With tariffs and political uncertainty affecting the economic outlook, some employers may be considering the possibility of downsizing their operations. While we remain cautiously optimistic, we felt it was prudent to speak with a labour and employment law expert about key issues related to layoffs, constructive dismissal, group terminations, and obligations under the Labour Relations Code.

Maggie Campbell, a Partner at Roper Greyell LLP, answered all of our questions—providing a practical guide to the legal obligations associated with downsizing in both unionized and non-unionized work environments in British Columbia.

Pressed for time? Skip ahead:

S1: Layoffs and Legal Obligations

S2: Changing Terms and Conditions of Employment and Constructive Dismissal

S3: Group Termination, Proper Notice, and Section 54

Layoffs and Legal Obligations

MC: I’ll start with some information about laying people off, specifically in a non-union work environment without a collective agreement. Under the Employment Standards Act, employers do have some ability to temporarily lay off employees, but there are certain conditions.1

GB: How should companies go about conducting these layoffs?

MC: Employers are generally required to obtain the employee’s consent for a temporary layoff. This can be done in a couple of ways. It may be included in the employment agreement or offer letter, with a specific clause stating that the employer has the right to temporarily lay off the employee. Alternatively, an employer can ask the employee to consent to the layoff at the time it becomes necessary. That’s the first condition.

GB: What happens if the employee doesn’t agree?

MC: The alternative would be termination. Faced with those options, employees are often more open to accepting a temporary layoff.

GB: Are there time limits on these layoffs?

MC: Under the Employment Standards Act, an employee can only be laid off for a total of 13 weeks within any rolling 20-week period. This becomes particularly relevant in cases where an employee is laid off for a short period, brought back, and then laid off again.

Whether the layoff is 13 consecutive weeks or 13 cumulative weeks within that 20-week period, a termination is triggered under the Employment Standards Act, regardless of the parties’ intentions. This doesn’t mean the employer can’t rehire the employee, but it does mean the employee becomes entitled to notice of termination or termination pay under the Employment Standards Act. Employers must keep detailed records of all layoffs to make sure they understand when a termination may be triggered.

GB: What exactly constitutes a layoff? When do ‘scaled-back hours’ qualify as a layoff?

MC: A layoff occurs when an employee earns less than 50% of their regular pay. In most cases, this is straightforward—for example, if an employee’s hours are reduced from 40 per week to 15, that would be a layoff.

For employees with variable shift schedules, it can be harder to gauge. Generally, Employment Standards uses a snapshot of the prior eight-week period. If the employee earns less than 50% of their usual average earnings based on the previous eight weeks, it qualifies as a layoff.

Changing Terms and Conditions of Employment and Constructive Dismissal

GB: Instead of imposing layoffs, can companies simply cut pay? 

MC: Sometimes employers look to adjust the terms and conditions of employee compensation in order to reduce costs. In a unionized environment, this is very difficult to do. You must adhere to the terms of the collective agreement and negotiate any changes with the union, rather than unilaterally altering compensation. If you approach the union and explain that the business is at risk, there’s a possibility of reaching an agreement. However, generally speaking, you must follow the collective agreement.

GB: What about non-unionized environments? 

MC: In non-union workplaces, employers have more flexibility. As a general rule of thumb, adjusting compensation by up to 10% typically does not trigger a constructive dismissal. Once that 10% threshold is crossed, the risk of a constructive dismissal claim increases.

Sometimes, employers will ask employees to accept a larger reduction—say, 20%—and seek their consent. In most cases, if the employee agrees, the employer can implement those changes. The greater risk arises when employers unilaterally impose compensation changes without employee agreement.

GB: Do employees have any duty to continue working in those situations? 

MC: Employees do have a duty to mitigate their losses by continuing to work through the notice period at the reduced rate—unless they can demonstrate to a court that continuing to work for the employer would be objectively unreasonable.

GB: Are you currently fielding many calls regarding this issue? 

MC: Not at the moment, but I’ve encountered it before—especially during the pandemic. Employers were facing difficult decisions: how do we keep the lights on? In some cases, there was a need to cut pay in order to keep people employed and the business running. That period served as the most recent test, and it led to some litigation. That said, generally speaking, employers do have some ability to adjust compensation without facing significant liability.

Group Termination, Proper Notice, and Section 54

MC: The worst-case scenario occurs when an employer has to shut down either a location or the entire business. Every employer needs to be aware of the Employment Standards Act, which states that additional notice or pay in lieu is owed to employees in the event of a group termination. If the employer does not have enough runway to provide working notice, they will need to provide that notice as pay.

GB: What is the threshold for a group termination?

MC: Under the Employment Standards Act, a group termination occurs when 50 or more employees are terminated at a single location. If that threshold is reached, each affected employee is automatically entitled to an additional eight weeks of notice or pay. For 101 or more terminations, the entitlement increases to 12 additional weeks. At 300 or more terminations at one location, it increases to 16 weeks.

GB: What is the intention behind these group termination thresholds?

MC: The purpose of termination notice is to provide a bridge from one job to the next. It’s meant to carry employees through the transition to new employment. The Employment Standards Act recognizes that when a large group of employees is let go in the same geographic area and within the same industry, it may be more difficult for each individual to find new work, as they’ll likely be competing with one another for similar positions.

GB: Does this apply to both unionized and non-unionized workforces?

MC: That liability applies regardless of union status. In unionized environments, employers often refer to the collective agreement to determine the employees’ entitlements if a facility shuts down. However, the group termination obligation exists in addition to those other entitlements.

GB: Does this become contentious? Are employers able to avoid such responsibilities by, say, terminating 49 employees at a time?

MC: Sometimes it happens that way, but generally speaking, if a business needs to shut down, it simply needs to shut down—and this obligation becomes part of the closing costs.

In some cases involving multi-location employers, we may see terminations occurring at several sites that, when combined, surpass the 50-person threshold. Unions or employees may argue that this constitutes a single large termination. However, legally, the threshold applies to 50 or more employees at one location.

GB: What is Section 54 of the Labour Relations Code? What is required of employers?

MC: In a unionized workplace, if there’s going to be a closure or a significant downsizing, employers are obligated to provide what is known as a Section 54 notice. This requires the employer to give 60 days’ notice to the union.

Whether this requirement applies depends on the size of the reduction, but if it involves a substantial portion of the workforce, you’re likely to meet the threshold. The notice is owed to the union, not to individual employees. If you’re facing the prospect of a closure, you are obligated to inform the union.

There is also a consultation requirement under Section 54. Employers must meet with the union to explore ways to lessen the impact on affected employees—this could include enhanced severance or additional support measures.

It is critical to comply with both parts of Section 54: the notice and the consultation. If sufficient notice is not given, the labour board’s default remedy is 60 days’ pay, which is added on top of all other entitlements, including group termination pay. That can be a significant and unexpected cost. It’s essential for employers to understand these requirements.

GB: As an employment and labour lawyer, are you brought into these situations ahead of time?

MC: Ideally, yes. It’s more difficult to manage the process once it’s already underway. If notice requirements haven’t been followed, it often becomes significantly more expensive to resolve.

Cited Sources

 1 Direct communication with Maggie Campbell.