What Is a Temporary Layoff Under Ontario Law?
A temporary layoff occurs when an employer reduces or eliminates an employee’s work temporarily, with the expectation of recalling them when conditions improve. Unlike a termination, the employment relationship is not formally ended — it is placed in a state of suspension.
Ontario’s Employment Standards Act acknowledges temporary layoffs and sets the outer boundaries for how long they can last before triggering termination obligations. But the ESA’s framework describes the consequences if a layoff occurs — it does not automatically give employers the right to impose one. That distinction is where most Ontario employers get into serious legal difficulty.
Unionized workplaces are typically governed by collective agreement provisions addressing temporary layoffs directly. The framework described in this guide applies to non-unionized Ontario employers, where both ESA compliance and common law exposure are active concerns.
The ESA Temporary Layoff Framework
Part XV of Ontario’s Employment Standards Act, 2000 sets out the temporary layoff rules. The framework operates in tiers:
| Layoff Type | Maximum Duration | Conditions Required |
|---|---|---|
| Short-term layoff | 13 weeks in any 20-consecutive-week period | No special conditions required |
| Extended layoff | Up to 35 weeks in any 52-consecutive-week period | Employer must continue substantial payments (benefit plan contributions or wages), or employee has a contractual recall right to a specific date |
| New extended layoff (Nov. 2025) | More than 35 weeks, less than 52 weeks in any 78-consecutive-week period | Written agreement between employer and employee plus Director of Employment Standards approval |
How the Layoff Weeks Are Counted
A week in which the employee earns more than 50% of their regular weekly wages does not count as a week of layoff under the ESA. This means that partial recalls — even for a few days — can interrupt the layoff clock. In complex situations involving mixed weeks of partial work, track earnings week by week to avoid miscounting the layoff period and missing a deemed termination trigger.
What Qualifies as Substantial Payments to Extend to 35 Weeks?
The Ministry of Labour has interpreted substantial payments to include continued contributions to group benefit plans (health, dental, life insurance) and employer pension contributions. A small nominal retainer generally does not qualify. Document all contributions carefully — the Ministry may review them if a complaint is filed about a deemed termination date.
New November 2025 Extended Layoff Rules
Effective November 27, 2025, Ontario amended the ESA through the Working for Workers Six Act, 2025 to introduce a third layoff option for situations where an employer expects the recovery period to exceed 35 weeks. Under this new provision, an employer and employee may agree in writing to a layoff of more than 35 weeks but less than 52 weeks in any 78-consecutive-week period.
This is a significant new mechanism — but it comes with strict procedural requirements:
| Requirement | Details |
|---|---|
| Written agreement required | Both the employer and employee must agree in writing before the extended period begins |
| Latest recall date must be specified | The agreement must state the latest date on which the employer intends to recall the employee, and the employee must agree to that date |
| Non-withdrawal disclosure | The agreement must explicitly state that once signed, neither party can withdraw from it |
| Director of Employment Standards approval | The application must be submitted to and approved by the Director using the Ministry-approved form — and this must happen before the extended period begins, not after |
The Director’s approval is not a formality. Employers who wait until the 35-week mark to begin the approval process will face a deemed termination at that point. This process requires meaningful lead time — begin it well before the 35-week deadline if you expect to need it.
The Common Law Trap: Constructive Dismissal Risk
Here is the most important thing Ontario employers need to understand about temporary layoffs: the ESA framework describes what happens after a layoff occurs. It does not give employers the legal right to impose one in the first place.
At common law, employment is understood as a continuous relationship involving an ongoing exchange of work for pay. When an employer unilaterally eliminates or substantially reduces an employee’s work and pay without their consent and without a contractual right to do so, courts have consistently found this to constitute a constructive dismissal. The employee can resign, treat themselves as having been terminated without cause, and claim full common law notice damages — which for a senior or long-tenured employee can reach 18 to 24 months of compensation.
This means the constructive dismissal claim can arise from day one of the layoff, before any ESA time limits are even relevant.
When Do You Actually Have the Right to Lay Off?
| Situation | Right to Lay Off? | Key Consideration |
|---|---|---|
| Employment contract contains a clear, express temporary layoff clause | Yes | The clause must be specific and drafted for Ontario law — generic “modify terms” language rarely suffices |
| Established and accepted industry practice in the specific trade (e.g., seasonal construction, film production) | Possibly | Courts apply this narrowly. Do not assume without legal advice specific to your industry |
| Employee clearly and explicitly consented to the layoff at the time it was imposed | Possibly | Silence or simply collecting EI may not constitute consent — document any explicit agreement in writing |
| Standard office, retail, or professional employment — no specific clause in the contract | No | This is the most common situation. Laying off without a contractual basis is constructive dismissal at common law from day one |
The practical takeaway: review all employment contracts now — before you ever need to use a layoff clause. A clause added to a contract after the employer announces a layoff, or obtained through pressure, creates its own enforceability problems. Build the right to lay off into your standard offer letters before any business disruption makes it necessary. See our guide on Ontario employment contracts for what a compliant layoff clause looks like.
When a Layoff Becomes a Deemed Termination
If the employee is not recalled within the applicable ESA time limits, the layoff is automatically deemed a termination under the Act. The employer must then pay the employee their full ESA termination entitlements:
| ESA Entitlement | Amount | Who Qualifies |
|---|---|---|
| ESA Termination Pay | 1 week’s regular wages per completed year of service, up to 8 weeks maximum | All employees with 3 or more months of service |
| ESA Severance Pay | 1 week’s regular wages per completed year of service, up to 26 weeks maximum | Employees with 5+ years of service where the employer has a $2.5M+ Ontario payroll, or has permanently discontinued business with 50+ terminations in a 6-month period |
| Common Law Notice | Based on Bardal factors — often 1 month per year of service for senior employees, potentially reaching 24+ months | All employees where the employment contract does not validly limit common law notice |
Critical timing point: The deemed termination date is the last day of the allowable ESA layoff period — not the date the employer formally communicates a termination. Late payment of ESA entitlements after that date triggers Ministry orders, interest, and penalties. For the full termination entitlements framework, see our Termination and Severance Pay Ontario guide.
Record of Employment Obligations
When an employee is temporarily laid off, the employer must file a Record of Employment (ROE) through Service Canada’s ROE Web within 5 calendar days of the first day of the layoff. This obligation is separate from and independent of the employer’s ESA compliance.
| ROE Requirement | Details |
|---|---|
| Deadline | Within 5 calendar days of the first day of the layoff (electronic ROE Web) |
| Reason code | Code A (shortage of work) for a standard business-related temporary layoff |
| Employee access | Provide the employee with the ROE number or a copy so they can begin their EI application immediately |
| If layoff converts to termination | A new ROE must be issued when the deemed termination occurs, reflecting the termination |
Failure to issue the ROE within the required period delays the employee’s EI application and can result in a complaint with Service Canada. It is a compliance obligation that exists separately from your ESA duties.
Benefits During a Temporary Layoff
The ESA does not require employers to continue group benefit plan coverage during a temporary layoff. However, continuing substantial benefit plan contributions is what allows the layoff to extend from 13 weeks to 35 weeks under the Act. From a business perspective, continuing benefits during a layoff also serves as a retention tool — employees who lose health and dental coverage are far more likely to secure other employment and decline the recall when it comes.
Before assuming your group insurance plan continues automatically during a layoff, review the plan terms. Many group policies have specific provisions requiring active premium maintenance during a layoff period. Consult your benefits broker or plan administrator before the layoff begins.
How to Implement a Lawful Temporary Layoff
- Verify the contractual right before you act. Review the employment contract for an express temporary layoff clause. If no clause exists and there is no clear industry practice, get HR or employment law advice before proceeding. A layoff without a legal basis is constructive dismissal.
- Deliver written notice of the layoff. Specify the layoff start date and the anticipated recall date if known. Even where not technically required, written notice creates a clear record and starts the employment relationship on the right footing for recall.
- Issue the ROE within 5 calendar days. File through ROE Web using Code A. Make sure the employee has access to the ROE so they can begin their EI claim.
- Confirm benefit contribution arrangements. If you intend to extend the layoff beyond 13 weeks, ensure substantial benefit plan contributions are continuing and document this with remittance records before the 13-week mark passes.
- Set calendar alerts for ESA thresholds. Mark the 13-week and 35-week deadlines. Engage your advisor immediately if you are approaching either threshold without a confirmed recall date.
- For the November 2025 extended option, begin the process early. Initiate the written agreement with the employee and submit the Director application well before the 35-week mark — this process takes time and cannot be completed retroactively.
- Document the recall in writing. When recalling the employee, confirm the return date and role in writing. Document any refusal to return and the stated reason — this may be relevant to whether ESA entitlements are forfeited.
Temporary Layoff vs. Mass Termination
A temporary layoff and a mass termination are legally distinct events with different obligations. If 50 or more employees at an establishment are terminated within a 4-week period — including layoffs that convert to deemed terminations — Ontario’s mass termination rules are triggered. These require Form 1 filing with the Director of Employment Standards and statutory notice periods of 8 to 16 weeks depending on the number of employees affected.
In a large-scale layoff affecting 50 or more employees, where ESA time limits expire for all employees around the same time, employers may face retroactive mass termination obligations they did not anticipate. This is one of the most overlooked and costly intersections in Ontario employment law. See our mass termination Ontario guide for the complete Form 1 framework.
Common Employer Mistakes with Temporary Layoffs
| Mistake | Risk and Consequence |
|---|---|
| Imposing a layoff without an express contractual right | Constructive dismissal — common law damages potentially up to 24 months of compensation |
| Failing to issue the ROE within 5 days | Delayed EI access for the employee; complaint with Service Canada |
| Assuming 35-week limit applies without maintaining benefit contributions | Deemed termination at 13 weeks; ESA termination pay owing immediately |
| Missing the ESA time limit without recall or Director approval | Deemed termination; termination pay and severance pay owing; Ministry order risk |
| Not tracking partial-recall weeks against the ESA layoff clock | Miscalculation of layoff period; unexpected deemed termination date |
| Using the November 2025 extended option without Director approval | Invalid extended layoff; deemed termination at the 35-week mark |
| Changing the employee’s role, title, or compensation on recall without consent | Fresh constructive dismissal claim for post-recall changes |
| Using US-style at-will language or generic boilerplate instead of an Ontario-specific layoff clause | The contract does not authorize the layoff; full constructive dismissal exposure results |
When to Get HR or Legal Support
Temporary layoffs are among the highest-risk actions an Ontario employer can take in a non-unionized setting. Get professional HR or employment law support when any of the following apply:
- The employment contract does not contain an express temporary layoff clause
- The layoff affects a long-service or senior employee (common law damages exposure is largest here)
- The layoff is expected to last more than 13 weeks
- You are approaching the 35-week threshold without a clear recall date
- 50 or more employees are being laid off at the same establishment within a 4-week period
- The employee has raised a Human Rights Code or OHSA complaint before or during the layoff
- The employee has indicated they may treat the layoff as a constructive dismissal
If you are not certain whether your employment contracts permit temporary layoffs, now is the time to review them — before a layoff becomes necessary. HRX Connect provides HR consulting services to help Ontario employers navigate workforce reductions, restructuring, and layoff implementation in a way that minimizes legal risk. Contact us to discuss your situation before you act.
Frequently Asked Questions
How long can a temporary layoff last in Ontario?
Under the ESA, a standard temporary layoff can last up to 13 weeks in any 20-week period. With continued substantial benefit plan contributions, it can extend to 35 weeks in a 52-week period. As of November 27, 2025, a new extended option allows up to 52 weeks in any 78-week period with a written agreement and Director of Employment Standards approval.
Can an Ontario employer temporarily lay off an employee without their consent?
At common law, generally no — unless the employment contract expressly permits it or there is a recognized industry practice. Without this foundation, the layoff may constitute constructive dismissal, entitling the employee to common law notice damages from day one.
What happens when a temporary layoff exceeds the ESA time limit?
If the employee is not recalled within the applicable ESA time limits, the layoff is automatically deemed a termination. The employer owes ESA termination pay and, where applicable, severance pay — as well as common law notice if the contract does not validly limit it.
Must an employer issue an ROE during a temporary layoff in Ontario?
Yes. The employer must issue a Record of Employment within 5 calendar days of the first day of the layoff, using Code A for shortage of work, so the employee can apply for Employment Insurance benefits without delay.
What are the new November 2025 extended temporary layoff rules in Ontario?
Effective November 27, 2025, the ESA was amended to allow temporary layoffs beyond 35 weeks, up to 52 weeks in any 78-week period. Both parties must agree in writing, the agreement must specify the latest recall date, must state it cannot be withdrawn once signed, and must be approved by the Director of Employment Standards before the extended period begins.
Can an employee collect EI during a temporary layoff in Ontario?
Yes. Once the employer issues the ROE, the employee can apply for EI regular benefits through Service Canada. EI eligibility is determined by Service Canada as a federal matter, independent of the employer’s ESA obligations.
Sources: Ontario Employment Standards Act, 2000 | SpringLaw — Ontario New Leave and Layoff Rules 2025-2026 | Samfiru Tumarkin — Temporary Layoff Ontario 2026 | Service Canada — Record of Employment