Ontario COVID-19 deemed leave of absence raises pension issues
On May 29, 2020, the Government of Ontario enacted O. Reg 228/20: Infectious Disease Emergency Leave (the Regulation) which expanded the scope of the Infectious Disease Emergency Leave under the Employment Standards Act, 2000 (the ESA). This introduces a new form of deemed leave for temporarily laid-off non-unionized employees. Although primarily aimed at ensuring that temporary lay-offs due to COVID-19 do not result in mandatory terminations under the ESA, the new deemed leave can also have an impact on pension and benefit plan coverage. This development provides an update to the COVID-19 related leaves, discussed in the May 2020 News & Views.
Deemed infection disease emergency leave
The temporary provisions of the Regulation are retroactive to March 1, 2020, and continue until six weeks after the provincial declared emergency is terminated (COVID-19 Period). The Ontario Government enacted the Regulation to automatically place non-unionized employees on a deemed Infectious Disease Emergency Leave during the COVID-19 Period at any point in which their hours of work are temporarily reduced or eliminated by their employer due to COVID-19.
The Regulation applies to all non-unionized employees. Notably, the Regulation does not apply to employees who were terminated prior to May 29, 2020, and to employees who were terminated during the COVID-19 Period due to permanent discontinuance of the employer’s business.
Ordinarily, an employer is only permitted under the ESA to place an employee on temporary lay-off for up to 13 weeks in a 20 week period, at which point the employee is automatically considered terminated. This period is extended in some cases, for example, if the employee is provided with pension benefits during the leave or if the employee agrees to a longer temporary lay-off period. The Regulation now permits employers to provide for longer temporary absences without having to provide for automatic terminations.
Impact on benefit plans during the COVID-19 Period
Unless an employee has stopped participating in a pension or benefit plan prior to May 29, 2020, the employee continues to participate in the pension plan during the Infectious Disease Emergency Leave unless the employee elects in writing not to continue. This is consistent with the treatment of other leaves provided for under the ESA, such as pregnancy and parental leave.
However, if the employee had already stopped participating in the pension plan as of May 29, 2020, they do not have the right to continue to participate in the plan during the COVID-19 Period. Under such circumstances, this would mean that employers would not be required to provide pension coverage in respect of most temporary layoffs resulting from COVID-19, assuming that they began prior to May 29, 2020.
A submission was made by the Association of Canadian Pension Management (ACPM) dated June 29, 2020, to the Minister of Labour in respect of the deemed Infectious Disease Emergency Leave. The ACPM raised concerns that there may be unintended consequences as a result of the deemed leave. For example, pension plan terms may give members a right to continued pension accrual during employment leaves that go above and beyond minimum statutory requirements. In addition, pension plan members may gain additional pension buy-back rights as a result of the deemed leave, or may be subject to different pricing rules under a leave as opposed to lay-offs.
The ACPM also highlights the disparity in treatment between employers who ceased providing pension accrual prior to May 29, 2020, and those that did not. Lastly, the ACPM noted that the new provisions do not apply to unionized employees and may raise perceptions of unfairness between unionized and non-unionized employees.
Termination of the deemed leave period
On July 24, 2020, Ontario’s provincial declaration of emergency in response to the COVID-19 pandemic terminated. Therefore, the termination of the provincial declaration of emergency on July 24, 2020, means that the temporary changes to the ESA under the Regulation will end on September 4, 2020. After September 4, 2020, any deemed Infectious Disease Emergency Leave will end and the usual rules respecting lay-offs under the ESA will once again apply.
Employers who implemented temporary lay-offs of Ontario non-unionized employees due to the COVID-19 pandemic should be aware of the potential impact of the deemed Infectious Disease Emergency Leave. Depending on the pension plan terms and whether the employees continued or ceased contributing to a pension plan as of May 29, 2020, there may be an impact on pension plan administration and the employer may be obligated to provide for pension accrual in certain cases.