplace manuals, because it is often not quite enough.
Some employers may have already had to layoff employees, and some may be considering doing it yet still, maybe they’ve found a way to survive up to this point. The hope is that with the easing public health restrictions that we’ll be able to get back to work soon, but you as a business owner have to decide where you are at, financially.
The emergency wage subsidy program that got rolled out recently may help stave this off. So the program provides a salary subsidy of up to 75% of an employee’s wages. There’s a weekly cap of $847 and it’s for up to 12 weeks, and it’s retroactive back to March 15th and it presently ends on June 6. The subsidy is intended to make it easier for eligible employees to either avoid laying off or terminating employees. The other goal is, is that if you’ve already laid off an employee, the hope would be that you would actually recall that employee and place them on the CEWS instead because 75% of their salary up to that cap (and I don’t have the math in front of me) but I believe it’s up to $52,000 a year, is the salary. So, depending on what kind of workforce you have the chances are the 75% of their salary would be below those caps which would further help you and that employee maintain their wages. So an employee doesn’t qualify if there was a period of 14 or more days where they were not paid by the employer and in order to be eligible for the CEWS the employer actually has to pay the wages, and then they have an application process to the government to get that back.
Paul: And there’s also a requirement that the company has lost a certain amount of revenue as well, right? You can’t just anticipate lost revenue, you have to actually prove it. Do you remember what the threshold was?
Sheridan: There’s three tranches I believe, the first ranch was 15% and then the two thereafter I believe were 30% and you don’t have to apply for all three tranches. You can apply for one or two, depending on your business requirements.
Paul: It’s interesting, though, if you’re in a business where you’re affected or you’re anticipating a major slow down, but you haven’t actually seen the slow down yet. It’s very hard with this program to be proactive about it.
Dave: And essentially from the survey, I think there was an essence that there’s more to come, there’s another shoe maybe to drop in all this, so it’s hard. I think a lot of businesses are preparing for a recession, possibly a deep recession, not knowing of course, this is all new. That’s a really critical part of this is to look forward and use these things. It’s hard until you already know it’s painful and you can’t relieve the pain.
Sheridan: Yeah, and the tax implications as well. I’m not an accountant, so I would encourage everybody to get accounting advice about applying for these programs because I know at least for the CERB that’s taxable and the CEWS is going to be taxable for the employer as well. Cash flow is a big problem. So even if on your books, you look one way, then making sure that you can still afford to pay your employees, if you put them on the subsidy is going to be an assessment that each business owner is going have to make. And so this is where we come to the next part of this which is that employers are encouraged but they’re not actually required to top up your employees wages with the additional 25% that’s not covered by the CEWS. The hope would be that if you can do it, you would pay the difference.
Paul: If you’re a restaurant, for example, and you’ve laid everybody off because you’re not having any business at all you could actually bring them back on the books, pay them 75% and still be ready to go should your restaurant restart. Is that it?
Sheridan: Yes, you can try and do it that way.
Paul: Very interesting…
Sheridan: So, the employer is under no obligation to even apply for the subsidy though I would assume that if you could, you would. So there is no requirement that the employer recall previously laid off employees, and place them on the CEWS. The hope is that you will, but there’s no obligation to do so. While there’s no requirement like I just talked about to top up over the 75% this actually relates back to our constructive dismissal, discussion that I explained earlier because what you are doing is, is you are effectively reducing an employee’s wage, which is a material term of their employment. So you’re going want to try to want to obtain your employees consent that if you do bring them back from a layoff and place them on the CEWS you have to make sure that you have the letters to your employee explaining their recall and outlining whether or not you are going be able to pay that difference in their salary and hopefully, get buy-in from them, right about accepting that hopefully temporary pay cut. There’s no bright line test in British Columbia as to how much an employees’ wages have to be reduced before they can claim constructive dismissal, but the change must be substantial, and detrimental to the employee.
There’s one case from 2009 which summarized it. They are really reticent to use a formulaic or rigid approach but the rough and ready rule is failure to play an employee to approximately 9 to 10% of his or her average salary without more doesn’t necessarily amount to a constructive dismissal, a failure to pay between 14 and 17% can amount to a fundamental breach, but only in conjunction with some other significant unilateral change to the employment contract. Finally, a unilateral reduction in remuneration amounting to anywhere between 20 to 46% on its own has been held to amount to fundamental breach. So in Ontario, for example, a wage reduction must be more than 10% to constitute constructive dismissal.
So, employment law principles are pretty even across the country. So, I wouldn’t rely too much on those ranges that I just provided but in this circumstance because it’s essentially a 25% pay cut, then you’re clearly within the constructive dismissal range where it could stand on it’s own, no other changes have to happen.
Paul: I have the question about that Sheridan. If this is affecting a whole bunch of employees and maybe it’s not everybody, but maybe it’s a third or a quarter of your workforce, does the employer have any recourse to say well, it’s clearly not a constructive dismissal because we’ve had to do this with a number of people. Isn’t the idea in law of constructive dismissal basically a roundabout (and maybe I’m wrong about this) the roundabout way of getting rid of somebody that you don’t want to fire because you can’t fire them so you just make it terrible to work there, right? Isn’t that kind of the point of constructive dismissal or am I missing that point completely?
Sheridan: Intent isn’t necessarily important, it’s more important when it comes to that other branch of constructive dismissal, which is creating an intolerable work environment.
Sheridan: But when it comes to the fundamental breach of an employees contract, yes you’re right there’s the stereotype that…“oh, we’re just going to cut their hours and hope that they quit.” Yes, that’s one way of doing it. Even if an employer doesn’t necessarily intend on a constructive dismissal, an employee can still claim it, it’s a tough threshold. The burden is on the employee to prove that they have been constructively dismissed.
Paul: Oh interesting.
Sheridan: And so, in a situation like a pandemic, your views about…Well, the employer approaching the employees and saying that we have to do this with everyone that’s where getting the employees consent to this and you’re right, these are strange times. And this is a circumstance which was unforeseeable. There’s been some discussion about whether or not the contract of employment, you can argue whether or not it’s been completely frustrated which means that neither employee or employer have any obligations, aside from the Employment Standards Act but I don’t think that that would necessarily fly in these circumstances.
Because it has to come to an end through no fault of either party. And one other thing is because these are unprecedented times, no one’s got into court yet to make a ruling about whether in light of a pandemic, you can assess whether or not this was truly a constructive dismissal, or not, and whether or not the employer was evincing, an unequivocal intention to no longer be bound by the terms of the employment agreement. If how you approach your employee is like what we talked about trying to get their buy-in and saying what we have to do this, we hope it’s temporary and later on in the presentation, I’m going walk you through some of the key points you should hit when you’re trying to talk to your employees and get that buy-in from them, but hopefully that will stave off any whiff of somebody taking the view that they’ve been constructively dismissed.
Paul: Just before you carry on just clarifying one other point you had mentioned that there was a 10% threshold is sort of… is that a common law thing?
Sheridan: They’re looking at previous cases and that 10% is actually from Ontario, BC is 9 to 10% just to get your foot in the door and then you need some other changes to the contract as well. The clear and this is a 2009 case, so it’s 11 years old. And that was a summary that they provided then. But there is no bright line over this amount of way reduction, you are clearly in a rout of the constructor dismissal discussion, but if it’s nominal, and you are below 10%, I wouldn’t in my perspective, that wouldn’t be worth going through the rigamorole of litigation.
Paul: Yeah, I think there’s probably a lot of employers who are like… We’re going to be super careful right now, we don’t know what’s what. We’re asking everybody, including management ourselves to take a 5% or 10% pay cut or whatever. And so I think people should probably find that line right and respect that line and would that line include benefits with the value of, say, a benefit that you would normally get if that was taken away, would that be considered part of the… Are we looking at total compensations or just the wage?
Sheridan: Yeah, removal of benefits can constitute a constructive dismissal, depending on the value and the importance of those benefits to that employee. If you’ve got one employee with a family member who used to have health coverage for a particular illness and now that that illness is going cost them thousands then, yeah, that could amount to a constructive dismissal. But one way to stave that off even pandemic aside is if you’re going to offer an employee benefits you make it subject to the terms and conditions of your benefit plan provider and that you guys have the discretion to change those plans. As long as you’re not doing it in a discriminatory way, where you’re picking and choosing which employees get benefits and which ones don’t, and you can foresee a situation where even aside from the benefit discussion, the layoff discussion where you happen to just be laying off entirely women. You didn’t plan for it that way, but the key people that you needed to keep in the office to keep the business running, just all happened to be men. And so you want to make sure that you have the business justification ready for when and if you need to make those decisions because on the outside, it looks suspicious but it may be entirely innocuous.
Paul: What about categories? You have different departments, some departments, you just can’t serve the customer right now because of the certain conditions and other departments could be busier than ever. And I suppose the question then, does it come down to identifiable things like gender, or what not? But assuming that it doesn’t, is that problematic potentially discriminating against certain employees because of their role within the company or the department that they serve?
Sheridan: So discrimination under our Human Rights Code there’s a set number of categories and I believe it’s Section 13 of the Human Rights Code (and forgive me, I haven’t memorized all of those categories) but they’re basic your age, your gender, your race, or ancestry and in certain circumstances unrelated criminal convictions). But for anything that doesn’t have to do with a protected round under the Human Rights Code if you’re talking about just a specific department that’s really slow and it just makes sense to lay that department off, that’s where you would just have to have your business justification ready to defend against any potential allegations. And so that would mean you show your balance sheets. Well, this department literally has not had any income, right? And then you would just stave off that discussion but being prepared and keeping these documents safe and on-hand is going to help you, God forbid, anybody start lifting around about litigation in the future.
Paul: Very interesting…
Sheridan: So when we’re talking about recalling employees and the wage subsidy, if your employer does decide to recall you and place you on the wage subsidy they can ask you to come back but work in a different capacity. So much like a restaurant, they can ask you to answer the phone and do takeout orders rather than waiting tables like you used to in order to stay on the payroll. This relates to the constructive dismissal discussion as well because you are changing someone’s job description which was a fundamental term of their employment. However, if I were the employee, I would be grateful to have any work during this time versus being late off. So I think one thing would have to be clear is whether or not the changes in employment are temporary and just to make it through the pandemic. You don’t want to be using this as an opportunity to fly under the radar and constructively dismiss somebody while garnering the sympathy of a pandemic.
Paul: If god forbid we end up in a second wave and some terrible stuff like that and you never intended for it to be anything more than temporary. Do you think that there’s a legal issue there for people if they end up keeping their head waiter on the phone for the next year or nine months or something, is it case–by–case?
Sheridan: The running joke is if you ask a lawyer, a question, the answer is… Well, it depends.
So you’re right, it is absolutely fact-specific. So it’ll be up to that employee, whether or not they want to accept to continue on with that position but if they’ve been in that position for a long time, but they’re seeing other people return to work in their prior position and they’re not given that position depending on the rest of the organization, whether or not it’s appropriate to return them is going to be a different discussion. And it all entirely depends on if you can get that employees consent.
Paul: On the return to work topic one of the things that I… And you’ve probably seen this already, where somebody on CERB is actually making more money than when they were working and then they get called back to their job where they make less money (and I actually know one or two people in this category). And are they obligated to go back or can they say…“Can you call me back in six weeks?” Assuming that they’re being invited to go back for the same job at the same wage as they were before. So, that’s one category is that weird, quirky situation where people are making more money on benefits than they were working and that’s, I think a real category. And then the other category of course, is people that just simply are too afraid to go back to work?
Sheridan: For the first circumstance, I can’t say that I haven’t looked into that but my knee-jerk position is that the employer has the ability to recall that employee if that employee does not return then there’s a potential argument, that that employee has abandoned their position (quit). So, some frank discussion between the employer and employee may be beneficial and maybe the employer was only trying to recall this person and it would have actually caused them hardship to recall this person, but they were trying to do the employee a benefit. So frank discussion between the two of them about whether or not it’s in both of their interest to have that employee recalled at that point in time is going be a discussion, but I have to wonder about your eligibility for the CERB and whether or not there’s any risk here in gaming the system in misrepresenting to either the EI commission or CRA about the nature of your stoppage of work because it’s provided for a particular reason and the last thing that I think our Canadian government needs is more people drawing from a system when they don’t necessarily need to.
Paul: Well, you can calculate minimum wage and the qualifications and then no benefits and that sort of thing and 2000 a month, is slightly more than what that minimum would be in that scenario. It’s definitely it’s a weird range, but there’s definitely people that fall into that category, but I think probably the bigger one and maybe the one, people would want to hear more about is what to do when people don’t want to return because they’re afraid or they obviously employers want to give flexibility and understanding and that sort of thing. But is there a legal line in the sand, around that?
Sheridan: So I would have to look into the occupational health and safety regulations and requirements. You as the employer as a baseline have an obligation to provide a safe employment environment and if there’s no guarantees or that’s not happening, then the employee can technically refuse work. But in this circumstance, fears are going to be deep-seated and they’re going to be difficult to overcome. It would entirely depend I think on each independent employees circumstances, because are the immuno compromised or do they live with an immuno compromised folks? Because we’re potentially facing a second wave, but I think a lot of employees especially potentially, the ones that are just above the threshold, we just talked about where it would be in their interest or return you would have to make sure that the employee if they didn’t return, would have clear timelines on when they would return, what was being put in place. Is it reasonable for them to refuse to return just on a basic xenophobic fear, right?
Dave: I have I think a related question, and I think this came up in a conversation somewhere but some people have been doing the work-from-home thing and actually, really loved it. I’d love to do this long term and somebody suggested to me if they are in that position for long enough, making them come back to the original workplace can actually be a constructive dismissal issue. I’m not sure if that’s the case or not.
Sheridan: I don’t believe it’s a constructive dismissal issue. A lot of people are learning that meeting could have definitely been an email, and a lot of our work can be done remotely.
Sheridan: Yes, exactly, a lot of things can be done remotely, however your employer, the baseline understanding when you entered into your employment agreement, is that you would show up at the workplace and do the work and be paid for it. Now, you can enter into new agreements where maybe you try a modified work environment but your employer is under no obligation to provide that to you. I know that for parents right now they’re all trying to homeschool their children and they have no idea how long that’s going on for. So right now, employers are probably allowing the few more folks to work from home than they otherwise would or work on modified timing schedules in order to allow them to care for their children, which is a reasonable accommodation, but in order to protect the employer at the outset when you initially have your workforce start to work remotely is to make it clear that this is temporary, you’re not creating a new standard this does not change. What we’re doing is just a stop gap measure to keep everybody working in the course of a pandemic. But I appreciate that it is nice to work from home and work in your pajamas.
Paul: For the record, I’m not wearing my pajamas right now. Okay, interesting. This is all very interesting in light of the survey, we just did as well because about a quarter of our respondents indicated that they reduced staff by more than 20% in March. But we still have almost another quarter that think that they’re going to be a decreasing staff by 10% or more throughout 2020. This is all going to still be relevant, I think, for the foreseeable future subject to the miracle cure or something coming along, right? Yes, sorry, carry on.
Sheridan: Yeah, so I think we have covered off all of the legal background, so we could chat a little bit more about how you can approach your employees and what you should do when you’re trying to approach them about laying them off, recalling them and how you can handle that. I’ll take this opportunity to make a quick plug for alternatives to layoffs either CEWS which we just as talked about or trying to do productive work from home. I would assume that if you can have your employment workforce do productive work from home, you would have been doing that by now. But there are some other ways that you can structure the layoff, you can ask your employee to use their vacation time first, then if that vacation time isn’t enough time to make it through, then you can lay them off, replace them on the CEWS thereafter. You as the employer actually have the ability to determine what an employee takes their vacation. I would still recommend approaching the employee with that as an option. Don’t start them blazing, and force them to do it, but if you’re at your wits end and you can’t justify it, then you have to proceed with seeing if they’ll take their vacation first. Under the Employment Standards Act you would pay them out their vacation pay seven days before they start their vacation time, but the vacation pay and the vacation time are two separate obligations under the Employment Standards Act. A lot of folks actually accidentally lump to in together. So the actual vacation time that an employee gets under the Employment Standards Act is unpaid time.
Paul: So if they get back to work, they can still demand two weeks off, they just wouldn’t get paid for that if you pay them for two weeks earlier.
Sheridan: Because the vacation pay doesn’t necessarily always equal out to an amount an employee gets, for vacation time. It may be that in your employment contract you’ve set out that an employee gets a greater amount of time than is provided to them under the Employment Standards Act. And maybe you can negotiate with them on when they take that. But it does kind of suck to try and take a vacation right now because where are you going to go? My vacation is between the bedroom and the living room.
Paul: Well, it is my understanding that Sooke reopened the beaches, so we can go to the beach now.
Sheridan: Yeah, and this past weekend was a great weekend to do that.
You can try to do a reduced work week. I think you mentioned before about, everybody just unilaterally taking a 5 to 10% pay cut. That’s one way to do it. But again, try and get their consent. I think if you’re in that percentage range, then you’re not at too great of risk of constructive dismissal, but it’s always relevant, in there, because if you’ve got that minute pay difference, with a job description difference and a change in hours and duties, then all of these could vortex together to create one complaint for construction dismissal.
I talked about already about keeping that business justification for proceeding with layoffs close at hand. So explaining your revenue, explaining who’s doing what, where you need to do it and making sure that those decisions are not just arbitrary.
Strongly go for the “we’re all in this together, approach.” Thank your employees, go to them with gratitude, don’t be afraid to be honest about what challenges the business is facing. It’s a great way to get them on your side. I suggest having a letter to the employees when you either proceed with the layoff or you have them recalled. Tie directly to Covid-19 that way you’re making this decision in light of a pandemic and it’s not just a generalized business decision. So we have yet to see what kind of cases are going be coming out of the courts in relation to employment matters, in this pandemic but protecting yourself from those potential eventualities is going to be important for you at this stage. So tie it directly to Covid-19, make sure it’s temporary at line and outline your intent to recall the employee. You technically have, those 13 weeks under the Employment Standards Act. How many weeks are we in now?
Paul: I don’t know all the days and weeks melt together it.
Sheridan: A bit. So you probably have about a month left before you need to start figuring out, alright, am I going be able to recall these employees? And then, if you recall them, can you keep them on enough time to get yourself outside the temporary layoff requirements, keep them on the payroll long enough so that if you had to re lay them off, you could restart the clock if you had to, so I… So outline an intent to recall them.
On your ROE don’t say “not returning” on your ROE record of employment put unknown. But build in the flexibility in the language of your letter, that as the situation evolves you’re going to have to re-assess or you’re going do the best that you can. Keep your employees on their benefit plans if you can afford to. It’s going go a long way to keeping that employee buy-in on the difficult choice because if you’re laying them off and they are losing all of their benefits, they may be less inclined to give you a break.
But yeah, the overarching result is that it is generally in the employee’s best interest to accept the temporary layoff rather than take the view that they’ve been constructively dismissed because there is a chance that they won’t meet that threshold and the courts won’t agree. And if you make a claim for constructive dismissal, there’s no meeting in the middle. You either were constructively dismissed and your employer owes you severance obligations or you will be deemed to have quit.
Paul: Right and not exactly a great time for most people to quit their jobs. Yeah, it’s interesting. We talked about being 9 weeks into 13 weeks people have been waiting and seeing and we’ve all been waiting and seeing to some degree, they really need to jump on looking at CWS program in a big way because of course, the cost of hiring staff and vetting them and going through that whole process and stuff, versus retaining somebody, as we know, right, Dave? It’s enormous what’s the figure like seven times the total cost.
Dave: And a lot of gray hair.
Paul: Yes, and a lot of gray hair. So even if we have a large pool of unemployed people who are looking for work that doesn’t necessarily mean your costs are lower it just means you’re going through vetting more people right? So keeping your good people in some way, shape or form, committed to coming back even if it’s not now, I guess that’s the root looking at CWS and I guess individually approaching all your employees and making sure that they’re going to be comfortable with 75%, if you can’t top it up I guess, right? Would that be your general advice, then for people in this moment in time, middle of May?
Sheridan: Yeah, we don’t know whether or not the programs that are being offered are going to be changing, extending, they could announce a new program tomorrow, so you do the best you can with the information that you have on hand, keep the lines of communication clear and open. Other than that you may be in a tough spot, but to your point about retaining your employees that have been trained, I can appreciate that it would be very difficult to try and hire, and even train or give an employee direction from a remote location when you don’t have the ability to show them your internal processes, so that is not ideal. But when you’re approaching your employees, just one more point if you have different levels of employees say, for instance, and you’re going to be making different decisions about each sub category of employee. I wouldn’t have one massive… Don’t mass email everybody and just say “tough break guys, this is what we’re doing.” Try and have smaller focused group meetings with each individual subset of employee and if you’ve got one particular employee who you think is a risk then meet with that person one-on-one, make sure you have if you’re big enough to have an HR department have your HR person with you, don’t go into meetings alone just so that you’ve got a witness there who’s impartial and then try and if one person’s getting a better deal than another person ask that person who’s getting the better deal to keep it confidential.
Paul: What about recording online? Having those meetings and then using your zoom or your teams and recording those meetings? Can you ask an employee for consent for that? It kind of sets up an awkward situation, I guess.
Sheridan: Yeah, I think it interferes with a little bit of an organic discussion but there’s actually no problem with it. You kind of think about, well, we’re having a virtual meeting right now, but in all reality, would you take a tape recorder into this meeting if we were having it in person? And so that might help be a brometer to help you determine whether or not recording is appropriate. But as long as you’re not surreptitiously recording the conversation in that your doing it without anyone’s knowledge.
Sheridan: Than you can’t absolutely do that.
Paul: That’s generally against the law in Canada anyway, I guess other than maybe in public spaces or something. How about a silver lining here? We got almost 5% of our respondents said that they are actually planning to increase their staff this year. And you have to think some businesses like grocery stores and delivery companies two obvious ones where they’re going to be on a hiring spree right? What sort of advice would you have in light of this whole, the contracts for the normal work expectations versus the current work expectations? You bring them on in a pandemic, do you have a special pandemic contract for your employee and then have to switch it off later on or do you use your regular employment contract and then sort of add an addendum to say… “for the moment, we’re doing things a little bit differently because of the pandemic.” Any general advice in that range?
Sheridan: I’m a big advocate for written employment contracts across the board. I think it sets out the obligations for both employee and employer quite neatly. When you hire an employee though before you change a term of that contract if you have a contract and you operate under that contract for any amount of time and then circumstances change and you want to put a new contract to that employee which changes some fundamental terms you’re either the back in the constructive dismissal argument again or you have to give them fresh consideration and that can be done by a signing bonus, that can be done by a wage increase, but there has to be sort of consideration in the form of a value to the employee to change the terms of their employment.
I, out of an abundance of caution you can use your standard employment agreements because just off the top of my head, I can’t really picture any particular terms that would fundamentally change as your standard terms. You’d want to make your termination clear, you’d want to make their job description clear and then I would make sure you get their agreement both to what their job description is going look like now, but also be wary of what kind of promises that you are going to make to that person when things return to normal because the concern would be that an employee signs on, takes a job that’s not quite what they wanted on the understanding that they were going to be getting a different job when the public health recommendations started to ease off and if they don’t actually transition into that role within a reasonable amount of time than again you’re facing the constructive dismissal argument. So, be very clear is essentially how I would do it. And so you could keep your employment contract the way that you normally would, but then make sure that you have a covering letter or a job description that are actually incorporated into the terms of those contract.
Paul: Including expectations about being on-site and visiting with clients, and all that sort of stuff that might not apply today.
Sheridan: Yes, you want to make sure that they’re agreeing to what the normal is.
Paul: The normal. Wow, what an interesting time we live in today. This has been very insightful. I’ve learned a whole ton I hope the people listening have as well. I don’t know, Dave do you have any more questions? This is the closest we’re going to get to free legal advice.
Dave: Can we keep her on here for hours? Well, you kind of spoke to okay were at 9 weeks of the 13 weeks that threshold. I guess there’s some things we can do now what about that as we’re getting to that maybe losing sleep over a constructive dismissal issue. I don’t know if there’s any different advice at that time, but what would you say to somebody there? A month out or so in the situation?
Sheridan: So the person on the 11th hour right before the 13 weeks?
Dave: Well, I’ll just preface with they can’t easily bring them back. It’s been a temporary layoff it’s that worst-case scenario. Is there something they can do or is in a cross their fingers and hope?
Sheridan: Without knowing each independent person’s situation, it’s going be tough to give generalized advice on that. But the baseline I think would be to… You’ve got a couple of options, one you can do nothing, you can see if the employee decides to make a claim for it, or you could look at your business and decide “alright, am I ever going to be able to recall this person?”
And if you need to terminate them, then depending on the way that if you’ve got an employment contractor, or you don’t have an employment contract depending on whether or not you think common law or “reasonable notice” obligations will arise if you opt to not recall this person and they’ve technically been terminated, then maybe do the math and maybe if you can offer them a little bit more than the ESA but maybe less than their common law reasonable notice. And then if you did decide to proceed with that termination, you make them an offer which is just enough to get them to accept it but you would also want to get a release of all claims at the same time.
Dave: That’s what I was wondering.
Sheridan: Yeah, I would really just encourage everyone to get independent legal advice about everything that I’ve talked about here today. These are some general principles, but every business is different, every employee is unique. And so these are some general outlines but you’re going to want to make sure that you get that legal advice about how it applies to your unique circumstances.
Paul: This has been fantastic, thank you still much Sheridan and for joining us and for anyone who’s listening in, obviously Ramsey Lampson Rhodes serves customers all up and down Vancouver Island? Do serve every community? So right from Oak Bay to Port Hardy and everywhere in between.
Sheridan: And everywhere in between. I’m not even necessarily restricted specifically to Vancouver Island. I have had clients who have got issues in Chillawack, Vancouver those matters. Sometimes residents will be living on the island and they have matters on the mainland, but you build a client-base and even if that client moves if you’ve done great work for them. But I’ve got no geographical restrictions, it just depending on the nature of the matter, it may be more cost-effective for you to have local council rather than.
Paul: Right. What about for some island companies where they have employees in different provinces perhaps in the United States or places around the world, is that something that you could help them to navigate local laws as they’re going through this as well?
Sheridan: It would depend on the nature of the business, but yes, we can try and help them. It depends.
Paul: Or find somebody that can help that I guess too.
Sheridan: You can certainly help them with the local issue. It would entirely depend on how they’ve set their company up whether or not they are federally incorporated, such that the Canada labour code applies, which we can absolutely help them with, but if they’re dealing with a provincial issue, there is some restrictions on lawyers abilities to practice in other provinces. They do allow you to do it on a limited basis, but it depends on what you’re after, as to whether or not having counsel in each independent province is in your interest or even necessary. I can say that with US issues you’re going to want to make sure that you have a US Attorney.
Paul: Okay, well thank you so much. Rlr.law is the website. So please check it out and thank you everybody for tuning into this episode of our podcast. And we certainly welcome ideas for future ones. If you’re watching us on YouTube do all the liking and the subscribing otherwise, thanks for being with us today, and special thanks to Dave Monahan, our president for being here. But especially special thank you to Sheridan King from Ramsay Lampman Rhoads. We appreciate you taking the time today.
Sheridan: Thank you very much for having me, it was my pleasure.
Dave: Thank you.