Layoffs in the Unionized Workplace in the Era of COVID-19

By Brent Mullin

As the COVID-19 public health emergency enters its fourth week with no clear end in sight, employers are facing difficult decisions. Forced to respond immediately to the crisis, many businesses and services have drastically reduced or shut down their operations with little or no time to plan. In this uncertain environment, temporary layoffs may stretch into months or longer, possibly becoming permanent by operation of law or otherwise. Employers may ultimately need to make strategic decisions to adjust to the new realities brought about by the COVID-19 pandemic response.

In this newsletter we will outline some of the issues which can arise in the context of layoffs and terminations in the unionized workplace and consider how the COVID-19 pandemic may impact the obligations of employers.

Under Normal Circumstances

Under normal circumstances, downsizing a unionized workforce raises several considerations:

1. The Collective Agreement

The collective agreement is the primary source for determining the rights and obligations of the employer to reduce hours, layoff or terminate employees as part of the reduction or shutdown of operations. These matters are generally covered by provisions dealing with reduction of hours, seniority, layoff, bumping, recall rights and severance pay entitlements. In addition, collective agreements are required to have a joint union-management committee for regular consultation about issues that arise during the term of the collective agreement. This would include, among other matters, layoffs and workforce reductions.

2. The Labour Relations Code

Section 54 of the Labour Relations Code (the "Code") may apply to the downsizing of a unionized workforce if the change "affects the terms, conditions or security of employment of a significant number of employees to whom a collective agreement applies." In such cases, section 54 requires the employer to provide at least 60 days notice to the union to allow for joint discussions of an adjustment plan.

The key to this provision is whether a "significant number of employees" are affected. This determination can be based on the absolute numbers of employees affected even if it is not a significant percentage of the overall bargaining unit. For example, section 54 has been found to apply where a little as 4% of the bargaining unit was affected (37 out of 850 employees).[1]

Where a significant number of employees are affected by the change to terms, conditions or security of employment, section 54 requires the employer to do the following:

  • give the union at least 60 days notice of the change before it is implemented; and
  • meet with the union in good faith to try to develop an adjustment plan to address:
    • alternatives to the proposed change, including amendments to the collective agreement;
    • human resource planning, employee counseling and retraining;
    • notice of termination;
    • severance pay;
    • entitlement to pension, early retirement or other benefits;
    • a bipartite process for overseeing the implementation of the adjustment plan.

Failure to give 60 days notice as required by section 54 may result in the employer being ordered to provide severance pay in lieu of notice to the affected employees as damages.

Section 54 of the Code was recently amended to allow either party to apply for the appointment of a mediator if an adjustment plan is not concluded. The mediator may issue a report recommending terms for an adjustment plan (subsections 54(2.1) & (2.2)).

There are certain exemptions from section 54 which may be applicable to terminations occurring in the context of the COVID-19 public health emergency. These will be discussed later in this article.

3. The Employment Standards Act

As the COVID-19 public health emergency stretches into months, layoffs that were originally temporary in nature may become permanent, possibly triggering entitlements to group notice and/or individual notice, or termination pay in lieu of notice, under the Employment Standards Act (the "ESA").

For employees covered by a collective agreement, a temporary layoff is deemed to be a termination once the employee's recall rights under the collective agreement have expired (see ESA, section 1). If the employee does not have recall rights, then a temporary layoff of 13 weeks in any period of 20 consecutive weeks will be deemed to be a termination. For these purposes a temporary layoff includes a 50% reduction in wages, calculated on a weekly basis.

Under normal circumstances, where 50 or more employees are terminated from the same location within a two-month period, section 64 of the ESA requires the employer to provide notice of "group termination" (or termination pay in lieu of notice) to the affected employees. Written notice must be given to the individual employees, the union and the Minister of Labour. This group notice ranges from 8 to 16 weeks depending on the number of employees terminated. Significantly, group notice is in addition to any individual notice or termination pay the affected employees are entitled to receive under the collective agreement or the ESA.

Under section 63 of the ESA, individual employees are entitled to notice of termination (or pay in lieu) ranging from one to eight weeks depending on their length of service. This section will apply to unionized employees if their collective agreement contains no provisions dealing with seniority retention, recall, termination or layoff, or if the collective agreement does not "meet or exceed" the requirements of the ESA.

As with section 54 of the Code, there are certain exceptions to the individual and group notice provisions of the ESA which we will discuss below.

Does the COVID-19 Pandemic Relieve Employers of Notice Obligations?

The COVID-19 public health emergency has forced employers to take immediate and extraordinary steps to reduce or cease operations in response to unanticipated events well beyond their control. This raises the question as to whether the urgent and unforeseen nature of the COVID-19 pandemic response will relieve employers of the legal obligations under the Code and the ESA when laying off or terminating their unionized employees?

The obligations under section 54 of the Code and sections 63 and 64 of the ESA do not apply where a contract of employment "is impossible to perform due to an unforeseeable event or circumstance..." (see Code section 54(3) and ESA section 65(1)(d)). The Employment Standards Branch's Guide to the Employment Standards Act & Regulations (the "Guide") offers some guidance as to how the exemption is applied:

If it is impossible for work to be performed due to a change in circumstances that could not have been anticipated, ss.63 and 64 do not apply. An example of such a change would be the destruction of a worksite by fire or flood. Such events are not foreseeable and would exclude affected employees from compensation for length of service and group termination.

A business failure caused by cancellation of orders, insolvency, landlord eviction or loss of key personnel could result in an employer not being able to provide continued employment to employees in a workplace. These events are considered to be a part of the normal business cycle and cannot be construed as "unforeseen". A business failure for these reasons would not discharge an employer's obligation to provide individual compensation for length of service or group termination under sections 63 and 64 of the Act.

Sections of the ESA which remove a minimum statutory benefit from employees are always given a narrow and cautious interpretation, including section 65(1)(d). The Employment Standards Tribunal has said that "section 65(1)(d) is meant to apply only to events and circumstances that are completely unforeseeable, such as a major earthquake or other 'act of God.'"[2] The event must be one which is "not reasonably expected"[3] or is "incapable of being anticipated."[4]

The word "unforeseeable" should be interpreted cautiously. It would seriously undermine the minimum protections given employees by the Employment Standards Act to deny them length of service compensation when their employer encounters a difficulty in the marketplace, be it a product market or a real estate market.[5]

Not only must the event be unforeseeable, it must also render the performance of the contract "impossible".[6] We are not aware of any case in which the Branch or Tribunal has found section 65(1)(d) to be applicable. However, given the extraordinary and unprecedented nature of the COVID-19 pandemic, there is a reasonable basis to argue that it constitutes an "unforeseeable event or circumstance" within the meaning of section 65(1)(d).

Today, the BC Government updated the Guide's interpretive guidelines regarding section 65(1)(d) by adding the following passage to that section:

COVID-19

Many business closures or staffing reductions that are due to the current COVID-19 pandemic could be seen as resulting from unforeseeable events that make an employee's work impossible to perform. If the closure/reduction is directly related to COVID-19 and there is no way for the employee to perform work in a different way (for example, working from home) the exception may apply to exclude employees from receiving compensation for length of service and group termination pay. However, this may not always be the case.

If an employer terminates an employee for reasons that are not directly related to COVID-19, or if the employee's work could still be done (perhaps in a different way) this exemption would not apply. These situations will be dealt with on a case-by-case basis.

This COVID-19 specific update signals that in light of the current pandemic, the Employment Standards Branch may find this exception applies in certain cases.

Conclusion

The statutory exception in section 65(1)(d) may offer employers relief from the group and individual notice requirements of the ESA and from the obligation to provide notice and develop an adjustment plan under the Code. To our knowledge, the Labour Relations Board has not yet indicated whether this exemption will apply to COVID-19 related workforce reductions, though it may do so in light of the update to the Guide to the ESA. We will continue to monitor the situation and keep you apprised of any relevant developments.

While the legal principles and statutory provisions discussed in this newsletter offer some general guidance, employers in a collective bargaining relationship would be well advised to engage in consultations with their unions when responding to these extraordinary circumstances. As each collective agreement and workplace is unique, we also encourage you to seek the expert advice of our lawyers who can assist you in navigating these complex matters.

[1] Pacific Press BCLRB No. B375/96
[2] Top Gun Investments BC EST # D619/01 at p. 8
[3] Finlay Contracting Ltd. BC EST # D396/01 at p. 4
[4] Labyrinth Lumber Ltd. BCEST #D407/00 at p. 4
[5] ARFI Holdings Ltd. , BCEST No. D054/97 at p. 3
[6] Labyrinth Lumber Ltd. BC EST #D407/00 at p. 4