Employment Law

Employee rights when a company downsizes

downsizing, severance when downsized, employee rights when downsized, downsize, severance

Canada’s economy, like anything in life, has its ups and downs. When it hits a rough patch – due to things like a recession, inflation, or high interest rates – employers take steps to reduce costs. They usually do this by cutting staff, also referred to as downsizing.

Staff reductions may be short-term, through a temporary layoff. Most of the time, though, employees are permanently fired or let go from their job. These layoffs often hit many types of employment, from the manufacturing sector to the tech industry.

WATCH: Employment lawyer Lior Samfiru explains why you are still owed severance if you have been downsized, on an episode of the Employment Law Show.

Can my employer put me on a temporary layoff?

Your employer does not have an automatic right to put you on a temporary layoff, even if the layoff is the result of downsizing due to a struggling economy. They are an illegal change to the terms of your employment, which you established with your employer when you were hired.

Some companies require employees to sign an employment contract. These agreements contain language that carve out various aspects of the working relationship, including whether or not the employer can put the employee on a layoff. If your contract doesn’t contain terms allowing a layoff to occur, the company likely can’t impose one on you. If your contract does give your employer that right, or you have agreed to a similar layoff in the past, they may be able to exercise that option.

Employment Law Show: 5 facts about temporary layoffs

If your employer doesn’t have the right to put you on a temporary layoff, you may have the ability to resign from your job with a full severance package. This is achieved through a constructive dismissal claim with an employment lawyer at Samfiru Tumarkin LLP.

Can I be fired?

The company can fire you, or let you go permanently, if they choose to downsize due to the economy.

Employers in Canada have the right to dismiss employees for nearly any reason, even if it is a trivial one. This is called a termination without cause. When this type of termination happens, the employer must give the employee the proper amount of severance.

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While your employer can let you go through downsizing (or “rightsizing” as some companies now call it), they can’t fire you for discriminatory reasons. This includes things like your age, gender, sexual orientation, and ethnicity.

What about a termination for cause?

Your employer can’t use the economy or downsizing as an excuse to fire you “for cause.” This type of termination allows a company to dismiss employees without paying them severance. It also robs someone of the ability to collect Employment Insurance (EI).

It is common for employers to allege cause when they fire someone. They either do it to avoid paying compensation to the individual, or they believe that they actually have a legitimate reason to let them go in this way. The truth is that a termination for cause is reserved only for the worst workplace offenders – people who are insubordinate, assault coworkers or steal from the company. This is why, if you are let go for cause, you should always speak to one of our employment lawyers to find out what your options are.

When Should I Apply for EI in Ontario?
How EI and Severance Pay Work in B.C.

Severance pay when downsizing

Non-unionized employees are owed severance pay when they are downsized and lose their job.

Severance pay is calculated using various factors, including your age, length of time working for the company, and the position you held. It can total as much as 24 months’ pay.

Never accept the initial severance offer from your employer before you use the Severance Pay Calculator to find out what you may be owed – and always talk to an experienced employment lawyer to find out how to get full compensation.

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Employment Law Show: Facts about the termination process

You have two years after your termination date to file a claim for severance, so don’t be fooled by an employer who gives you a one, two or five day signing deadline.

Contact us

As Canada’s largest employee-side employment law firm, we have helped tens of thousands of clients in Ontario, Alberta and British Columbia navigate their workplace issues – and secured fair compensation following a downsizing.

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