The B.C. government will not extend a blanket suspension of the rules around temporary layoffs and severance, but it will offer a mechanism allowing businesses to apply for extensions.
But that may not prevent a wave of bankruptcies for those businesses that are now squaring off with lawyers as employees exercise their right to sue for higher severance payouts than what the B.C. Employment Standards Act provides.
Under the BC Employment Standards Act, temporary layoffs become permanent, by statute, after 13 weeks. If the employee is not recalled by then, he or she is deemed, by statute, to be permanently laid off, which triggers severance payment obligations.
But with so many businesses uncertain about when they may be able to recall employees during the pandemic lockdown and phased in reopening of the economy, the B.C. government extended those timelines twice, first to 16 weeks then to 24.
But there will be no more blanket extensions, so after August 30, any employee who was temporarily laid off will now be deemed to be permanently laid off and be eligible for severance, unless they agree to an extension.
The government is offering a mechanism for employers who need more time. They can apply for a further variance, which would continue to deem layoffs temporary beyond 24 weeks. Those extensions may be granted, if the employees agree to the extension.
But BC Labour Minister Harry Bains said Thursday that those employers who think they may need extensions beyond August 30 need to apply for a variance now. Applications can be made online.
“Employers, with support from their workers, can apply for further extensions to the temporary layoff period, based on the individual circumstances of their business,” Bains said.
“All businesses who need to extend the temporary period beyond August 30 should begin the process now, if they haven’t already."
Getting an extension will help those businesses that are still shut down or running at lower staffing levels, but who hope to eventually recall their employees.
But some employers who have had to resort to permanent layoffs now face some potentially crippling severance payouts.
One local businessman, who had to temporarily lay off half of his employees when the pandemic struck, told Business in Vancouver that he could now face bankruptcy, if one of the employees he had to lay off permanently is successful in her bid to get 18 months of severance.
He said he has been able to bring back three of the four staffers he had to temporarily lay off, but said he had to lay one of them off permanently because there simply is not enough work.
He offered the employee eight weeks of severance – about $8,000 – as per the Employment Standards Act, but she hired a lawyer and is demanding 18 months – about $77,000.
Even if the employee would settle for half that amount, the business owner – who did not want to be named, since the dispute could end up in court -- said he doubts his business can afford even that amount.
And if he has to declare bankruptcy, the result will be seven people will lose their jobs – seven people who would also be owed severance.
Ryan Anderson, a lawyer specializing in employment law at Mathews Dinsdale and Clark LLP, said there are “dozens” of similar disputes on his desk.
The problem, as many B.C. businesses are now discovering, is that an employee always has the option of saying the severance payouts established by the Employment Standards Act aren't enough, and go to court.
That can be a crap shoot, so what often happens is that the employer will bargain with the employee’s lawyer for something a bit lower than the opening bid. But that may still be high enough to bankrupt a business.
“I can’t imagine how some of these employers, medium and small-sized employers, can – having gone many months without revenues or deeply reduced revenues – be able to foot the bill for these severances and be able to survive,” Anderson said. “I’m certainly very concerned about how employers are going to fund these pending liabilities if they are forced to let people go.”
Regardless of what the Employment Standards Act says about severance, employees have always had the right to sue under common law, and that is unlikely to change.
In the absence of a signed employment contract that clearly states what the conditions of severance would be, it’s something all employers can face.
Under the Employment Standards Act, all employees in B.C. are entitled to either a notice of termination or severance.
But it’s hard to plan for a pandemic, so in many cases, layoffs in B.C. that have or will become permanent were not planned, so employees could not be given sufficient notice of termination, which triggers statutory severance payments.
Generally, for a small business, it works out to one week of pay for three months of employment, two weeks for more than 12 months, and three weeks for more than three years, plus a week for every additional year, up to eight years.
For larger businesses that may have to resort to group terminations, the severance obligations can be crippling.
For group terminations of more than 50 employees, the severance is eight weeks of pay per employee, 12 weeks for more than 100, and 16 weeks per employee for 300 or more.
“The math on that is pretty staggering,” Anderson said. “And if you’re a nightclub, or medium to large-sized restaurant, you could easily have 100 full-time and part-time employees.
“If they earn roughly $40,000 a year, 101 employees, each one of them is entitled to 12 weeks…that’s a $930,000 price-tag.”
Anderson said employers are hoping for some kind of temporary suspension of the group termination liability – something the Government of Alberta has enacted.
“In Alberta, they have turned that liability off,” Anderson said. “In B.C., they haven’t done that.”
The B.C. government has temporarily suspended group termination obligations, but only if the layoffs are the direct result of the pandemic.
But if a business continued to operate throughout the pandemic, albeit with lower earnings, it may be tricky to argue that layoffs were a “direct” result of the pandemic. The pandemic might have been just been one of the variables that resulted in declining business revenues.
A lot of headaches can be avoided if employers and employees enter into an employment contract that explicitly states how much an employee would be entitled to if dismissed without cause.
In absence of such an agreement, an employee is entitled to reasonable notice under common law – and when it ends up in court, “reasonable” is whatever a judge thinks it is.
Under normal circumstances, an employer can often give employees reasonable advance notice of a layoff. But many of the permanent layoffs now occurring couldn’t have been planned or even imagined, as they were the direct or indirect result of the pandemic, and lockdowns erasing earnings.
Bains said the Employment Standards Branch can help mediate these kinds of disputes, and said there is a tribunal system that might help resolve the issues out of court.
But ultimately, everyone – both employers and employees -- has a right to sue, if they think they were not dealt with fairly.
“Like everything else, an employer (or) an employee have a right to go to court for judicial review,” Bain said. “Those are the processes, and whether it’s a pandemic or not, I think those are the processes that I expect that both parties will follow.”