COVID-19: A Brief Analysis of Layoffs in Alberta

In light of COVID-19 and many clients executing layoffs, we wish to provide more information regarding the legal framework of layoffs in Alberta.  As this is not client-specific, this article is merely information and not legal advice.  Before implementing any steps, we urge you to seek legal advice to confirm that those steps are appropriate at the current time and in light of your specific circumstances.  Our main office contacts for employment law are at the bottom of this document.  This document is partially in response to some questions inspired by an article recently published in the Financial Post, among other similar publications from Ontario.

This article attempted to paint Canadian layoff law with one brush, which is problematic.  It focused on the law in British Columbia and Ontario, which has completely different legislation and court-created law (also called ‘common law’).  If you are attempting layoffs in jurisdictions other than Alberta, please let us know.  Otherwise, our previous information relating to Alberta law remains accurate, and in order to provide further context, a more in-depth exploration on Alberta layoff law follows.

Short Answer

The question is this: are temporary layoffs legal in Alberta?  The short answer is most likely, so long as they are done correctly, and with an eye to the risk of doing so without notice.

The Law in Alberta

In Alberta, we operate on a legal system that integrates both legislated (statutory) law and court-created (common) law.  Layoff law requires both for full understanding.  We will briefly summarize both below:

Statutory Law

Most law firms, including ours, hesitate to provide actual legislation to their clients.  It is our job to interpret the legislation and provide our clients with advice.  That being said, this in-depth analysis is necessitated by the differences in Alberta, BC, and Ontario layoff law.  Therefore, we have determined that it is prudent to provide the relevant Alberta legislation in this memo. The Alberta Employment Standards Code, RSA 2000, c E-9 (referred to throughout this memo as the “Code”) contains some fundamental principles:

REALIZING that the employee-employer relationship is based on a common interest in the success of the employing organization, best recognized through open and honest communication between affected parties;

RECOGNIZING that employees and employers are best able to manage their affairs when statutory rights and responsibilities are clearly established and understood; and

RECOGNIZING that legislation is an appropriate means of establishing minimum standards for terms and conditions of employment.

These fundamental principles underwrite all interactions between employers and employees and are the principles that employment law attempts to balance.  In deciding employment law cases, including those relating to layoffs, the Alberta courts regularly return to these principles.  They especially enforce the idea that the Code contains minimum standards, out of which employers and employees cannot contract and above and beyond which employers can reach if they choose.

Another fundamental part of the Code is section 3:

Civil remedies and greater benefits

3(1)  Nothing in this Act affects

• (a)  any civil remedy of an employee or an employer;
• (b)  an agreement, a right at common law or a custom that
  • (i)  provides to an employee earnings, leaves of the types described in Divisions 7 to 7.6 or other benefits that are at least equal to those under this Act, or
  • (ii)  imposes on an employer an obligation or duty greater than that under this Act.

(2)  If under an agreement an employee is to receive greater earnings or leaves of the types described in Divisions 7 to 7.6 than those for which this Act provides, the employer must give those greater benefits.

Section 3 reiterates that, notwithstanding the Code, employees and employers maintain their ability to claim against one another for civil remedies (remedies that they can obtain through the courts and tribunals available for employment disputes).  Moreover, section 3 states that employees and employers can agree for rights and benefits greater than those provided under the Code.  In other words, the Code provides for minimum rights and obligations, which must be provided, and employees and employers can agree for greater rights and obligations.  Notwithstanding that, employees and employers remain at liberty to maintain their rights and entitlements via ‘civil remedies’, by taking each other to court or tribunals available to them.

Finally, the Code contains explicit sections regarding layoffs.  These sections are so important to employer and employee understanding during layoffs that they are required to be reproduced in their entirety in any Alberta layoff notice.  These provisions are very different from those in Ontario and BC.  Below are Alberta’s layoff provisions:

Temporary layoff

62(1)  An employer who wishes to maintain an employment relationship without terminating the employment of an employee may temporarily lay off the employee only by giving the employee a written layoff notice.
(2)  Unless a collective agreement provides otherwise, a layoff notice must be given to the employee

• (a)  at least one week prior to the date that the layoff is to commence, if the employee has been employed by the employer for less than 2 years, 
• (b)  at least 2 weeks prior to the date that the layoff is to commence, if the employee has been employed by the employer for 2 years or more, or
• (c)  if unforeseeable circumstances prevent an employer from providing the notice in accordance with clause (a) or (b), as soon as is practicable in the circumstances.

(3)  The layoff notice must

• (a)  state that it is a temporary layoff notice,
• (b)  state the date that the layoff is to commence,
• (c)  include a copy of this section and sections 63 and 64, and
• (d)  include any other information provided for in the regulations.

Termination pay after temporary layoff

63(1)  The employment of an employee who is laid off for one or more periods exceeding, in total, 60 days within a 120-day period is deemed to have been terminated unless

• (a)  during the layoff the employer, by agreement with the employee,
  • (i)  pays the employee wages or an amount instead of wages, or
  • (ii)  makes payments for the benefit of the laid-off employee in accordance with a pension or employee insurance plan or similar plan,    or
• (b)  there is a collective agreement binding the employer and employee containing recall rights for employees following layoff.

(2)  When payments under subsection (1)(a) cease or recall rights under subsection (1)(b) expire, the employment of the employee terminates and termination pay is payable.

Recall

64(1)  An employer may request an employee to return to work by providing the employee with a recall notice.

(2)  A recall notice must

• (a)  be in writing,
• (b)  be served on the employee, and
• (c)  state that the employee must return to work within 7 days of the date the recall notice is served on the employee.

(3)  If an employee fails to return to work within 7 days of being served with the recall notice, the employee is not entitled to termination notice or termination pay if the employer decides to terminate the employee’s employment as a result of the employee’s failure to return to work in accordance with the notice.

(4)  Subsection (3) does not apply to an employee bound by a collective agreement containing recall rights for employees following a layoff

Difference with Ontario and British Columbia

The sections above, read in hand with the fundamental rules, set the minimum standards for layoffs.  It is important to note that Alberta’s legislation explicitly states that a layoff occurs “without terminating the employee” and that termination only expires at the end of the temporary layoff.  British Columbia and Ontario do not contain this language and layoffs are treated differently:

• BC only permits layoffs when they are agreed to be permitted by the employer and employee, part of the employment contract, or are part of a seasonal business such as logging, or whereas Alberta permits them within the legislation
• BC explicitly states that, in the event that their temporary layoff period is exceeded (up to 13 weeks in a period of 20 weeks), the termination is deemed to have occurred at the beginning of the layoff, not the end
• BC does not explicitly state that employers may lay off employees without terminating them
• BC does not provide for a separate notice period for layoffs
• Ontario layoff legislation is similar to BC, in that it deems termination the first date of the layoff and does not provide a separate notice period for layoffs

Because of the above, both BC and Ontario leave open the notice period for layoffs and also leaves open the ability for employees to claim constructive dismissal.  Aside from the legislation, and as a remark on common law trends, both BC and Ontario have historically been very employee-friendly jurisdictions.  Alberta also interprets all contracts and employment laws in favour of employees, but that skew is generally less slanted.

Alberta’s Common Law of Constructive Dismissal

As stated in our previous materials, Alberta’s law on constructive dismissal for temporary layoffs is somewhat grey.  We wish to dive a bit deeper into that framework.

At the outset, ‘constructive dismissal’ is the following principle:

In the event that an employer makes unilateral changes to the employment relationship (whether that relationship is governed by a written contract are not) and those changes are so significant that they are a breach of a fundamental term and condition of the employment contract/relationship, they represent an unwillingness of the employer to continue to be bound by that contract and an employee may be able to claim that he or she is constructively dismissed.

Constructive dismissal is not from the Code – it is a common law principle created in the courts.  Therefore, the ability to claim for constructive dismissal exists despite the Code (recall those fundamental provisions).  As you can imagine, drastically reducing or completely removing an employee’s wages in a temporary layoff could fit within the above definition of constructive dismissal.  However, we have to read that in conjunction with Alberta’s legislation above. Remember, the Code provides for the minimum standards and the common law exists surrounding those standards.

The Alberta Courts’ Initial Interpretation

As we have been advising clients, whether a layoff constitutes constructive dismissal in Alberta is a grey area of law.  We cannot advise that there is no risk there.  We have also advised that providing the proper notice required in the Code for a layoff (1-2 weeks depending on seniority) reduces that risk.  Finally, if you do not intend to provide that proper notice, your risk is reduced by having a strong ‘unforeseeable circumstance’ to fall back on (such as the Alberta Dental Association & College reducing dental services to emergency only).  Our opinion on these topics has not changed but we will expand it here with the legal background.

The most frequently relied-on decision in Alberta dates back to 2004.  Even at 16 years old, it remains the law because it was decided by the Court of Appeal (the highest Alberta court) and has not been overturned.  This decision (Vrana v Procor Ltd., 2004 ABCA 126, “Vrana”) assessed a temporary layoff where the employer gave no notice.  At the time, the Code did not provide for specific notice dates for layoffs.  The Court of Appeal was asked to determine whether the Code’s allowing for a temporary layoff overrides the common law ability to claim constructive dismissal.  The Court explicitly declined to decide on that issue (paragraph 8).  The trial court had decided that this was not a constructive dismissal because, while an employee retains a civil remedy for wrongful dismissal, this dismissal only occurs once the employment relationship terminates. That does not occur, in the event of a temporary layoff, until the expiry of the 60-day period.

The Court of Appeal states the following:

[W]e have concluded that, at a minimum, the potentially negative consequences of a temporary layoff demand that when an employer elects to exercise its rights under s.62, it should provide a fair notice to the employee of its intention to do so. To comport with the spirit and intent of the Code and to ensure that the employee is properly advised of the employer’s intentions, the notice should contain not only the fact of the temporary layoff and its effective date but also the relevant sections of the Code outlining the effect of that layoff, that is ss.62, 63 and 64. This minimal obligation on the part of the employer will assist in ensuring that there is no misunderstanding between employer and employee as to the respective rights and obligations of each, a goal stressed in the preamble to the Code. In particular, it will avoid the employer’s lulling an employee into a situation where the employee believes that he or she has been constructively dismissed […]The real problem here is that Procor did not provide the required notice to Vrana. (paras 13 and 14, emphasis added).

Since this decision was written, Alberta amended the Code to explicitly require 1 or 2 weeks’ notice of layoff (other than in unforeseeable circumstances) and to include the relevant sections of the Code.  Neither were required in 2004.  As of 2020, so long as notice and the relevant sections of the Code are provided at the point of layoff, an employer would seem to have complied with the Court of Appeal in Vrana.  As noted in previous materials, in the event that an employer wishes to lean on the provision of the Code permitting notice to be reduced in “unforeseeable circumstances”, this would increase the risk of both breaching the Code (if ‘unforeseeable circumstances’ are not found) and constructive dismissal.  This is based on the changed Code and interpretation of Vrana and decisions since 2004.

Another court decision recently relied on in temporary layoff law is the 2005 decision of Turner v. Uniglobe Custom Travel Ltd., 2005 ABQB 513 (“Turner’).  Turner followed the principles from the Court of Appeal in Vrana but went a bit further.  Similarly to Vrana, the Code interpreted in Turner did not contain notice periods for layoffs.  In Turner, the Court determined that the employer had multiple opportunities to explain to its employee that she was not terminated and that the employer did not give notice or include the Code sections on layoffs.  Therefore, the employee was constructively dismissed.

The Court in Turner explicitly turned its mind to Ontario and British Columbia courts interpreting layoffs and preserving the common law principle of constructive dismissal.  It explained the differences in the legislation and those provinces not providing an explicit right to lay off in the same way that Alberta’s Code does.  It also explained that the trial judge in Vrana found that the right to lay off in Alberta overrides the common law right to claim constructive dismissal.  However, the Court in Turner found that a constructive dismissal had occurred for similar reasons to the Court of Appeal in Vrana: the employer did not take the opportunity to give the employee notice or make clear that this was not a termination.  The Court was especially disappointed in the employer’s failure to explain that this was a layoff when the employee and her counsel sent letters that made clear she thought that she was terminated.

In Turner, the court goes on:

With the utmost deference to Ouellette, J, I now differ from him decision in Vrana; and I find that Turner’s common law right to treat her layoff as a termination is preserved, and she should be entitled to compensation for wrongful dismissal. If I am wrong in this interpretation, then legislative reform may be in order to clarify whether the layoff provisions are to take precedence, and also to protect employees from being subject to revolving door layoffs.

(para 56, emphasis added)

Since 2005, Alberta has legislated against such revolving doors, capping layoffs at 60 days within a 120 day period.  It has also legislated in notice periods for layoffs.  Finally, it has legislated precisely what information must be given to employees explaining the layoff laws.  Therefore, the questions that the courts left open in Vrana and Turner – the very reasons that those courts found constructive dismissals occurred – have been closed by the legislation.

The Law after Vrana and Turner

The general legal position is now that, so long as employers follow the legislation and give the required statutory notice of layoff, they have the right to temporarily layoff without it being a termination.  Turner is a Court of Queen’s Bench decision, not Court of Appeal.  There is very little, case law investigating this topic since the legislation changed in light of Turner.  This means that it has not been overturned or confirmed in Alberta, so Vrana is still generally followed as the governing law (since it is Court of Appeal, a higher level of court).

Alberta amended the Code to include the notice periods for layoff in 2018.  Since then, we can locate only one decision that touches briefly on the topic: Dunbar v Northern Air, 2019 ABPC 179 (“Dunbar”).  Dunbar is a decision of Alberta’s Provincial Court, so it does not overrule either Turner or Vrana.  However, the Court in Dunbar determined that the employee was constructively terminated and that his right to argue that was not taken away by the layoff laws in place.

There are very important facts in Dunbar that make this decision less useful to our exploration of layoff law in Alberta.  In that case, the layoff was done over the phone.  The employer did not give notice.  The employer did not give information regarding the legal framework of layoffs and recall.  The employer told other employees that the employee no longer worked for the employee, and locked him out of the computer system.  The employer issued an ROE with an unknown return date and gave the employee “severance pay” and monies for “termination”.  This employee was likely also governed by federal labour laws, not the Alberta Code, as he was a pilot and air transportation is a federally regulated industry.  In short, the employer complied with none of the Alberta laws regarding layoff and certainly took many steps that would indicate that this was a termination, not a layoff.

Summary

As at 2020, the governing law indicates that there is still a risk of constructive dismissal, but that this risk is heavily reduced by providing proper notice and completely complying with the provisions of the Code relating to layoffs.  If an employer must argue that there are unforeseeable circumstances in order to provide no notice, it would be best to have good backup for that (such as dental clinics being restricted to emergency services).  Moreover, if an employee complies with a layoff notice and does not raise a constructive dismissal claim, he or she has effectively accepted this change in her employment.  We fully expect that this law will be firmed up in the wake of massive layoffs during COVID-19.

These are complicated issues in a fast-changing environment.  While we will endeavour to keep you informed, we strongly recommend that you seek legal advice before undertaking any steps.  We are prepared to answer your employment questions and remind you that, as a full service firm, we have lawyers equipped to help with all other aspects of this time of change.

For more information on these topics or any other matters please contact one of the below lawyers from Bryan & Company LLP or access our Employment Law group here and it would be our pleasure to assist.