Employer Obligations – Layoffs due to Wage Increases

The question for today is, “If layoffs or downsizing occurs due to the increase in wages, what are the obligations of the employer?”

I just want to clarify that I am not against the minimum wage being raised but there is a “good way” and a “bad way” to do things, and perhaps not enough consideration was given to the overall impact of this rapid increase.

I am hearing some employers say that the proposed change means they may no longer be able to compete with their overseas competitor’s pricing, and in some instances, the increased minimum wage translates into a 36% increase in overall costs, all due to labour.

Unfortunately, if downsizing or layoffs occur, the obligations here are the same, regardless of the reason “why” the termination is happening.

“Layoffs” must be temporary, under Employment Standards law.  The layoff period can be no longer than 13 weeks or the Ministry will consider this a termination of employment, effective from the first day of the layoff period.

This means you must treat it as if you are terminating employment in a “without cause” situation. The affected employees are entitled to their Notice of Termination period, or pay in lieu of that Notice Period.  The Notice Pay is intended to compensate the employee for the period they are not working (EI is meant to be a “back up plan”).

The Notice Period that is stated in the Employment Standards Act is a “bare minimum” requirement. You must consider four factors when determining how much Notice to give:

1– Length of service: how long has this employee worked for you? More than 3 years will mean they likely don’t get “just the minimum”.

2 – Age of the employee. Persons over age 45 will be granted more Notice by the courts than the minimum.

3- Role or position held: if this person has a specialty, is a manger, or is a “key person” in your workforce they will also be granted more than just the minimum

4- Likelihood of obtaining new employment at a same/similar rate and position: Yes, you have to consider how long it might take this person to get another similar job. If there are a lot of job losses, this could be a longer period.

5 – How many people are you terminating? If your organization will be terminating or laying off more than 50 people at the same time, special advanced notice must be given to the Ministry of Labour.

This is a complex situation that requires individual attention.  If you find your organization in this position please contact me to assist you.