Can Your Employer Lay You Off Instead of Terminating You?

Yes, an Ontario employer can place an employee on a temporary layoff instead of permanently terminating employment in some circumstances. But calling the decision a “layoff” does not automatically make it lawful or allow an employer to avoid termination pay, severance obligations, or a constructive dismissal claim.

If you are unsure whether your employer had the right to lay you off, an Employment Lawyer can review your employment contract, the layoff terms, your workplace history, and the applicable employment standards before you decide how to respond.

What Is the Difference Between a Temporary Layoff and a Termination?

A temporary layoff is intended to pause or substantially reduce an employee’s work without permanently ending the employment relationship. A termination ends the employment relationship and may trigger statutory notice or termination pay, statutory severance pay where the employee qualifies, and potentially common law reasonable notice.

Ontario’s Employment Standards Act, 2000 (ESA) establishes how long a temporary layoff can continue before it is treated as a termination for statutory purposes.

The distinction matters because an employee may hear “we are not firing you” and assume there is nothing to challenge. That is not always correct. The ESA rules are only one part of the analysis. The employment contract and common law can also affect whether the employer had the right to impose the layoff.

How Long Can a Temporary Layoff Last in Ontario in 2026?

Ontario’s ESA allows several forms of temporary layoff, depending on the circumstances.

For many employees, a temporary layoff can last no more than 13 weeks in any period of 20 consecutive weeks. A layoff can extend beyond 13 weeks, but remain less than 35 weeks in a 52-week period, when specific statutory conditions are met. Examples include continued substantial payments, continued contributions to certain pension or benefit plans, supplementary unemployment benefits, or an applicable recall arrangement.

Ontario also introduced a new extended temporary layoff framework effective November 27, 2025. For a non-unionized employee, a layoff can now reach 35 or more weeks in a 52-week period while remaining less than 52 weeks in a 78-week period, but additional requirements apply. The employee and employer must enter into a written agreement, the employee must receive specific written information before agreeing, and the Director of Employment Standards must approve the extended layoff.

A request to sign an extended layoff agreement is not routine paperwork. The agreement can affect how long you remain away from work without the layoff becoming a statutory termination, so it should be reviewed carefully before signing.

Can a Temporary Layoff Be Constructive Dismissal?

Yes. A temporary layoff can potentially amount to constructive dismissal even when it falls within the ESA’s permitted time limits.

Ontario’s Employment Standards Act guidance recognizes that a layoff can constitute constructive dismissal when the employment contract does not allow the employer to impose it. Common law rights and ESA minimum standards are related, but they are not the same analysis.

An employment contract may contain an express temporary layoff clause. In other situations, the employer may argue that a right to lay off employees is implied by the nature of the workplace, a long-standing practice, or industry custom. Whether that argument succeeds depends on the facts.

This is why employees should avoid assuming that a 13-week layoff is automatically legal. The first question is not only “How long is the layoff?” It is also “Did my employer have the contractual right to lay me off?”

If your employer has imposed a layoff without a clear contractual basis, review the circumstances with Unified LLP’s constructive dismissal lawyers before resigning or taking a position that could affect your rights.

Can an Employer Use a Layoff to Avoid Termination or Severance?

A temporary layoff is not a guaranteed way for an employer to avoid termination obligations.

If a layoff exceeds the period permitted as a temporary layoff under the ESA, the employment is treated as terminated for statutory purposes. When this occurs because the layoff went beyond the permitted temporary period, the termination is deemed to have occurred on the first day of the layoff.

An employee may then be entitled to termination pay and, if the separate statutory requirements are met, severance pay. Those terms are often used interchangeably, but Ontario law treats them differently.

Termination pay generally replaces the statutory notice of termination an eligible employee should have received. Statutory severance pay is a separate entitlement available only when the ESA’s qualifying conditions are met. Common law reasonable notice can also be relevant, depending on the employment contract and circumstances.

Employees who are told that a “layoff” means they have no severance rights should not rely on the label alone. Unified LLP’s wrongful dismissal lawyers can review whether the employment relationship has legally ended and what compensation may be available.

What Should You Check in a Layoff Letter or Employment Contract?

Start with the documents your employer is relying on. A careful review can help clarify whether the employer is proposing a temporary interruption of work, an extended layoff, or something that may amount to a termination.

Check:

• The temporary layoff clause: Does your employment agreement expressly give the employer the right to lay you off?
• The proposed start date and duration: Is there a recall date or only a statement that the layoff is “temporary”?
• Benefits and pension contributions: Will coverage or contributions continue?
• Payments during the layoff: Is the employer continuing salary, supplementary unemployment benefits, or other substantial payments?
• Any agreement you are asked to sign: Does it extend the layoff period or change your employment terms?
• Release language: Does the document contain a release or waiver affecting future claims?

Keep copies of emails, letters, employment agreements, pay statements, benefit information, and messages about recall. Those documents can matter if there is later disagreement about the terms or duration of the layoff.

What Should You Do After Being Temporarily Laid Off?

Don’t make an immediate decision based only on the employer’s description of what is happening.

Ask for the layoff terms in writing if they have not been provided. Confirm whether benefits continue, whether there is a proposed recall date, and whether you are expected to sign anything. Keep a dated record of communications.

Review your employment agreement for language dealing with layoffs, reductions in work, suspensions, temporary closures, or changes to hours. Contract wording can materially affect the legal analysis.

Avoid resigning before you understand the consequences. A constructive dismissal claim can depend on how and when an employee responds to a fundamental change. Waiting too long can also create legal issues in some cases, which is why early advice can matter. Ontario guidance specifically recognizes that an employee’s response to an alleged constructive dismissal can affect the analysis.

If the layoff is connected to broader downsizing or reorganization, Unified LLP’s guide to restructuring layoffs in Ontario explains additional issues that can arise when positions are eliminated or departments are reorganized.

When to Speak With an Employment Lawyer for Ontario Layoff Issues

Legal advice is particularly useful when the employer’s right to impose the layoff is unclear, you have been asked to sign an extended layoff agreement, your benefits have stopped, the layoff is approaching an ESA time limit, or you suspect the layoff is being used as an alternative to a formal termination.

Unified LLP represents employees and employers in employment matters across Ontario. The firm’s employment lawyers can review the contract, layoff documentation, statutory rules, and potential common law rights before you sign an agreement, resign, or accept that the layoff is valid.

Frequently Asked Questions

Can my employer temporarily lay me off without giving me written notice?
The ESA does not generally require an employer to provide written notice or a reason before placing an employee on a temporary layoff. However, an employment contract, collective agreement, or other legal obligation may impose additional requirements, and the absence of an ESA notice requirement does not determine whether the layoff is lawful at common law.

How long can my employer keep me on temporary layoff in Ontario?
For many employees, the basic ESA limit is no more than 13 weeks of layoff in a 20-week period. Certain conditions can permit a longer layoff, and since November 27, 2025, an approved extended layoff for a non-unionized employee can continue beyond 35 weeks, provided the new written agreement and Director approval requirements are satisfied.

Do I have to sign an extended temporary layoff agreement?
The new extended layoff framework requires an agreement between the employer and a non-unionized employee. Before entering the agreement, the employee must receive specified written information, including the latest intended recall date and notice that the agreement cannot be withdrawn once entered into.

Does a temporary layoff mean I am not entitled to severance or termination pay?
Not necessarily. If the layoff becomes a termination under the ESA or amounts to constructive dismissal, termination-related entitlements may arise, although statutory severance pay has separate eligibility requirements and common law rights depend on the contract and facts.

What if I am unionized or work in a federally regulated industry?
Different rules may apply. Unionized employees may have recall and layoff rights under a collective agreement, while federally regulated employees can be governed by the Canada Labour Code rather than Ontario’s ESA, so the applicable legal framework should be identified before relying on Ontario’s general rules.