There was no decision, no notice and no dismissal. There was a lay-off with no recall date, a benefits deduction that kept running, and a calendar nobody was watching.
At a glance
The buyer acquired a metal fabricator with two plants on a share purchase. Plant 1 ran automotive brackets; Plant 2 ran a single-customer line that the customer was about to retool. The retooling was public knowledge at signing and was expected to take four to five months, after which volume would return.
So the buyer idled Plant 2 rather than closing it. Forty-one employees were laid off with no recall date, told the line would restart when the customer's programme completed, and kept on the benefit plan — the buyer continued paying group insurance and pension premiums throughout, at $104 per employee per week.
The default is “a lay-off of not more than 13 weeks in any period of 20 consecutive weeks”. Plant 2 passed that at week fourteen. What kept it temporary was clause (b), which extends the runway where the lay-off is less than 35 weeks in any period of 52 consecutive weeks and one of a list of conditions holds — including that “the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan”. The buyer's benefit payments were doing exactly that job, whether or not anyone had framed them that way.
Clause (b) has its own ceiling built into it: it only applies while the lay-off is less than 35 weeks in any 52. At week thirty-five it stopped applying, and no other clause caught it. Clause (c) covers a lay-off of 35 or more weeks where a union recall agreement sets the recall time; Plant 2 was not unionised. Clause (d) covers a lay-off of 35 or more weeks where the employer has an individual agreement and has received an approval for an extended lay-off from the Director under subsection 66.1 (6). There was no such agreement and no such approval.
So at week thirty-five the lay-off ceased to be temporary, and the employment was terminated under s.56(1)(c). And then the sting: “If an employer terminates the employment of an employee under clause (1) (c), the employment shall be deemed to be terminated on the first day of the lay-off”.
Termination pay. Because the termination is deemed to have happened on the first day of the lay-off, no notice was given for any part of the required period, and termination pay under s.61 must be paid in full. Section 9(1) had carried the seller's service across the transaction, so the tenure was long: 29 employees at eight years or more (eight weeks each), 5 at five to seven years (six weeks each), 7 under five years (two weeks each) — 276 weeks. At an average $1,280 per week, $353,280. Add the s.61(1)(b) benefit contributions across those 276 weeks at $104: $28,704.
Severance. The same calendar crossed a second, separate line. Section 63(1)(c) severs the employment where “the employer lays the employee off for 35 or more weeks in any period of 52 consecutive weeks”. Nothing else needs to happen.
Whether severance is payable is a different question, governed by s.64(1), and this is where the wrong unit is easiest to pick up. Severance requires five years' service and then one of two things: a permanent discontinuance of all or part of the business at an establishment with 50 or more severed inside six months, or “the employer has a payroll of $2.5 million or more”. Only 41 people were severed, so the first route fails. The second is not about the plant and not about the 41 — s.64(2) computes it on “the total wages earned by all of the employer’s employees in the last or second-last fiscal year of the employer prior to the severance of an employee’s employment”. The buyer's Ontario payroll was $19,400,000. The test was met by a margin nobody had looked at, because everyone was looking at the plant.
Thirty-four of the 41 had five years or more, averaging 14.2 completed years. Section 65(1) multiplies regular weekly wages by completed years plus completed months over twelve, and s.65(2) counts all time in the employer's employ. At $1,280 a week: 34 × 14.2 × $1,280 = $617,984. Nobody hit the ceiling in s.65(5), which caps entitlement at “an amount equal to the employee’s regular wages for a regular work week for 26 weeks”.
Total: $999,968.
One detail worth keeping, because it shows the clock is per employee rather than per plant. Two of the 41 were called in for short runs in weeks 9 and 22 and earned more than a quarter of a regular week in each. Section 63(2.1) defines a laid-off week as one in which “the employee earns less than one-quarter the amount he or she would earn at his or her regular rate in a regular work week” and the week is not an excluded week. Those two weeks did not count. Their clocks crossed at week thirty-eight, not thirty-five.
Section 56 counts weeks per employee against that employee’s own earnings; s.63 counts the same weeks for a different purpose, against a different earnings threshold: one-quarter of a regular week for the severance test in s.63(2.1), against one-half for the termination test in s.56(3.1). The two clocks look identical and are not.
Section 64 counts payroll per employer. A file that asks whether the plant had a $2.5 million payroll has asked the wrong question. So has a file that treats 50 severed as a precondition for any severance at all — it is one of two alternative routes, and the payroll route has no headcount element.
The buyer paid, having had two live routes at week thirty and having used neither, because nobody was counting weeks. The first was s.66.1: an employer and an employee may agree to a lay-off of 35 or more weeks in any 52 (though not 52 or more in any 78), and the employer may then apply to the Director for approval. It requires the agreement to be made before the fact, and the employer to have given the employee in writing “the latest date the employer intends to recall the employee” and a statement that the agreement cannot be withdrawn. It also “does not apply to an employee who is represented by a trade union” — irrelevant here, but decisive at Plant 1, which was unionised.
The second was cheaper and was demonstrated by accident: recall people for enough work to break the laid-off-week test. Forty-one employees doing a week of maintenance work in each of weeks 20 and 30 would have moved the whole plant's dates, at a fraction of $1,000,000.
For the workforce problems that surface earlier in the same kind of transaction, see vacation accrued and never paid out and common-law notice exposure in Ontario.
The measurable addition is the benefit premiums. Thirty-six weeks × 41 employees × $104 = $153,504, spent specifically to preserve temporary-lay-off status under s.56(2)(b)(ii) — status the buyer then lost anyway at week thirty-five. That is the purest cost in the file: money paid for a protection that expired on a date nobody had diarised.
The tell is in the Act itself: “An employer who lays an employee off without specifying a recall date shall not be considered to terminate the employment of the employee, unless the period of the lay-off exceeds that of a temporary lay-off”. A lay-off with no recall date is a countdown that has already started, and the statute says so in the negative — it is not a termination yet.
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