The global tech industry suffered lately from an economic slowdown which resulted in thousands of workers being dismissed from their jobs. For instance, in early January 2023, the CEO of Amazon announced that the company will lay off more than 18,000 jobs. This announcement is one of many and has followed other companies like Meta/Facebook, Microsoft, Netflix, Shopify, Twitter, Google and others that have all performed layoffs in 2022. It looks like this trend will continue in 2023 with more tech companies announcing mass layoffs and terminations. For instance, Hudson’s Bay Company has announced that it plans to lay off two percent of its total workforce. Postmedia has announced that it will pay off 11 percent of its editorial staff. The Canadian tech company Benevity has announced that it will lay off 14 percent of its total workforce. The Canadian social media company Hootsuite has announced that it will lay off 7 percent of its total workforce. The Canadian retail tech company Lightspeed Commerce has announced that it will layoff 10 percent of its total workforce. The Canadian tech company Clearco has announced that it will lay off 30 percent of its total workforce. The purpose of this blog is to review certain key employment law concerns that will arise in any layoff or mass termination scenario.
What exactly is a “layoff”?
We have noticed that the term “layoff” has been a source of confusion for many years for both employes and employees alike and that the confusion over the term “layoff” peaked during the economic shutdowns caused by the COVID-19 pandemic in 2020 and 2021. In fact, we have a blog entitled Layoffs, Layoffs, Layoffs which attempted to clarify what a “layoff” means.
So, firstly, it is important to note that absent an enforceable contractual term, an employer cannot just inform the employee that there is no more work available to them and, as such, that at a certain future date the employee should be able to continue with their job once the workload has increased. This set of circumstances actually amounts to “constructive dismissal.” Constructive dismissal would entitle the employee to both statutory and common law entitlements as the employment relationship is at an end.
To be clear, a layoff is not lawful even if the employer has complied with the layoff provisions in Ontario’s Employment Standards Act, 2000. This due to the fact that the right to layoff is found in the employment contract or agreement and not in the statute. Therefore, again, absent layoff being a contractual term (either express or implied), the moment when the employer “lays off” the employee, they are facing the fact that they have constructively dismissed the employee who can now sue the employer for compensation.
Some Information about Severance Pay
Similarly to the term “layoff, “severance pay” has also been a source of confusion. For instance, “termination pay” and “severance pay” are often used interchangeably, when in fact these terms are not the same at all.
Severance pay is a payment made to a dismissed employee who qualifies for the payment of severance under statute. There are certain qualifiers for severance pay. The first is that the employment of the employee must be “severed” and that they have worked for the employer for five or more years. The second is that the employer must have a global payroll of at least $2.5 million or has severed the employment of 50 or more employees in a six-month period because all or part of the business permanently closed.
Review of Termination or Severance Packages and Employment Agreements
The first thing that a laid off employee should do is to get their termination package reviewed by an employment lawyer if they have one along with their employment agreement. When an employee is terminated without cause, they will be entitled to termination pay and, if applicable, severance pay, among other things. It is important that the employee approaches an employment lawyer to ensure that their termination package complies with Ontario’s employment statutory standards under Ontario’s Employment Standards Act, 2000 and the common law.
Sometimes the employer will only give the terminated or dismissed employee a few days to review the terms of the termination or severance package. It is common for the employer to demand that the laid off employee agree by a certain date or risk that the termination or severance package will no longer be available to them. The dismissed employee needs to be aware that these deadlines as set out by the employer are simply arbitrary and the employer has no power to declare the employee’s rights under statute or the common law to notice as void. Most of the time, the employee has two years from the date of termination to be able to sue the employer for their legal entitlements in a court of law.
It is crucial that dismissed employees take their severance or termination package to be reviewed by an employment lawyer. Employment lawyers do not simply dabble in employment law. Please read our blog What does an Employment Lawyer Do? for more information.
The employment lawyer will review the termination or severance package and assess its fairness on the basis of various legal principles. For instance, the employment lawyer will review whether the termination or severance package complies with the minimum standards of Ontario’s Employment Standards Act, 2000. In this context, the employment lawyer will look to see if the employer has properly accounted for termination pay, whether there is any severance pay owing to the employee, whether there was any vacation pay or benefits owing to the employee, etc. Then the employment lawyer will go on to review the termination or severance package to determine if the employee is entitled to common law notice in addition to their statutory entitlements under the Employment Standards Act, 2000. The employer can only lawfully limit an employee’s entitlement to proper notice under the common law if the employee’s employment agreement’s termination clause or provision is enforceable. In our experience, not a lot of employers’ employment agreements or employment contracts with their employees contain properly drafted and implemented termination clauses that can be enforced. Finally, the employment lawyer will discuss the facts leading to the employee’s dismissal taking into account the employee’s treatment, any potential human rights concerns, etc.
The employment lawyer will then proceed to assist the dismissed employee in determining what the next steps should be now that the dismissed employee has this new information in their arsenal. For instance, should the dismissed employee accept the terms of the termination or severance package? Should they retain an employment lawyer to negotiate with their former employer for better terms under the termination or severance package? Should they simply sue or bring a claim against their former employer for constructive dismissal? These are all questions that the employment lawyer can help the dismissed employee answer.
Our Thoughts
The bottom line is that a dismissed or laid off employee in the tech industry (or any industry) should not rush to accept any termination or severance package that their former employer gives to them. They have the option to approach an employment lawyer to assist them to navigate these confusing waters to ensure the best possible outcome for themselves and to ensure that their legal entitlements are protected.
