DIFFERENCE BETWEEN LAY-OFF AND REDUNDANCY

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May 7, 2020

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One of the harsh realities of the COVID-19 pandemic is the inevitable effect it has on employment contracts. The fact is that businesses of all sizes and natures are enduring the adverse effects of the virus on productivity and income, with the consequence that serious cost-cutting measures may have to be explored.

For most businesses, staff costs outstrip almost every other expense, so it is only reasonable that with employees working fewer hours or not working at all, business owners might be forced to make decisions that may be unfavourable to employees. In some cases, employees accept proposals from their employers to take home a fraction of their regular salaries to help to keep the business afloat, but in many cases, lay-off or redundancy is being discussed because revenue targets cannot be met.

Let us compare and contrast lay-off and redundancy.

LAY-OFF
A temporary suspension of employment that may be extended for an indefinite period.
Employment is not terminated, and the employee may return to work after the lay-off period has ended.
No payment is due to an employee during the period of lay-off.
Usually used as a cost-cutting measure or when there is insufficient work for employees to do.
Employer must rely on the contract of employment (for example, in cases of seasonable employment) or the common law.
No consultation is required, although it is advisable to consult, where possible.
After 120 days, the employee may opt to treat employment as being terminated by reason of redundancy or continue to be treated as being laid off.

REDUNDANCY
A permanent cessation of employment.
Employment is terminated.
Eligible employees (those who had been employed for up to 104 continuous weeks at the time of termination) are entitled to receive not only notice pay and unused vacation pay but also redundancy pay. Pension fund considerations may arise.
Usually used when a business is restructuring and eliminating certain job positions, or when a business is sold or is ceasing to operate.
Always available if the circumstances provided for in the Employment (Termination and Redundancy Payments) Act arise, such as cessation of business.
Employer must consult with employees.
Employee may have no option in this matter.

The best approach for any employer who is facing financial challenges as a result of COVID-19 is to have open and frank discussions with employees about the state of the business so that the best decisions can be made in the interests of the business and the employees.

Sherry Ann McGregor is a partner, mediator, and arbitrator in the firm Nunes Scholefield DeLeon & Co. Please send questions and comments to lawsofeve@gmail.com.

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