RETURN TO WORK AFTER COVID 19 – 5 CRITICAL QUESTIONS TO ASK
Written by: Michael Weiler and Chris Drinovz
In March 2020 most businesses in BC ground to a halt with many laying off most, if not all, of their employees or dramatically reducing hours of work or wages. In many cases employers were able to carry on some portion of their businesses by having employees work from home.
Chris and I spent much of the last 3 months counselling clients on how to deal with dramatic changes in their businesses and how to access the numerous Federal, Provincial and Municipal programs intended to keep businesses and employees afloat.
As we enter Phase 2 of BC’s Restart Plan, many employers are realizing that the light at the end of the tunnel might not be the oncoming train they saw in March. Chris and I are now fielding more questions on how businesses open up again, in many cases on reduced capacity, in order to maximize their chances of success post COVID-19 lockdown.
Here are 5 critical questions you might consider. The list of course is not exhaustive. We once again caution the reader to not consider these comments to be legal advice for your business. Each case must be considered on the particular facts of your business—did you totally shut down or were you partially shut down? Did you keep your benefits for employees while on lay off? Are you union or non-union? Do employees have binding written employment agreements? Are any of your employees entitled to COVID-19 leave under the Employment Standards Act? Given these limitations if you have any questions about your business or your employees and are seeking legal advice please consult your professional advisors. However the value of this article we hope is to help you identify what questions to ask those advisors as you search for the optimum avenue to return to business post COVID-19 lockdown.
5 CRITICAL QUESTIONS TO ASK AS YOU RESTART YOUR BUSINESSES
1. Mike—I want to open my business but financially I cannot do it without help. I read that the Canada Emergency Wage Subsidy (CEWS) which is a lifeline for us is finished on June 6th 2020. What should we do?
We have been saying from the beginning that it is incumbent on employers to ensure they maximize all the financial benefits being provided by all 3 levels of government. That is something each business must do on an ongoing basis as the programs are changing almost daily. The programs are too numerous to describe here but include the initial amendments to EI to waive the waiting period, the $2000 a month CERB payments, to the 75% wage subsidy under CEWS, to all the other financial programs such as the Canada Emergency Business Account (CEBA) which provides for an interest free loan of up to $40,000 with up to $10,000 forgiven, to bank loans and deferrals, to deferrals of taxes such as the Employer Benefit tax and GST/HST remittances and rent relief. The Provincial government has introduced numerous programs to support employees and businesses including $1000 for each employee.
So do your due diligence and maybe assign one of the management team members to do a daily or at least weekly update. If you are part of a business association see if they are providing any useful information and assistance. For example the New Car Dealers Association of BC provides daily updates for its members and is proactive in lobbying government for changes.
The good news is the CEWS has been extended now for another 12 weeks to August 29th 2020. This is not surprising as the goal of government in introducing CEWS was to allow employers a runway to get back on their feet and maintain a strong work force. Don’t be surprised if further extensions are provided.
We also note that the government has announced changes to the criteria for the CEBA to allow more businesses to access the program. In particular, the previous requirement that the business have at least $20,000 in payroll for 2019 is going to be waived so that self-employed persons and others that pay themselves in dividends can access the program provided they can show eligible non-deferrable expenses between $40,000 and $1.5 million. Eligible non-deferrable expenses could include costs such as rent, property taxes, utilities, and insurance.
If you need help in accessing information on all these programs give us a shout.
2. Mike -- most of my work force has been laid off due to the immediate impact of COVID-19. I keep reading about possible claims by employees for severance pay and damages for wrongful dismissal. Can you shed some light on what this may all mean?
Generally if an employer lays off non-union employees due to lack of work then severance pay under the Employments Standards Act (“E S Act”) or damages for wrongful dismissal at common law may be owing. However the world has changed in such a fundamental way that we need to talk about pre COVID-19 and post COVID-19.
If an employer laid off a non-union employee then under the E S Act that temporary layoff became a termination if it lasted more than 13 weeks within a 20 week period. Severance pay would then be owing. In addition at common law, absent an express agreement, laying off an employee due to lack of work would normally constitute a fundamental breach of the employment contract and thus the employee could claim her employment was terminated. She could then claim damages for lack of working notice as she was wrongfully dismissed. Those damages could far exceed the minimum severance payments under the E S Act which cap at 8 weeks after 8 years of service.
For example in Bessie v Dr. A. S. Machner Inc. 2009 BCSC 1316 the employer mistakenly relied on advice from the Employment Standards Branch that he could temporarily lay off an employee so long as it was less than 13 weeks. The court held that a temporary layoff constitutes, in the absence of a contractual provision permitting the same, a fundamental breach of contract. Dr. Machner breached an essential term of the contract of employment as the continued attendance of an employee at the place for work, for pay, is central to the employer-employee relationship.
However if the layoff was caused by COVID-19 then it is very likely that no severance pay under the E S Act would be owing nor would the employee necessarily have a claim for wrongful dismissal damages.
The E S Act was amended recently to expand the temporary layoff provisions from 13 weeks to 16 weeks within a 20 week period when the layoffs are related to COVID-19. But more importantly it is likely that the severance provisions under section 63 (individual severance) or section 64 (group termination) would not apply because of the exception under section 65(1)(d) of the E S Act that provides no severance is owing if the employee is:
(d) employed under an employment contract that is impossible to perform due to an unforeseeable event or circumstance.
The Director of Employment Standards has issued a revised Interpretation Bulletin outlining the circumstances when the exclusion would apply when the layoffs were related to COVID-19.
A similar principle may well apply to claims of wrongful dismissal based on layoffs caused by COVID-19. At common law a contract can become “legally frustrated” when the substratum of the contract is impossible to perform because of unforeseen events.
In Wightman Estate v. 2774046 Canada Inc., 2006 BCCA 424, 57 B.C.L.R. (4th) 79 (C.A.) Smith J.A., giving the decision of the Court, stated the concept of frustration at para. 1 as follows:
It has long been a tenet of our law that a contract may be brought to an end by operation of law and the parties discharged from further performance if, without the fault of either party, the circumstances in which it was expected to be performed have changed so radically that performance would be impossible or at least something fundamentally different than was initially contemplated. In such circumstances, the contract is said to be frustrated.
If an employer simply loses business (e.g. loses a big contract) such an exempting principle would not normally apply to relieve an employer of its fundamental obligations to provide working notice of termination or pay in lieu. But here COVID-19 is a game changer– a pandemic that has suddenly shut down almost the entire province. Indeed it would be ironic for a plaintiff’s lawyer to argue that the layoff caused by COVID-19 was a dismissal when all levels of courts in BC are shut down because of COVID-19.
Different considerations might apply however at some point in the layoff process. So for example if an employer’s business starts up but some employees are not recalled then the layoffs might well constitute a wrongful dismissal or otherwise attract severance pay under the E S Act after 16 weeks of lay off.
If an employer can recall all employees before the 16 week period arrives then it is highly unlikely that any claims by employees will be made.
3. Chris-- many of our employees are receiving the $2000 a month CERB payment plus are earning $1000 a month and have told us they won’t come back. Some of them claim they do not want to come back due to risk of contracting the virus. We have followed all the government guidelines to ensure a safe work place. But the bottom line is I need them to come back otherwise I have to replace them. What can I do?
The first thing to do is check if any of the circumstances of the COVID-19 leave provided in section 52.12 of the E S Act applies (for example, is the employee providing child care due to school closure). If the employee meets any of these criteria, they are entitled to an unpaid job-protected leave as long as the circumstances persist.
The second thing to consider is whether the employee is making a legitimate work refusal for health and safety reasons. Employees have the right to refuse unsafe work under section 3.12 of the Occupational Health & Safety Regulation. A valid work refusal requires that the employee have reasonable cause to believe that performing the job or task will create an undue hazard to their health and safety. The term “undue hazard” means something that will expose the worker to an excessive or unwarranted risk of injury or occupational disease. Once the worker makes an unsafe work complaint, the OHS Regulation and Guidelines mandate a four-step process for investigating and responding. If you cannot resolve the issue with your worker, the final step and last resort is to call in WorkSafeBC to make a ruling. We recommend that take these complaints very seriously and be sure not to retaliate against an employee for making a complaint or you may end up with a prohibitive action complaint (previously called discriminatory action complaint) under the Workers Compensation Act.
It is my view that so long as employers strictly comply with WorkSafeBC’s COVID-19 Safety Plan guidelines and industry-specific protocols, it is unlikely that an employee can make a valid work refusal based on general concerns about getting the virus at the workplace. You can read more on COVID-19 Safety Plans and work refusals in our previous blog entry here.
Absent a valid health and safety reason, if your employee refuses to attend work when scheduled then you can likely take the position they have abandoned their position and issue a Record of Employment stating “Quit”. This may well mean that the employee can no longer collect the CERB too, though it is their responsibility to report accurately.
We are carefully monitoring the recent federal government announcement regarding employers possibly having to provide all employees with 10 days of paid sick leave and will report further as this issue develops.
4. Mike-- I want to start up again but do not want to recall employees based on seniority. Also I want to require all employees to take a 10% wage reduction for at least one year. And I want to have everyone sign an employment agreement that limits their rights on dismissal. What can possibly go wrong?
This is a good example of why we cannot provide employer specific advice as each case clearly depends on the facts plus the law regarding constructive dismissal and creating enforceable contracts is complicated.
Recall from Layoff
First if you are unionized and have a collective agreement in force then likely you must recall the employees in a certain order with seniority likely playing a major role.
For your nonunion employees, absent any contractual obligations, provisions in your employee handbook or promises you made when you laid them off, you are able to recall employees back in the order you wish. There are as you might expect some caveats to that.
First if you are not recalling a person in order of seniority in whole or in part because of (for example) that employee’s disability then you are likely violating the Human Rights Code. Therefore if you are going to deviate from recalling in order of seniority we suggest you have a valid reason.
Secondly if an employee is off on a COVID-19 related leave of absence under section 52.12 of the E S Act and the conditions that created that leave have expired then the employee has a right to be placed back in her position or if her position no longer exists then in a comparable position.
Finally even if you have a right to recall employees in any order you might want to consider that if a number of employees are upset by that decision they may seek union representation. Given the significant changes to the Labour Relations Code in 2019 in favour of unions making it easier for them to unionize your workplace you need to be careful to not create an environment where your employees might feel the need to obtain union representation. Unions are businesses too and their income is set by the number of members they have so they are likely motivated to find such organizing opportunities. A large part of your restart should involve proper communications with your employees.
Imposing a 10% wage cut
If employers simply want to unilaterally impose a wage cut then they run the risk of creating a constructive dismissal. A constructive dismissal will occur when an employer unilaterally imposes a fundamental change to employment terms or otherwise changes fundamental terms. The courts ask whether the conduct evinces an intention on the part of the employer to no longer be bound by the employment contract.
While pay and benefits are clearly central to the employment relationship it is clear that some reductions in remuneration will not constitute a constructive dismissal. In Pavlis v HSBC Bank Canada 2009 BCSC 498 the court considered how big a decrease in pay would have to be to constitute a constructive dismissal. Generally the court stated that a reduction in salary of up to 10% would not be a fundamental breach; a reduction 14—17 % may amount to a fundamental breach if another significant or substantial unilateral change occurs and any reduction beyond 20% will on its own will be a fundamental breach.
Again these cases will have to be decided in Post COVID world. In my view courts are going to be far more sympathetic to employers when these changes are necessitated in order to continue in business.
If the change does not constitute a constructive dismissal an employee may have a right to claim wages under the E S Act which now provides that claims can go back 12 months.
Employers should not take any chances in our view if they can get the employees to accept the reduction. Such an agreement in writing may well constitute a defence to a constructive dismissal claim. Further even in the absence of a written agreement if the employee continues on in the employ under the altered terms without complaint then likely she will have been found to have condoned the change.
Finally if the employee refuses to accept the reduction in pay then we recommend employers continue to offer that position as the employee may be bound to accept the new pay structure in mitigation of her damages.
2021 Case Law Update:
In Kosteckyj v Paramount Resources Ltd, 2021 ABQB 225, the Alberta Justice found that the Employer’s implementation of a COVID-19 related Cost Reduction Program imposing a salary reduction of 10%, a suspension of the RRSP contribution valued at 6% of the employee’s salary, and the “delay/cancellation of the 2019 Bonus Program” amounted to constructive dismissal. The employee was a 47 year old Engineer who had worked with the Employer for over 6 years, and was awarded 9 months notice.
In most cases employees will be thrilled to come back to work and receive a steady income and benefits. Most will be glad to turn in their day pajamas and get back to work. They now have a lot more skin in the game when it comes to having the business succeed.
In my view this is a good opportunity to have employees sign employment agreements with a view to limiting their rights on termination as well as standardizing a number of key terms such as vacations, bonuses, benefits etc. Further, employers might want to obtain more flexibility to make changes to terms and conditions of employment and provide for the right to lay off or suspend employees. Employers can argue that it is best practices to standardize the employment agreements for all employees. Despite a recent court decision that suggest that legal consideration for amendments to employment agreements may not be necessary, we strongly recommend paying employees some bonus or otherwise improving their pay or benefits as the legal consideration for entering into the agreement. If an employee refuses to sign the agreement then you can consider your options including giving working notice of termination.
5. Mike and Chris—when the pandemic hit in March I sent all of my 50 employees home and they have been working from home since. I am now starting to call them back. But at the same time some are asking me to create the option of working from home permanently. Do you see any issues?
My son is in-house counsel for a large telecommunications company in Australia. Despite the fact I have worked from home for 4 years we have debated the issue of whether working from home is a good business model. He argues that it is an efficient, productive and cost effective way of doing work in the 2020’s. I, of course, note all the problems with such an arrangement from an employers’ perspective.
An excellent article by Eric Andrew-Gee in the Saturday May 30th edition of the Globe & Mail puts this debate in a different light. In “Is the office era over?” the author references a study/experiment conducted by James Liang CEO of Ctrip in 2010. He had employees divided in two groups—one worked from home and one worked from the office. His conclusions were rather surprising. He found after 9 months that, contrary to popular belief, those that worked from home were 13 % more productive than those that worked at the office. But the study also found that half the employees who worked from home were discontent and when offered the choice decided to come back to work. Apparently “loneliness” was the biggest factor.
There are many things to consider when instituting a program of working from home. This article got me thinking as much about the practical issues as with the legal issues. In my view a much more nuanced approach needs to be taken given today’s workplace and employee. One size does not fit all for either the employer or the employees. I suspect that the optimum compromise is one that allows some days work from home but the majority of days’ work at the office or some other variation. Absent a vaccine COVID-19 also creates logistical and social problems in having employees return en masse to their workplaces. Employers might not want to rent more space or reconfigure work stations in order to provide for social distancing and other safety measures
Practical issues may well trump legal issues. Most importantly consider how in fact it did work during COVID-19—was it efficient and productive? What do your employees think about it? What were the problems? What will the costs be to reconfigure your current workforce to have employees return with social distancing etc? Where are you in your lease ie can you walk away without penalty?
So in my view before any business considers putting in a permanent program of working from home (in whole or in part) this article is well worth reading. If you would like a copy of the article let me know and I will send the link.
There are as well some legal issues to consider that Chris will comment on.
Thanks Mike, I too enjoyed working from home on a regular basis before the pandemic and plan to continue doing so at least part-time for the foreseeable future. For those employers that will be offering continued working-from-home (WFH) arrangements, there are several legal issues to consider.
In the WFH scenario, the employee’s home workstation is an extension of the workplace and is therefore subject to the jurisdiction of WorkSafeBC and occupational health and safety laws and regulations. This means that if the worker is injured in the course of employment at home, the employer will still be held accountable for any unsafe working conditions and will be penalized with a premiums increase in the event of a claim. This of course presents unique challenges where you have little control over the home workstation or the employee’s actions while at home. In an ideal world, the employer would conduct home safety inspections, however some reasonable alternatives include inspection via video conferencing or having the employee complete a hazard assessment checklist. For more on this topic, see our previous blog entry here. You can also access these helpful WorkSafeBC resources:
We also recommend that you create WFH policy which includes tips on setting up an ergonomic workstation and outlines how employees should report workplace injuries or safety concerns. Also, ensure you have a mechanism for employee check-ins and monitoring and that you ensure you specify the employer’s right to end or suspend the WFH arrangement and require the employee to come back to the office if there are productivity issues or circumstances require.
Some employees may make requests for specialized equipment such as ergonomic chairs, desk or other office equipment. These requests should be considered on a case-by-case basis. Consider human rights issues and whether you might be obligated to provide such equipment as part of the duty to accommodate a disabled employee. If the employee was already being accommodated at work, such measures ought to continue in the home workspace at the employer’s cost.
Several important issues arise regarding employment standards, including business costs and overtime. The E S Act prohibits employers from requiring employees to pay for their business costs. In the WFH scenario, the employee may be incurring additional costs they would not otherwise have, such as home-office items (scanners, printers, paper) long-distance charges, increased internet or data use, and software. These extra costs are likely business costs and must be borne by the employer. We recommend that employers carefully assess whether their employees are paying any such costs and ensure they are reimbursed. In most circumstances, a portion of the employee’s rent would not be considered a business cost.
Be mindful of overtime issues. In the WFH scenario, the line between on and off-duty can become blurry. If you are expecting the employee to be “on call” and available to answer calls and/or emails at all times while at home, this may create significant overtime pay liabilities. If appropriate, set clear hours and ensure the employee abides by them and logs out of the company system entirely at the end of the workday.
Finally, be cognizant of privacy issues. Be careful with how you are tracking employee productivity when they are using personal devices. Also, ensure that employees are not downloading and/or sending sensitive or confidential information onto their personal devices or over personal email addresses or text message without proper security measures in place.
In every case, we recommend you work collaboratively with your employees to design a WFH arrangement that works for both parties and achieves a balance between safety, productivity, and employee satisfaction and well-being.
Note to our Readers: Information regarding COVID-19 is rapidly evolving. We are working to bring you up-to-date articles as the legal issues unfold. This is not legal advice. If you are looking for legal advice or are dealing with an issue in relation to COVID-19, please contact our Employment & Labour Group:
I’ve known and worked with Mike Weiler
for 35 years
I have changed firms at least 5 occasions during that time frame and have always brought Mike’s advice and experience along with me.
We have been successful on literally hundreds of cases. From Favorable Union negotiations, to de-certifying to legally foiling a corrupt collective drive. From defending unjust dismissal claims to a Human Rights case dismissed, Mike has always been a collaborative partner.
The key to success is a secure relationship between client and practitioner . I have always brought Mike into situations long before they blow up. In other words Most of our cases were thought out in advance rather than being reactive.
Needless to say I highly recommend Mike and his approach.
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