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Saying you’ve been “fired” tends to have a negative connotation that encourages people to use softer language. One of the most common substitute words for people who lose their job, but not as a result of any wrongdoing, is to be “laid off”. To be “laid off” however, has a very particular meaning in law, and one that is certainly not synonymous with a dismissal or termination without cause. Understanding the difference should avoid confusion if you’re ever in this situation, and can help you better understand your rights.

In essence, there are two ways that one’s employment can permanently end: if the employee ends the relationship, it’s a resignation; if the employer ends the relationship, it’s a termination. There are many different reasons for either a resignation or a termination, but the term “termination” can basically be broken down into two categories: a termination with cause, and a termination without cause. When people say someone was “fired”, they probably mean terminated for cause; when people say someone was “laid off” they probably mean terminated without cause.

An employer can terminate an employee for cause without providing any notice or payments. Whether there was cause for the termination is a factual question however, and is determined on a case-by-case basis. It is a difficult standard to meet.

A common misconception in Canada is that if an employee does their job and “doesn’t do anything wrong”, the employer cannot terminate their employment. This is simply not true outside of unionized environments. An employer can terminate an employee’s employment at any time for no reason (with the exception of certain statutorily prescribed situations), provided the employer provides adequate notice of termination, and complies with any other requirements set out in the governing legislation. In Ontario, for example, the Employment Standards Act, 2000 (“ESA”) requires most employers to provide up to 8 weeks’ notice of termination, and certain employers to pay up to 26 weeks of severance pay. Employees might be entitled to additional notice at common law, if their employment contract doesn’t properly preclude them from such notice, depending on various factors – basically, a court will ask how much time it would reasonably be expected to take for the employee to find a comparable new job and provide for that amount of notice. These instances where the employer terminates an employee’s employment without any reason are commonly (yet mistakenly) referred to as being “laid off.”

A lay-off is defined entirely differently at law. It is a temporary suspension of work, generally because there is insufficient work to require the employee’s service. There is no common law basis allowing an employer to lay an employee off. In Ontario, courts have determined that employers can lay employees off where it is an industry norm, where there is an explicit contractual term in the employment contract permitting lay-offs, or the employee, through conduct or agreement accepts the lay-off. One example of an industry where lay-offs are common is the construction industry where it is accepted that work tends to fluctuate throughout different times of the year.

The ESA also sets out certain limitations on the duration of lay-off periods with which employers who are permitted to lay employees off must comply.

What this means is that if your employer tries to lay you off, and you don’t fall into one of the categories where a “lay-off” is permitted, you may have a strong claim for constructive dismissal. This means that the employer has not officially terminated your employment, but has fundamentally breached a term of your employment contract, ending the relationship. You may be entitled to damages in the amount of what the employer would have been required to pay you pursuant to the governing statute and, if not excluded by the employment contract, the common law.

An important thing to note, however, is that if you take the position you were constructively dismissed, and demand notice and severance pay, you will likely not be able to return to your position once the “lay-off” period ends.


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This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

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