How to lay off workers without ending up in court
3-minute read
Laying off employees is something no entrepreneur wants to do. However, if you’re forced to do a permanent layoff because of business conditions, you need to do it right.
Mistakes in laying off workers can land you in court and cost you a lot of time and money when you can least afford it. “One of the mistakes an employer can make when planning a permanent layoff is not being aware of the rules,” says Jodi Gallagher Healy, a labour and employment lawyer in London, Ontario.
Here are steps to consider when laying off workers. (Note these tips aren’t legal advice. Consult a lawyer about your situation.)
1. Research the rules
The first step is to understand the rules that apply to your company’s layoff.
For example, in many provinces, you have to give employees advance notice that their employment is being terminated, advising them in writing several weeks in advance, depending on how long they’ve been with your company. Or you may have the option of paying the employee salary and benefits during the notice period, without requiring them to attend at work.
“We sometimes see employers mistakenly think they can permanently lay off people without following provincial standards,” Gallagher Healy says. “An employer needs to ensure that what they offer employees at least meets the legal minimums.” (Most small and mid-sized businesses fall under provincial rules. Federally regulated companies, on the other hand, must follow the Canada Labour Code.)
2. Check rules on mass layoffs
Some provinces have additional rules that apply to larger layoffs. For example, Ontario requires you to give a notice of up to 16 weeks plus severance pay to all employees affected by a “mass termination”—one involving 50 or more employees let go in a four-week period – in addition to other requirements.
Meanwhile, in Quebec, a “collective layoff” is defined as the termination of 10 or more employees over two months. Quebec doesn’t require a longer notice period in a collective layoff. But you do have to fill out provincial paperwork and inform employees and unions about the layoff.
3. Review contracts
Aside from provincial rules, you also need to follow the terms of any employment contracts, offer letters, promotion letters or collective agreements . These may entitle the employee to more than the provincial minimum standards.
4. Consider reasonable notice
If you don’t have an employment contract or the one you have is unenforceable, simply offering the minimum required by provincial law may not be enough, Gallagher Healy says. An employee may have a greater claim for “reasonable notice” of termination. The length of this notice (or amount of pay in lieu of notice, benefits and all other compensation) is based on case-by-case factors, including the employee’s years of service, position held and age at the time of termination.
A lawyer can advise you on what’s typical based on similar cases and help you prepare a termination package for each employee being laid off.