Layoff and termination difference
What is the difference between a “layoff” and a “termination”? Is there are any difference between being “laid off” vs being “terminated”?
Yes, there is a big difference between being “laid off” vs being “terminated”. A layoff is a temporary stoppage of work while termination is a permanent stoppage of work. In the result, when somebody is laid off they do not get to collect notice/severance but they get to come back. On the contrary, if someone is terminated they don’t get to come back to work, but they do get to collect notice/severance.
What is a layoff?
Lay-off meaning in labour and employment law: A layoff is a mechanism employers can use to temporarily stop providing work and pay to employees without triggering a termination (i.e. a firing) of an employee. A layoff is designed such that the employer’s intention is to bring the employee back after a short bit of time.
A layoff is used when companies suffer shortages of work or downturns but expect to return to normal soon. For example, the COVID-19 crisis was a good example of using layoffs. Employers had to close but they did not want to fire all their employees. Rather, they wanted to keep their staff, but they simply couldn’t afford to pay their salary when they themselves were not open or generating any income. In this regard, a layoff is a tool available to employers to lawfully stop paying employees.
Why use a layoff? If a business can’t afford an employee in some downturn but wants them to return because they are a good, well-trained employee, it should use a layoff.
Thus, the goal of the layoff mechanism in the Employment Standards Act is that when an employer is able to open up again, it will recall laid-off employees. It’s sort of a win/win in a rotten situation because the employer gets to save money and the employee gets their job back.
Lay off Rules
Ontario’s Employment Standards Act allows for temporary stoppages of work called “layoffs”. Per the Employment Standards Act, an employee is not terminated until and unless his or her temporary layoff exceeds the time frames allowed in the Employment Standards Act layoff clause. If the layoff does exceed these timelines, then the employee has been terminated as per the Employment Standards Act and entitled to termination or severance pay pursuant to the Employment Standards Act.
There are special procedures in the Employment Standards Act about layoffs that must be followed precisely by employers which can read about here.
An employer who lays off its staff does not have to pay salary of benefits or any other kind of remuneration. Nor does any employer need to provide any advanced notice of layoff.
While an employee who gets laid off is not entitled to Employment Standards Act notice or pay in lieu of notice or severance, they do get to collect employment insurance (“EI”). Read about EI here.
While a layoff is not a termination per the Employment Standards Act, under the common law, a layoff could be a termination called a “constructive dismissal”. Read more about that here.
What about “laid off” vs “furlough”? In Ontario, a layoff means the same thing as a furlough. Both are a temporary work stoppage without pay.
What is a termination?
A termination, unlike a layoff, is a permanent work stoppage. In short, if you are fired, let go or downsized, you are “terminated”. When someone is terminated, his or her employer does not hope to bring them back, rather the employer is seeking to cut ties with that person entirely, forever.
However, unlike a layoff, someone who is terminated is entitled to advanced “notice” of such of termination or compensation in lieu of that notice.
“Notice” is the advance warning an employer has to give an employee when they are terminating them. Employers can and usually do give “pay in lieu of notice” instead of providing “working notice”.
Notice is measured in units of time. Calculating the appropriate notice owed to an employee is an art, and there is no fixed formula.
What about “fired vs let go”: Being “let go” is the same thing as being “fired”. They both mean “terminated”.
Summary: Laid Off vs Terminated
In short, a layoff is a tool for employers to temporarily stop paying employees while termination is when an employer fires someone. Accordingly, it is not correct to say you were “laid off” if you were fired. Rather, the correct term for such a scenario if “terminated”. Someone is only “laid-off” if their employer told them to stay away from work for just a short bit of time.
Jeff is a lawyer in Toronto who works for a technology startup. Jeff is a frequent lecturer on employment law and is the author of an employment law textbook and various trade journal articles. Jeff is interested in Canadian business, technology and law, and this blog is his platform to share his views and tips in those areas.