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Cash-strapped: Alternatives to a permanent layoff due to COVID

As summer winds down, so too does some of the COVID emergency temporary leave permissions in many provinces across Canada. Many small business owners are being put in the position of either having to call workers back or lay them off permanently. The challenge is that a great deal of businesses don’t have work available to return to due to COVID slow-downs, and because they haven’t been able to earn regular revenue (or any revenue at all if they had to close their doors), they cannot afford to pay out termination entitlements due to workers once the temporary layoff permissions lapse. This makes a rock and hard-place seem like a pillow and couch-cushion.

There are alternatives to a severance-inducing permanent layoff:

  1. Apply for a variance – A “variance” is basically a request you make to the Director of Employment Standards for the ability to temporarily avoid having to follow the provincial Employment Standard minimum because of extenuating circumstances. In the case of COVID, if your business is still unable to bring back a worker due to decreased customer demand, you and the worker can apply for a variance to extend the temporary layoff. Requests will be processed and you should receive a response within 10-15 days of application submission. *CFIB lobbied the government for a streamlined variance application process. You can file for a variance in BC online here. DEADLINE TO APPLY IN BC IS AUGUST 25th*
  2. Work Sharing Program – This may have been the most underused, but one of the best, financial support programs during COVID. Essentially, you can reduce a worker’s hours by up to 60% (eg. From 40 hours/wk to 16 hours/wk), and the government will provide the worker with a top-up, via the Employment Insurance (EI) program. You will still have to compensate the worker for those remaining hours, but programs like CEWS, CEBA, and the RRRF they can be applied to those wages. Generally, it takes 2-4 weeks to wait for government approval
  3. Rolling temporary layoff – Employment legislation in each province permits employers to temporarily layoff a worker for a number of weeks out of a prescribed period (eg. 13 weeks out of a 20 week period). Assuming a work schedule of 4 weeks on and 4 weeks off, you can continue this cycle for as long as your employee agrees (or for as long as their contracts allows, if provided for in their employment agreement)
  4. Working notice – If your worker refuses to participate in any of the three alternatives to termination discussed above, you will have no choice but to terminate. That said, you can get value on amounts due to the worker. You may know that under your provincial Employment Standards Act, your worker is due a legislated amount of termination pay or working notice (roughly 1 week per year of service) PLUS they are often entitled to severance pay under Common Law (an additional 1-4 weeks of compensation per year of service). What you may not know is that these entitlements can both be given in the form of working notice. Since you are required to pay these amounts by law, you may as well get some value in return

All of these alternatives (except #4) require some level of permission from your employee, so the need for clear, concise, and transparent communication cannot be overstated. A permanent layoff is usually not the best solution for both parties (having to find a new job, having to train a new worker, severed access to benefits, having to pay severance, etc). As long as your worker feels that your cards are on the table, and an amicable agreement is in their best interest as well as yours, one of these solutions might just offer you the chance to keep your business open through these tough times, so that you can regrow it once again.


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Topics in this Article: Human Resources

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