While businesses enter 2012 hoping for the best, many are conscious of the fact that the world’s economy is on shaky ground and a repeat of the difficult days of 2008 is possible. Should we see a repeat of that difficult time, many employers may have to downsize.
If there is a shortage of work, the Employment Standards Act allows employers to lay off employees for not more than 13 weeks in a 20 week period, in most cases. However, the right to lay off an employee must be specified in the employment contract. If layoffs are not a viable option, employers will need to let employees go through ‘termination without cause’. When this occurs, employers must meet the minimum obligations to employees as set out in the Employment Standards Act. Depending on the circumstances, employers may also be liable for other ‘common law’ obligations.
The Employment Standards Act dictates that employees being terminated without cause are entitled to all accrued wages, vacation pay and other entitlements such as pension contributions or health insurance. In addition, the Employment Standards Act stipulates the minimum amount to be paid to an employee in lieu of notice when a termination occurs. All employees with a minimum of three months service are entitled to termination pay of one week pay per year of service, up to eight weeks pay. Employee benefits must continue to be paid during this time period and employees will also continue to accrue vacation pay. If your company payroll is greater than $2.5million and the employee has 5 or more years of service you will also have to provide severance pay. This entitles the employee to one week pay per year of service, up to a maximum of 26 weeks.
In addition to the minimum standards required by the Employment Standards Act, some employees may be entitled to additional ‘common law’ benefits, depending on their circumstance and the terms of their employment contract. The main factors that may contribute to additional entitlements are the employee’s length of service, age, the availability of similar employment and the character of employment. For example, a 60 year old senior vice-president with a lengthy service to the company who is let go during a recession could receive up to two years of pay in lieu of notice. All of this is subject to an employee’s duty to mitigate, which means the employee must actively seek out and accept reasonably similar employment.