High Tide for Wave of Job Cuts: What You Need to Know

What if there was a Layoffs Wrapped for 2024?

Unfortunately, many employers in Canada have reduced their workforce this year, and are continuing to do so.

In light of this high tide for the wave of job cuts, it’s important to remember that employment relationships are legal relationships. It’s a two-way street: both employers and employees have rights and obligations. So, the silver lining is that you can take steps to protect yourself.

Entitlements Upon Termination

Contrary to popular belief, every employee has an employment contract – if there is nothing in writing, then the contract is verbal, with implied terms that protect the employee. Even if there is a written contract in place, it must be implemented properly in order for it to be enforceable, and it must contain a valid termination clause.

There are three distinct sources to an employee’s entitlements upon termination:

1. The minimum requirements set out in the applicable employment standards legislation, such as the Employment Standards Act, 2000 in Ontario or the Canada Labour Code for federally regulated employers. These requirements cannot be contracted out of.
2. The entitlement to reasonable notice or pay in lieu of notice at common law (i.e. judge-made law), which is what employees are entitled to by default. Typically, an employee’s common law entitlements on dismissal are much more than their minimum entitlements pursuant to the statute. All of their compensation and benefits must be continued during the entire notice period, absent a contract or policy explicitly excluding it.
3. A written employment agreement, which can displace the entitlement to reasonable notice by establishing a specific entitlement, which can be as little as the statutory minimums but not less.

Employees: Don’t leave money on the table

Facing a layoff? Fired from work? Feeling like the rug is being pulled out from under you?

You are not alone. And your feelings are certainly valid. If you have just been laid off or let go, take some time to process what has just happened, but before you accept what your employer has offered, make sure you seek legal advice from an employment lawyer.

Often, employers offer their employees the bare minimum they are required to by statute, and then just a bit more to get them to sign a release in favour of the company, even when the employee is entitled to much, much more. They then impose an arbitrary deadline to accept, counting on the fact that most employees will be scared that they will lose everything and simply sign rather than seeking legal advice or attempting to negotiate.

Many employers get away with offering inadequate exit packages, because let’s face it, even you are probably feeling reluctant to contact a lawyer. While it can be hard to shell out a few hundred dollars to understand your legal entitlements when you have been let go, you could be leaving thousands of dollars – and sometimes tens of thousands of dollars – on the table. The reality is that sometimes what you think of as savings lead to more costs.

Employers: Contracts are your best friend

If you are an employer, you might be wondering: What does this mean for me?

The simple answer is this: You can either maintain the status quo and remain open to substantial liability in the short and long run, or you can implement employment contracts that protect your business interests and help you minimize your liability.

How can you do that?

1. Speak with your employment lawyer.
2. Review any existing agreements in place and update them so they can be relied upon. Employment laws have changed dramatically in recent years, mostly in favour of employees, so even if you have written contracts in place, they likely do not contain a valid termination clause.
3. If you do not have any written contracts in place, work with your employment lawyer to prepare well-drafted contracts and ensure they are properly implemented, in order to reduce your liability.

Without proper contracts in place, your employees would likely be entitled to a much larger amount on dismissal. For example, a long-service employee in Ontario may be entitled to:

• only eight weeks of notice of termination or pay in lieu of notice under the statute, but
• up to 24 months of pay at common law.

For an employee who earns $50,000 a year, the difference could be between having to pay the employee approximately $8,000 versus being on the hook for $100,000. That’s a massive difference.

So instead of just playing the game, why not make the rules? Especially when it ends up saving you money and it helps you run your business more smoothly?

The Main Takeaway

Whether you are an employer or an employee, it is important to keep in mind that employment relationships are legal relationships. You have rights and obligations at each stage of the relationship. It is helpful to understand those rights and obligations so you can maximize your rights and minimize your liability as an employer, and to get what you are entitled to as an employee.

We provide strategic HR advice to organizations in all industries, including customizing contracts and policies that reflect their goals and values while helping them to minimize liability and maximize flexibility when it comes to their most valuable resource: their employees. We also work with employees to achieve the best possible outcome, either through negotiation or litigation. As we always say, if you think you need an employment lawyer, you probably do.