TLDR: A temporary layoff is not a termination under Ontario’s Employment Standards Act — but laying off an employee without the right to do so, or exceeding ESA time limits, automatically converts the layoff into a termination triggering notice, severance, and potentially constructive dismissal damages. Ontario amended the ESA in November 2025 to allow extended layoffs up to 52 weeks within a 78-week period, with strict conditions. This guide explains the complete legal framework: ESA duration rules, the critical contractual authorization requirement, constructive dismissal risk, the new extended layoff provisions, and how to implement a temporary layoff without exposing your business to significant liability.
Table of Contents
- What Is a Temporary Layoff Under Ontario Law?
- ESA Duration Rules: The 13-Week and 35-Week Limits
- New Extended Layoff Rule (November 2025)
- Contractual Authorization: The Non-Obvious Critical Requirement
- Constructive Dismissal Risk
- Recall Rights and Obligations
- Benefits and Pay During Layoff
- Mass Termination Interaction
- Employer Checklist Before Implementing a Layoff
- 10 Common Mistakes
- Frequently Asked Questions
What Is a Temporary Layoff Under Ontario Law?
A temporary layoff is a period during which an employer reduces or eliminates an employee’s hours of work without terminating the employment relationship. The employee remains employed — their entitlements to benefits continuation, seniority, and recall rights are preserved — but they are not working and are not receiving their regular wages.
Temporary layoffs are common in seasonal industries (construction, hospitality, retail) and in businesses experiencing cyclical revenue fluctuations. They are also used by employers facing sudden business disruptions — a major client loss, a supply chain failure, a facility issue — where work is genuinely unavailable for a defined period but the employer expects the business to recover.
The key distinction from termination: Under the ESA, a layoff within the permitted time limits is not a termination. Once the layoff exceeds those limits — or if a recall is not issued — the layoff becomes a “deemed termination” and the employer is required to pay termination pay and, if eligible, severance pay. The deemed termination date is the day the layoff began, not the day the time limit was crossed.
ESA Duration Rules: The 13-Week and 35-Week Limits
Ontario’s Employment Standards Act establishes two maximum layoff periods:
| Layoff Duration | Applicable Period | Conditions Required | What Happens If Exceeded |
|---|---|---|---|
| Up to 13 weeks | In any 20-week period | No conditions — applies to all employees | Deemed termination; termination pay required |
| Up to 35 weeks | In any 52-week period | One of: (a) employer continues benefits substantially equal to pre-layoff, OR (b) employer makes substantial payments to employee, OR (c) employee has recall rights under a collective agreement | Deemed termination if none of the conditions met and layoff exceeds 13 weeks; deemed termination if conditions met but 35 weeks exceeded |
How the periods are calculated: The 20-week and 52-week periods are rolling, not calendar-based. If an employee is laid off on March 1, the 20-week period runs forward from March 1. Any weeks on layoff within that 20-week window count toward the 13-week limit. If there are multiple layoff periods during the year, they are aggregated within the applicable rolling window.
Benefits continuation for extended layoffs: To reach the 35-week maximum, the employer must meet at least one of the three conditions. The most commonly used is benefits continuation — maintaining health, dental, and other benefits substantially equivalent to what the employee received before the layoff. “Substantially equivalent” does not require identical continuation; minor differences in coverage level may be acceptable, but complete cancellation of benefits makes the 35-week extension unavailable.
New Extended Layoff Rule (Effective November 27, 2025)
Effective November 27, 2025, Ontario amended the ESA to create a new extended temporary layoff provision allowing layoffs beyond the previous 35-week maximum — up to 52 weeks within any 78-week period.
This provision was introduced to provide greater flexibility for employers facing extended business disruptions while still protecting employees through mandatory procedural safeguards.
| Requirement | Detail | Consequence of Non-Compliance |
|---|---|---|
| Written agreement with the employee | Employee and employer must agree in writing to the extended layoff before it is implemented | Without written agreement, extended layoff is not authorized — layoff converts to deemed termination when 35 weeks exceeded |
| Defined recall date | The written agreement must specify the latest date the employer intends to recall the employee — the recall date must be agreed to by the employee | No recall date = agreement not valid; layoff converts to termination |
| Statement of non-withdrawability | The employee must be informed before signing that the agreement cannot be withdrawn once entered into | Failure to provide this notice = agreement not valid |
| Director of Employment Standards approval | The extended layoff arrangement must be approved by the Director of Employment Standards | Without Director approval, extended layoff is not authorized — ESA minimum periods apply |
| Record retention | Agreements and Director approval must be retained for 3 years after the Director’s approval expires | ESA records violation |
Practical implications: The extended layoff provision is procedurally demanding. It requires not just written agreement with the employee but also Director approval — which adds a regulatory review step and processing time. Employers who need to use the extended provision should begin the application process well before the 35-week standard maximum is approached. The provision is not a casual tool — it was designed for employers with genuine long-term business disruptions and clear recall intentions.
Existing layoffs before November 27, 2025: The extended layoff rules apply to layoffs implemented on or after November 27, 2025. For layoffs that were already ongoing before that date under the pre-amendment ESA framework, the previous rules continued to apply until the current layoff period ended.
Contractual Authorization: The Non-Obvious Critical Requirement
Here is the aspect of Ontario temporary layoffs that catches the most employers off guard: ESA compliance alone does not protect you from a wrongful dismissal or constructive dismissal claim.
Under Ontario common law, an employer has no inherent right to temporarily lay off an employee. Employment is presumed to be continuous at the contracted hours and wages. Reducing an employee to zero hours — even within the ESA time limits — is a material change to the terms of employment that can constitute constructive dismissal.
A temporary layoff is only legally safe from a common law constructive dismissal claim if:
- The employee’s employment contract explicitly permits temporary layoffs, using clear language that mirrors or references ESA Part XIV, OR
- There is an established and accepted industry practice of temporary layoffs in the specific industry (typically construction and some seasonal trades), OR
- The employee consents to the layoff at the time it is implemented
If none of these conditions exist, an ESA-compliant layoff can still be challenged as constructive dismissal — exposing the employer to common law notice damages of 1–24 months’ pay, potentially far exceeding what ESA termination pay would have required.
| Scenario | ESA Compliant? | Common Law Risk | Employer’s Position |
|---|---|---|---|
| Contract has explicit layoff clause; layoff within 13 weeks | Yes | Low | Strong — both statutory and contractual authorization in place |
| No contract layoff clause; layoff within 13 weeks; unionized setting with CBA | Yes | Low | Strong — CBA recall rights typically cover common law gap |
| No contract layoff clause; non-unionized; layoff within 13 weeks | Yes | High | Weak — employee can bring constructive dismissal claim immediately |
| Contract layoff clause; layoff exceeds 35 weeks without extended provision compliance | No — deemed termination | High | Very weak — both ESA and common law exposure |
| No contract; employee consents in writing at time of layoff | Yes if within limits | Moderate | Better — but consent must be free, informed, and adequately documented |
Adding a layoff clause to an existing contract: If your current employment contracts do not include a temporary layoff clause, you can add one — but it requires fresh consideration. You cannot simply issue an addendum and require signature. Fresh consideration means offering something of genuine value the employee is not already entitled to: a salary increase, a signing bonus, a promotion, enhanced benefits. A promise to “continue the employment relationship” is not fresh consideration.
Case reference: In Taylor v. Salytics Inc., 2025 ONSC 3461, an Ontario court upheld a six-month layoff where the employment contract explicitly permitted temporary layoffs aligned with ESA provisions. The court confirmed that clear contractual authorization is the primary protection for non-unionized employers implementing temporary layoffs.
Constructive Dismissal Risk
Constructive dismissal occurs when an employer makes a fundamental change to an employment relationship without the employee’s consent — effectively forcing the employee out. A temporary layoff without contractual authorization is one of the most direct routes to a constructive dismissal claim in Ontario.
What constructive dismissal means for you: If a court finds that a layoff constitutes constructive dismissal, the employee is entitled to common law reasonable notice damages from the date the constructive dismissal occurred — the date the layoff began. The damages are based on the Bardal factors (age, length of service, character of employment, availability of comparable employment) and can range from one month to 24 months of total compensation.
The reinstatement right: Employees who accept a layoff may not be entitled to constructive dismissal damages for that layoff — accepting material changes without protest can be interpreted as acquiescence. However, employees who promptly and clearly indicate they do not accept the layoff, while mitigating their damages by seeking other work, preserve their right to sue for constructive dismissal.
| Employee Service | ESA Termination Pay (if deemed termination) | Common Law Notice (constructive dismissal — approximate) | Difference |
|---|---|---|---|
| 2 years, age 35, office role | 2 weeks | 4–8 weeks | +2–6 weeks |
| 5 years, age 42, manager | 5 weeks | 5–12 months | Up to 11 months |
| 10 years, age 50, senior professional | 8 weeks (ESA cap) + possible severance | 10–18 months | Up to 10+ months |
| 15 years, age 57, specialized role | 8 weeks + severance up to 26 weeks | 16–24 months | Potentially $100K+ difference |
Recall Rights and Obligations
A temporary layoff is only truly “temporary” if the employee is recalled. Ontario’s ESA does not create an automatic right to recall — but if an employer fails to recall an employee before the ESA time limits expire, the layoff becomes a deemed termination. The ESA and common law both recognize the expectation that a layoff with a genuine recall intention will result in the employee returning to work.
- There is no obligation to keep the exact same position open during a layoff — if the business genuinely restructures during the layoff period and the role no longer exists, the employer may be able to offer a comparable role on recall
- If no comparable role exists and no recall is issued before the ESA deadline, the layoff becomes a deemed termination
- For extended layoffs approved by the Director, the recall date agreed to in writing governs — if the employer cannot recall on that date, the parties must revisit the agreement and ideally amend it in writing
- Refusing to recall an employee specifically because they filed an ESA complaint during the layoff period is a prohibited reprisal under the ESA
Benefits and Pay During Layoff
The ESA does not require an employer to pay wages during a temporary layoff — the premise of the layoff is that the employee is not working and is not earning. However, benefits continuation is relevant in two specific ways:
- For extended layoffs beyond 13 weeks: One of the conditions to reach the 35-week maximum is that the employer continues to make benefit payments substantially equivalent to pre-layoff levels. Cancelling benefits makes the extended layoff unavailable.
- ESA minimum standards continue: Vacation pay that accrued before the layoff must still be paid. Statutory holiday pay accrual and other minimum standards continue to apply where they are not directly tied to hours worked.
EI during layoff: Employees on temporary layoff are generally eligible to claim EI benefits provided they meet the qualifying hours threshold. The employer is required to issue a Record of Employment (ROE) with code A (shortage of work) or D (illness) depending on the reason, typically within 5 calendar days of the first day of the layoff or by the due date on the ROE schedule. Late ROE filing delays the employee’s EI application and may trigger a Ministry inquiry.
Mass Termination Interaction
If 50 or more employees have their employment terminated within a four-week period, Ontario’s mass termination provisions under ESA s.58 are triggered. Deemed terminations from layoffs exceeding the ESA time limits count toward this threshold. This has two important implications:
- An employer who lays off 50+ employees, all of whom hit the deemed-termination threshold at the same time (e.g., all laid off on the same date, all hitting 13 weeks simultaneously), may trigger the mass termination notice requirement without realizing it
- Mass termination notice periods are substantially longer than individual termination notice (8 weeks for 50–199 employees; 12 weeks for 200–499; 16 weeks for 500+) and require filing with the Director of Employment Standards
As of November 27, 2025, employees subject to mass terminations (50+ employees terminated in a four-week period) are also entitled to three days of unpaid job-seeking leave to attend interviews, complete applications, or pursue training. Employers must be given three days’ notice where practicable and may request reasonable evidence of use.
Employer Checklist Before Implementing a Temporary Layoff
| Step | Action | Notes |
|---|---|---|
| 1 | Review the employment contract for a temporary layoff clause | If absent, proceeding without contractual authority creates constructive dismissal risk |
| 2 | Confirm the reason for the layoff is genuinely temporary (not a pretext for termination) | Courts will examine whether recall was ever intended |
| 3 | Calculate the maximum permissible layoff duration | 13 weeks standard; 35 weeks if conditions met; 52 weeks in 78-week period if extended provision used |
| 4 | Determine whether benefits continuation is required to reach 35-week limit | Benefits cannot be cancelled if you intend a layoff beyond 13 weeks |
| 5 | Issue the ROE within 5 calendar days with code A (shortage of work) | Late ROE = Ministry inquiry and delays employee’s EI claim |
| 6 | Send written layoff notice to the employee confirming the layoff start date, expected recall date, and entitlements | Document everything in writing; verbal-only layoffs create evidentiary problems |
| 7 | If extended layoff (52-week provision): prepare written agreement, confirm Director approval process, and obtain employee consent before implementation | No agreement = no extended layoff; no Director approval = not authorized |
| 8 | Diarize the ESA deadline date (13 weeks from layoff start) | Missing this date converts the layoff to a deemed termination retroactive to the first day of layoff |
| 9 | Confirm count of employees being laid off against the 50-employee mass termination threshold | If 50+ simultaneous deemed terminations possible, mass termination notice and Director filing obligations apply |
| 10 | Get legal review if employment contracts lack layoff clauses or if any affected employee has more than 2 years’ service | The cost of a legal review is a fraction of the constructive dismissal exposure for a long-service employee |
10 Common Employer Mistakes with Temporary Layoffs
| # | Mistake | Consequence | Risk Level |
|---|---|---|---|
| 1 | Implementing a temporary layoff without an employment contract clause authorizing it | Constructive dismissal claim; common law notice damages 1–24 months | Very High |
| 2 | Missing the 13-week ESA deadline — not tracking the layoff end date | Deemed termination retroactive to layoff start date; termination pay and severance obligations triggered | Very High |
| 3 | Cancelling benefits during the layoff when trying to extend beyond 13 weeks | Benefits cancellation means the 35-week extension is unavailable; layoff converts to deemed termination at 13 weeks | High |
| 4 | No written ROE — or late ROE — when implementing a layoff | Ministry of Labour inquiry; delays employee’s EI claim; ESA violation | High |
| 5 | Using “temporary layoff” as a pretext for termination without intending recall | Courts will find the layoff was a constructive dismissal or sham; full common law damages apply plus possible ESA reprisal finding | Very High |
| 6 | Attempting to add a layoff clause to existing contracts without fresh consideration | The amendment is unenforceable; contractual authorization fails; same exposure as no clause at all | High |
| 7 | Not checking the 50-employee mass termination threshold when laying off multiple employees simultaneously | Mass termination notice periods (8–16 weeks) not provided; Director filing not made; significant ESA exposure | High |
| 8 | Recalling the employee to a substantially different role at lower pay or different location | Recall to inferior role = continuation of constructive dismissal; employee can reject recall and maintain damages claim | High |
| 9 | Not using the extended layoff provision properly — failing to get Director approval before exceeding 35 weeks | Layoff converts to deemed termination; termination pay and severance owing retroactively | Very High |
| 10 | Retaliating against an employee who files an ESA complaint during the layoff | ESA reprisal prohibition; OLRB complaint; Ministry investigation; reinstatement and damages order | High |
Frequently Asked Questions
Q: If an employee on temporary layoff finds another job, does the layoff automatically become a termination?
A: Not automatically. An employee finding other work during a layoff does not end the employment relationship unless they formally resign. However, if the employee treats the layoff as a constructive dismissal and resigns to pursue an employment claim, they must mitigate their damages — finding other work is part of that mitigation. The practical effect is that if an employee finds a comparable job and does not return when recalled, they may be treated as having resigned. Employers should maintain contact with laid-off employees and document all recall communications.
Q: Does a temporary layoff require notice under the ESA?
A: The ESA does not require advance notice before implementing a temporary layoff — it simply defines the maximum periods before the layoff becomes a deemed termination. However, from a practical and common law perspective, providing reasonable advance notice of the layoff and its expected duration is strongly advisable. Abrupt same-day layoffs with no warning are more likely to trigger constructive dismissal claims and create evidentiary issues.
Q: Can an employer recall an employee from layoff and then lay them off again shortly after?
A: Yes — subject to the rolling period rules. Layoff weeks are aggregated within the applicable 20-week or 52-week rolling window. An employer cannot defeat the ESA time limits by recalling an employee for a short period and then re-laying them off. The Ministry of Labour and courts will look at the totality of the layoff pattern to determine whether the time limits have been respected.
Q: What happens if an employer’s business closes permanently before recalling a laid-off employee?
A: If the employer’s business closes permanently, the temporary layoff becomes a permanent termination. The employee is entitled to ESA termination pay and, if eligible, ESA severance pay, calculated from the date of the deemed termination (retroactive to the layoff start if the layoff was already beyond ESA limits). The permanent closure does not allow the employer to avoid the termination obligations — it simply clarifies that recall is impossible.
Q: Can a temporary layoff be used for performance management reasons?
A: No. Temporary layoffs under the ESA are for situations where work is genuinely unavailable — shortage of work, seasonal slowdown, economic disruption. A layoff used as a tool to manage a difficult employee, to apply pressure for resignation, or as a replacement for progressive discipline is a sham layoff. Courts will treat it as a constructive dismissal or wrongful termination, and the employer will face significantly higher damages than if they had terminated the employee properly with appropriate notice.
Q: Is a temporary layoff possible for a salaried employee?
A: Yes, with the same constraints as for hourly employees. The contractual authorization requirement is equally important for salaried employees — arguably more so, because salaried employees often have longer service and higher compensation, meaning constructive dismissal damages are larger. Ensure salaried employees’ contracts contain clear layoff authorization before implementing a layoff, and ensure the layoff is genuinely for shortage of work.
Temporary layoffs intersect with a range of other employment law areas. For information on ESA termination pay and severance pay triggered by deemed terminations, see Severance Pay Ontario and Termination Letters Ontario. For information on constructive dismissal risk in the context of employment contracts, see Wrongful Dismissal Ontario and Employment Contracts Ontario. For support building compliant employment contracts with layoff clauses, see HR consulting services or fractional HR services.
External references: Employment Standards Act, 2000 — Part XIV: Temporary Layoff | Ontario ESA Guide: Termination of Employment | Taylor v. Salytics Inc., 2025 ONSC 3461