By: Kristina Kovacevic, Principal Consultant, People & Culture
Yes. Ontario employers can temporarily lay off employees in 2026, but only where the layoff complies with the Employment Standards Act, 2000 (ESA) and the employer has considered its contractual and human rights obligations.
The answer is no longer as simple as checking a calendar and counting weeks. The legal risk now sits at the intersection of the ESA, the employment contract, and the Ontario Human Rights Code.
That matters because a layoff that looks compliant under the ESA can still trigger a constructive dismissal claim, while a layoff decision that appears neutral on paper can create human rights exposure if it affects employees because of disability, pregnancy, family status, age, or another protected ground.
For employers, the real question in 2026 is not just, “Can we do this?” but, “Can we do this lawfully, defensibly, and with a workable plan to recall employees?”
What is a temporary layoff in Ontario?
A temporary layoff is a period when an employer stops providing work to an employee, without permanently ending the employment relationship. Under the ESA, a temporary layoff is not automatically treated as a termination if it stays within the statute’s time limits and conditions.
That definition is important because many employers assume the ESA gives them a general right to lay employees off whenever business slows down. The ESA tells employers when a layoff will or will not count as a termination for minimum standards purposes, but common law still asks a separate question: did the employer have the contractual right to impose the layoff in the first place?
What are the ESA temporary layoff time limits in 2026?
The baseline rule remains the same in 2026: a temporary layoff can generally last up to 13 weeks in any period of 20 consecutive weeks.
In some situations, the layoff can continue for more than 13 weeks but less than 35 weeks in a period of 52 consecutive weeks without becoming a termination under the ESA. This may apply where, for example, the employer continues certain payments, maintains employee benefits or pension contributions, or satisfies another condition recognized under the ESA.
If the applicable conditions are not met and the permitted layoff period is exceeded, the layoff is treated as a termination of employment for ESA purposes. This can trigger termination pay and, for some employees, severance pay.
What are the new Ontario layoff rules that matter in 2026?
The biggest change is Ontario’s new extended temporary layoff framework, which came into force on November 27, 2025 for non-unionized employees. Under this framework, a layoff can extend beyond the prior ESA ceiling if the employer and employee enter into a written agreement and the Director of Employment Standards (responsible for administering the Act and its regulations) approves it.
The new rule allows an extended temporary layoff of less than 52 weeks in a period of 78 consecutive weeks. Before the employee agrees, the employer must provide written information that includes the latest date by which the employee may be recalled and notice that the agreement cannot be withdrawn once it is made. Employers must also retain the agreement for three years after the approval period expires.
This change gives employers more flexibility during longer downturns, restructurings, or project pauses. It also creates more paperwork, more decision points, and more room for error if the employer treats the extended layoff process as an informal business solution instead of a regulated statutory process.
Can a Temporary Layoff Be Constructive Dismissal in Ontario?
ESA compliance deals with minimum employment standards. It does not eliminate common-law wrongful dismissal risk. Ontario’s own employment standards guide states that a layoff, even if intended to be temporary, may amount to constructive dismissal if it is not allowed by the employment contract.
That is where many employers get caught. A business may think it is safe because it stayed inside the ESA layoff window, but if the contract does not clearly permit temporary layoffs, the employee may still argue that the employer unilaterally changed a fundamental term of employment and effectively ended the relationship.
A recent Ontario decision discussed by employment counsel in 2025 reinforced the opposite point: where the contract expressly permits temporary layoff in accordance with the ESA, the layoff may be enforceable even if the employee challenges other termination language in the agreement. The drafting quality of the employment agreement now matters as much as the timing of the layoff itself.
What human rights risks do layoffs create?
The Ontario Human Rights Code protects employees from discrimination in employment, including at the stage of layoffs and termination. Employers cannot select employees for layoff, extend layoffs, or refuse recall because of disability, sex, pregnancy, family status, age, race, creed, citizenship, or another protected ground.
This is not only about overt discrimination. Human rights risk also arises where a seemingly neutral layoff decision has a disproportionate impact on a protected group, or where the timing of a layoff intersects with a leave, accommodation request, or return-to-work issue.
The Ontario Human Rights Commission specifically notes that employees may allege discriminatory termination where employment ends after issues tied to Code grounds, and that constructive dismissal can also arise in human rights disputes. The Commission also makes clear that pregnancy, disability, and family caregiving obligations remain protected throughout the employment relationship.
When Do Temporary Layoffs Create Human Rights Concerns?
Human rights concerns most often arise in three situations:
- An employee on medical leave, disability-related accommodation, or modified duties is selected for layoff shortly before or after raising workplace limitations.
- An employee returning from pregnancy or parental leave is not recalled when others are recalled, or is told there is “no role available” without objective evidence supporting the decision.
- A layoff process is built around availability, scheduling flexibility, or caregiving assumptions that disproportionately affect employees with family status obligations.
In each case, the employer may believe the decision was based only on business needs. However, courts and tribunals may examine the timing of the decision, how comparable employees were treated, whether the selection criteria were applied consistently, what records were kept, and whether accommodation was considered before the layoff or recall decision was made.
What should employers check before using a temporary layoff?
A temporary layoff should be treated as a legal-risk project, not just a payroll or operations decision. Before proceeding, employers should work through a documented checklist:
- Confirm the employment contract contains a valid temporary layoff clause or that a clear industry practice supports layoffs.
- Confirm the layoff will fit within the ESA time limits, including any statutory conditions needed for a longer layoff.
- Decide whether the new extended temporary layoff framework is needed and, if so, prepare the required written disclosures and approval steps before implementation.
- Review whether any selected employee is on protected leave, has an accommodation issue, or may be affected because of a Code ground.
- Document the business reason, selection criteria, recall plan, and how decisions were applied consistently across comparable employees.
If layoffs are being considered as part of a broader restructuring, employers should also review related policies and agreements so the layoff plan aligns with termination language, leaves, benefits continuation, and accommodation obligations. For organizations reviewing their broader documentation, Pivot’s HR Policies & Contracts page is a useful internal starting point.
What happens if an employer gets it wrong?
The consequences vary depending on the error. If the layoff exceeds ESA limits, the employee may be entitled to statutory termination entitlements and, if eligible, statutory severance pay. If there was no contractual authority to lay off, the employee may claim constructive dismissal and seek damages at common law.
If the decision is tied to a protected ground, the employer may also face an application under the Human Rights Code, including potential compensation for injury to dignity and orders affecting workplace practices. In real terms, that means a poorly planned “temporary” measure can turn into three separate disputes at once: ESA liability, wrongful dismissal exposure, and human rights litigation.
How might this play out for an Ontario employer?
Consider a manufacturing employer facing a six-month slowdown in orders. Management places several non-union employees on layoff, keeps no written record of selection criteria, and includes an employee who recently returned from medical leave and another who just came back from pregnancy leave. If the contracts do not clearly allow layoffs, the first problem is constructive dismissal risk.
The second problem is that the layoff may exceed the normal ESA limit unless the employer meets an extension condition or uses the new extended temporary layoff framework properly. The third problem is optics and evidence: if protected-leave employees were chosen without a clear and neutral business rationale, the employer may now have to defend both discrimination allegations and the underlying employment decision.
Which sources should employers rely on?
For legal accuracy, two especially useful external sources are Ontario’s termination of employment guide and the Ontario Human Rights Code.
Where layoffs are part of a broader workforce planning issue, employers may also need advice on policy drafting, employment agreements, and accommodation processes. Pivot’s Workplace Investigations & Employee Relations and HR Policies & Contracts pages connect closely to those issues.
Employers should consider seeking HR support before issuing temporary layoff notices where employment contracts do not clearly permit layoffs, the expected layoff may exceed the standard ESA time limit, or affected employees are on protected leave or receiving workplace accommodation.
Pivot HR Services supports Ontario employers with employment agreement and policy reviews, employee relations guidance, layoff documentation, selection criteria, and practical recall planning. Organizations in the Greater Toronto Area can learn more about our HR consulting services for Toronto employers.
Temporary Layoff FAQs from Ontario Employers
1. Can an Ontario employer temporarily lay off an employee just because business is slow?
Sometimes, but not automatically. The employer still needs to satisfy the ESA framework and should have contractual authority to impose the layoff without triggering constructive dismissal risk.
2. Can a temporary layoff become a termination even if the employer plans to recall the employee?
Yes. If the layoff exceeds the ESA’s permitted period or conditions, it can become a termination under the ESA even if the employer hoped the interruption would be temporary.
3. Can a layoff create human rights liability if the employer did not intend to discriminate?
Yes. Human rights liability can arise from adverse effect discrimination, not just explicit bias, especially where layoffs intersect with disability, pregnancy, family status, or return-from-leave issues.
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