Ontario Regulation 764/20 - Terms and conditions of employment in defined industries - hospitality, tourism and convention and trade show industries

O. Reg. 764/20 – Terms and Conditions of Employment in Defined Industries – Hospitality, Tourism and Convention and Trade Show Industries– came into effect on December 17, 2020. It was originally set to self-revoke on December 17, 2021, but was later extended to self-revoke on July 31, 2022.

O. Reg. 764/20 applies only to employees who are represented by a trade union, and employers of those employees, in the following industries: hospitality, tourism, and convention and trade show industries.  It does not apply to the Crown and certain public bodies as defined in the regulation.

O. Reg. 764/20 creates a special rule that permits employers and trade unions to agree that the regulation applies instead of some of the provisions in s. 67 of the ESA.  Section 67 of the ESA governs the interaction between recall rights, termination and severance pay and establishes a requirement for payment of termination pay and severance pay into trust where recall rights are retained.  The agreement can be made with respect to a single employee, a group or groups of employees, or all employees.

Regulation does not require payment into trust

If the employer and the trade union agree to have the regulation apply with respect to an employee, the requirement in s. 67(7) of the ESA that the employer pay the termination pay and severance pay to which the employee is entitled into trust will not apply.  This exemption from the requirement to pay the money into trust happens automatically when the employer and trade union agree to apply the special industry rule.

Note that although the regulation does not require the employer to pay into trust the termination pay and severance pay to which the employee is entitled, the trade union and employer are not prohibited by the regulation from bargaining a trust arrangement with respect to any or all of the pay to which the employee is entitled. Unlike s. 67(7), the regulation does not contemplate that any such trust arrangement would involve paying the money into trust with the Director of Employment Standards.  Therefore, the Director will not accept any money into trust where the regulation applies.

Scheme re: retention of recall rights

In addition, where the employer and the trade union agree to have the regulation apply with respect to an employee:

• The trade union may elect to retain recall rights on behalf of some or all of the employees it represents, so long as the employee has not already elected to be paid termination and severance pay and abandon their recall rights. The union may make this election even if the employee had already elected to retain recall rights.
• If the trade union on behalf of the employee elects to retain recall rights, the employee may not renounce the right to be recalled – and be paid termination and severance pay - before a date agreed upon by the union and employer.
• The trade union may not renounce the recall right on behalf of an employee.

Where a trade union and employer agree to have the regulation apply with respect to an employee, if the employee individually elects to retain recall rights and the trade union does not elect to retain the right to recall on behalf of that employee, the only practical difference for that employee between being subject to the regulation and being governed by s. 67 is that there is no obligation on the employer to pay into trust the termination pay and severance pay to which the employee is entitled. (Note, however, that if the employee elected to retain recall rights before the trade union and employer agreed to have the regulation apply to that employee, the employer may have already paid the termination pay and severance pay into trust.  In that case, where the money was paid to the Director of Employment Standards in trust, it will be held and released in accordance with s. 67 of the ESA.  Where the money is being held in a private trust, it will be held and paid in accordance with the trust arrangement.)

Section 1 - Definitions

Section 1 defines the industries to which O. Reg 764/20, pursuant to s. 2, applies.

Section 1 provides a definition of “defined industries” (as referenced in s. 2) to mean the hospitality industry, the tourism industry and the convention and trade show industry.  It also defines each of those industries.

The definitions of those three industries are inclusive.  This means that there may be activities or businesses that are not explicitly set out within the definitions that fall within them.

Section 2 - Scope

Subsection 2(1) narrows the scope of O. Reg. 764/20 by restricting its application to employees in the defined industries who are represented by a trade union, and to their employers.

It does not matter for the purpose of s. 2 whether or not the unionized employees are covered by a collective agreement.  So long as the employees are represented by a trade union, the regulation applies.

If a trade union representing employees in one of the defined industries enters into an agreement with the employer pursuant to ss. 4(1) of this regulation and is subsequently decertified while this regulation is still in effect, the regulation would stop applying with respect to the employees who are no longer represented by a trade union on the date of the decertification, and s. 67 of the ESA 2000 would apply to the employees and employer as of that date.

Section 1 of the ESA 2000 defines “trade union” to be an organization that represents employees in collective bargaining under a number of labour relations statutes.  See s. 1 of the ESA 2000 for details.

Subsection 2(2) further narrows the scope of O. Reg. 764/20 by providing that it does not apply to the Crown, a Crown agency or an authority, board, commission or corporation, at least one of whose members is appointed by the Crown, or to any employees of such an employer.

For a discussion of the exemption that applies to the Crown and certain public bodies in the context of ss. 4(4.1) of the ESA 2000 and s. 2.1 of O. Reg. 285/01, see O Reg 285/01 s. 2.1. Note, however, that the exemption in this regulation differs from the exemptions for the Crown and certain public bodies in the context of ss. 4(4.1) of the ESA 2000 and s. 2.1 of O. Reg. 285/01.  In those contexts, all of the members of an authority, board, commission or corporation must be appointed by the Crown for the exemption to apply.  Here, the regulation will not apply so long as at least one of the members has been appointed by the Crown.

Section 3 – Terms and conditions of employment

Section 3 states that O. Reg. 764/20 sets out terms and conditions of employment that apply to unionized employees and their employers in the industries defined in s. 1.

This section must be read in conjunction with ss. 4(1) of O. Reg. 764/20, which provides that  the special rules regarding the application of recall rights in the regulation applies with respect to an employee only if the trade union and employer agree that it applies.  If there is no such agreement, s. 67 of the ESA 2000 applies with respect to that employee.  Depending on the agreement negotiated by the employer and trade union, it is possible that some unionized employees of an employer are governed by this regulation while other employees of the employer who are represented by the same trade union are governed by s. 67 of the ESA 2000.

Section 4 - Elections re recall rights

Subsection 4(1) of O. Reg. 764/20 provides that, if the employer and the trade union that represents an employee in the defined industries agree, subsections (2) to (7) of this regulation apply to that employer and employee instead of subsection 67 (3), (4), (5), (7), (8) and (9).

The trade union and employer can enter into an agreement with respect to a single employee, a group or groups of employees, or all employees: the regulation does not impose any restrictions in this regard.

Regulation does not require payment into trust where election made to retain recall rights

If the employer and the trade union agree to have the regulation apply with respect to an employee, where an election to retain recall rights has been made the requirement in s. 67(7) of the ESA that the employer pay the termination pay and severance pay to which the employee is entitled into trust will not apply.  This exemption from the requirement to pay money into trust happens automatically when the employer and trade union agree to apply the special industry rule.

Note that although the regulation does not require the employer to pay into trust the termination pay and severance pay to which the employee is entitled, the trade union and employer are not prohibited by the regulation from bargaining a trust arrangement with respect to any or all of the pay to which the employee is entitled. Unlike s. 67(7), the regulation does not contemplate that any such trust arrangement involves paying the money into trust with the Director of Employment Standards.  Therefore, the Director will not accept any money into trust where the regulation applies.

Scheme re: retention of recall rights

In addition, where the employer and the trade union agree to have the regulation apply with respect to an employee:

• The trade union may elect to retain recall rights on behalf of some or all of the employees it represents, so long as the employee has not already elected to be paid termination and severance pay and abandon their recall rights. The union may make this election even if the employee had already elected to retain recall rights.

• If the trade union on behalf of the employee elects to retain recall rights, the employee may not renounce the right to be recalled – and be paid termination and severance pay - before a date agreed upon by the union and employer.

• The trade union may not renounce the recall right on behalf of an employee.

Where a trade union and employer agree to have the regulation apply with respect to an employee, if the employee individually elects to retain recall rights and the trade union does not elect to retain the right to recall on behalf of that employee, the only practical difference for that employee between being subject to the regulation and being governed by s. 67 is that there is no obligation on the employer to pay into trust the termination pay and severance pay to which the employee is entitled.

The employer and trade union can enter into an agreement under this subsection with respect to an employee even if that employee already made an election to retain recall rights, and even if that employee made the election before O. Reg. 764/20 came into force. For example, if an employee elected to retain recall rights while subject to s. 67, the employer and trade union can subsequently enter into an agreement under this subsection with respect to that employee.  If they do, the regulation applies rather than the system set out in s. 67.  This means, for example, that upon entering into the agreement the employer is no longer subject to the requirement in ss. 67(7) to pay the employee’s termination and severance pay into trust, and as per ss. 4(4) of this regulation, where the union has made an election on behalf of some or all of the employees it represents, the employees may not renounce the employees’ right to be recalled and be paid termination and severance pay to which the employee is entitled before the date agreed to by the employer and union.  Note that where money is already being held in trust by the Director of Employment Standards pursuant to s. 67 in respect of a particular employee, there is no authority for the Director to return those funds to the employer if the employer and union come to an agreement under this regulation in respect of that employee’s recall rights; the Director can only pay out the funds in accordance with s. 67 of the Act. Where money is being held in a private trust, it will be held and paid in accordance with the trust arrangement.

Consolidation of the provisions of s. 67 of the ESA 2000 and of O. Reg. 76420 that apply if the union and employer enter into an agreement under ss. 4(1) of O. Reg. 764/20

If the employer and trade union enter into an agreement under ss. 4(1) with respect to an employee, the provisions of the ESA 2000 and this regulation governing the interaction between recall rights and termination pay and severance pay that would apply to the employer and employee affected by the agreement are as set out below.

(Note: although ss. 67(6) of the ESA 2000 is not displaced when the employer and trade union enter into an agreement under ss. 4(1) of O. Reg. 764/20, the text of ss. 67(6) is not set out below because it applies only to non-unionized employees and as such is not relevant.)

Where election may be made

ss. 67(1) of ESA 2000 This section** applies if an employee who has a right to be recalled for employment under his or her employment contract is entitled to,

1. termination pay under section 61 because of a lay-off of 35 weeks or more; or
2. severance pay.

Exception

ss. 67(2) of ESA 2000 Clause (1) (b) does not apply if the employer and employee have agreed that the severance pay shall be paid in instalments under section 66.

4. (2)Subject to subsections (3) and (4), the employee may elect to be paid the termination pay or severance pay forthwith or to retain the right to be recalled.

4. (3)If the employee is entitled to both termination pay and severance pay, the same election shall be made in respect of each.

4. (4)A trade union may elect to retain the right to be recalled on behalf of some or all of the employees it represents and if such an election is made, the following rules apply:

1. The election is binding on the employee in respect of whom it is made unless the employee elected to be paid prior to the trade union’s election.
2. The employee may not renounce the right to be recalled before the date agreed to by the employer and the trade union.
3. The trade union may not renounce the right to be recalled on behalf of the employee.

4. (5) If no election is made on an employee’s behalf under subsection (4) and the employee elects to be paid under subsection (2), the employee shall be deemed to have abandoned the right to be recalled.

4. (6) If the employee accepts employment made available under the right of recall, the employee shall be deemed to have abandoned the right to termination pay and severance pay.

4. (7) Subject to the limit set out in paragraph 2 of subsection (4), if the employee renounces the right to be recalled or the right expires, the employer shall pay the termination pay and severance pay to which the employee is entitled forthwith to the employee and, if the right to be recalled had not expired, the employee shall be deemed to have abandoned the right.

** Because ss. 4 (2)-(7) of O. Reg. 764/20 replace certain subsections of s. 67, the reference in ss. 67(1) of the ESA to “This section” means s. 67 and ss. 4(2)-(7) of O. Reg. 764/20.

Section 67 of ESA 2000 - Where election may be made

Subsection 67(1) sets out the circumstances in which the provisions regarding the election of recall rights apply. This section is subject to s. 67(2) of the Employment Standards Act, 2000, discussed in subsection (2) below.

Subsection 67(1) states that s. 67 will apply where an employee has the right to be recalled for employment under a contract of employment (which includes a collective agreement) and either a) or b) below applies. (Where a trade union and employer agree to have O. Reg. 764/20 apply to an employee who falls under ss. 67(1), the reference in ss. 67(1) to “This section” means ss. 67(1), (2) and ss. 4(2)-(7) of O. Reg. 764/20.)

Termination pay is due under section 61 because of a lay-off of 35 weeks or more - s. 67(1)(a)

Employees who are entitled to termination pay because of a temporary lay-off that equals or exceeds 35 weeks in a period of 52 consecutive weeks (ss. 56(2)(b) or ss. 56(2)(c)) are subject to s. 67. In that case, the employer of such an employee is also subject to s. 67.

This section does not apply if the termination pay comes due for reasons other than as a result of a lay-off that equals or exceeds 35 weeks in a period of 52 consecutive weeks. Therefore, it will not apply where, for example, there is a termination because of a lay-off that exceeds 13 weeks in a 20-week consecutive period (ss. 56(2)(a)). In that case, the employee is not required under the Act to make an election in order to receive termination pay after 13 weeks of lay-off and will not be deemed under the Act to have abandoned the right to be recalled in accepting that payment. If the employee is entitled to severance pay, however, he or she will be required to make an election with respect to the payment of the severance pay and the retention of recall rights. It should also be noted that a collective agreement or contract of employment may provide for the loss of recall rights as a consequence of an employee’s acceptance of termination pay that comes due other than as a result of a lay-off that equals or exceeds 35 weeks in a period of 52 consecutive weeks.

Severance pay is due – s. 67(1)(b)

Subject to ss. 67(2), employees who are entitled to severance pay under ss. 64(1) of the Act are subject to the provisions of s. 67. The employee's employer is likewise subject to the provisions of s. 67.

Exception - s. 67(2) of ESA 2000

Section 67(2) provides that, despite ss. 67(1)(b), the provisions of s. 67 (and of ss. 4(2)-(7) of O. Reg. 764/20) will not apply with respect to the severance entitlement where an employer and an employee have agreed to pay an employee severance pay in instalments under s. 66. See ESA Part XV, s. 66 for a detailed discussion of severance instalment plans under s. 66 of the Act. As such, an employee who agrees to accept severance pay by instalment will not be required to make an election as between the payment of his or her severance pay and retaining the right to recall, and the employer will not be required to pay the severance pay into trust.

However, s. 67 and ss. 4(2)-(7) of O. Reg. 764/20 will apply where an instalment plan is in place because the Director has approved the payment of severance pay by instalments (as opposed to it being in place as a result of employee agreement). Accordingly, in that case, the employee must elect either to be paid the severance pay (by instalment) or retain his or her recall rights. If that employee also has the right to termination pay because of a lay-off of 35 weeks or more, the same election must be made with respect to both the termination pay and severance pay entitlements - see ss. 4(3) of O. Reg. 764/20. Note that if that employee does not make an election, or elects to be recalled, it is Program Policy that the employee has not abandoned the right to be recalled even though the employer pays the employee severance pay by instalment under a plan approved by the Director, since the employee has not expressly elected to be paid the severance pay under ss. 4(2) of O. Reg. 764/20.

This subsection provides that subject to ss. 4(3) and (4) of O. Reg. 764/20, an employee may choose to have the termination pay or severance pay to which the employee is entitled paid to him or her immediately, or instead may choose to retain the right to be recalled.

Subsection (3) provides that where an employee is entitled to both termination pay and severance pay, the employee must make the same election in respect of both of those payments.

Subsection (4) provides that a trade union may elect to retain the right to be recalled on behalf of some or all of the employees it represents, so long as the employee has not already elected to be paid termination or severance pay.

This provision does not apply with respect to the employee's severance pay entitlement if the employee and employer have agreed to (as opposed to the Director approving) the payment of severance pay by instalment under s. 66 of the Act. In that event, ss. 67(2) of the Act provides that the provisions of s. 67 - and ss. 4(2) of this regulation since it only applies where s. 67 is triggered - do not apply with respect to the severance pay entitlement.

As noted earlier, there is no provision in the regulation corresponding to the obligation in ss. 67(7) of the ESA 2000 requiring that, where recall rights are retained, the employer pay the termination pay and severance pay to which the employee is entitled into trust.

This subsection, combined with ss. 67(1), provides that if an employee is entitled to termination pay on or after 35 weeks of lay-off in a period of 52 consecutive weeks and to severance pay, the employee must make the same election with respect to both.

Note, however, that this requirement does not apply if the employee and employer have agreed to (as opposed to the Director approving) the payment of severance pay by instalment under s. 66 of the Act. In that event, ss. 67(2) of the Act provides that the provisions of s. 67 - and ss. 4(2) of this regulation since it only applies where s. 67 is triggered - do not apply with respect to the severance pay entitlement.

This subsection provides that the trade union may elect to retain the recall rights on behalf of one, some or all of the employees it represents, and establishes rules in paragraphs 1-3 with respect to that election.

Paragraph 1 of ss. 4(4) provides that such an election is binding on the employee in respect of whom the election is made unless the employee elected to be paid the termination and severance pay to which the employee is entitled before the trade union made the election.  If an employee made the election to be paid first, that election stands and cannot be overridden by the trade union’s election.

That is the only situation under the regulation where the trade union’s election to retain the right of recall on behalf of an employee is not binding.  A trade union may elect to retain the right of recall on behalf of an employee – and have the rules set out in paragraphs 1, 2 and 3 of this subsection apply – even if the employee had already elected to retain those rights pursuant to ss. 4(2) of this regulation or ss. 67(3) of the ESA (in the case where the employee made the election before the trade union and employer entered into an agreement under ss. 4(1) of this regulation to have the regulation apply to that employee, including a situation where the election was made before this regulation came into force).

Paragraph 2 of ss. 4(4) provides that if the trade union elects to retain the right to be recalled on behalf of an employee, that employee cannot renounce the right to be recalled before the date agreed to by the employer and the trade union.

If the employer and trade union do not agree on such a date, the employee may renounce the recall right and elect to be paid termination pay and severance pay at any time.

Because this regulation revokes on December 17, 2021 as per s. 5 of the regulation, an employee will be able to renounce the recall rights as of December 17, 2021. An employer and trade union cannot agree to restrict the ability to renounce recall rights beyond that date. See the discussion of s. 5 below.

Paragraph 3 of ss. 4(4) provides that the trade union cannot renounce an employee’s right of recall on behalf of that employee.  The regulation only authorizes the trade union to retain an employee’s right of recall on the employee’s behalf.

Note that although there is no requirement in the regulation corresponding to the requirement in ss. 67(7) of the ESA 2000 that the employer pay the termination pay and severance pay to which the employee is entitled into trust where either the employee or the union on behalf of an employee elects to retain recall rights under this regulation, the trade union and employer are not prohibited by the regulation from bargaining a trust arrangement with respect to any or all of the pay to which the employee is entitled.  Unlike s. 67(7), the regulation does not contemplate that any such trust arrangement would involve paying the money into trust with the Director of Employment Standards. Therefore, the Director will not accept any money into trust where the regulation applies.

Subsection 4(5) provides that where the union did not elect to retain recall rights on an employee’s behalf and the employee elects to be paid termination pay that became due because of a lay-off of 35 weeks in a period of 52 consecutive weeks, or severance pay, the employee will be deemed to have abandoned his or her right to be recalled.

Note, however, that this provision does not apply if the employee and employer have agreed to (as opposed to the Director approving) the payment of severance pay by instalment under s. 66 of the Act. In that event, ss. 67(2) provides that the provisions of s. 67 (including ss. 4(5) of this regulation) do not apply with respect to the severance pay entitlement.

Subsection (6) provides that where the employee accepts a recall to work, the employee is deemed to have abandoned the right to termination pay and severance pay.

Subsection (6) deals only with the issue of what happens to the entitlement to termination and severance pay when an employee accepts a recall; neither it, nor any other provision in s. 67 or Reg. 764/20, has any bearing on what constitutes a termination within the meaning of s. 56 or what constitutes a severance within the meaning of s. 63. See the Court of Appeal decision in United Steel v National Steel Car Limited, 2013 ONCA 401 (CanLII), where the Court rejected the employer's argument that s. 67 means that an employee who accepts a recall cannot have any of the time spent on lay-off prior to the recall taken into account in determining whether there was a subsequent termination or severance. See ESA Part XV, s. 63(1) of the Manual for further discussion of this case.

Employee refuses to return to work

Sometimes situations will arise in which the employer recalls an employee who had elected to retain recall rights – or on whose behalf the union had elected to retain recall rights - and the employee refuses to return to work. Because the employee's refusal occurs after the point at which the employee became entitled to termination pay or severance pay, the employee's refusal to accept the recall cannot disentitle him or her to that termination pay or severance pay. Specifically, none of the exemptions in ss. 2(1) or 9(1) of O. Reg 288/01 apply to exempt such an employee from termination or severance pay to which he or she is already entitled. While paragraph 7 of s. 2(1) of O. Reg 288/01 provides that an employee on a temporary lay-off is exempt from the termination provisions if he or she does not return to work when recalled, it does not apply to a refusal to return to work that occurs after the point at which the right to termination pay has crystallized. Further, there is no exemption from severance pay in O. Reg 288/01 that corresponds to paragraph 7 of s. 2(1) of that regulation.

Accordingly, an employee who has been recalled after his or her termination or severance entitlements have crystallized may refuse to return to work and then -  subject to the restriction in paragraph 2 of ss. 4(4) of this regulation that prevents an employee on whose behalf the trade union elected to retain the right to be recalled from renouncing that right before the date agreed upon by the employer and trade union – the employee may renounce his or her recall rights, in which case he or she will be entitled to receive his or her termination or severance pay.

Alternatively, an employee could refuse the recall but retain the recall rights (if he or she did not lose them under the terms of the contract or collective agreement for having refused to return to work when recalled). If the employee's refusal resulted in the automatic termination of recall rights under the terms of the contract or collective agreement, then the result would be the same as if the recall rights had expired, i.e., the employer would have to pay the employee the termination and severance pay to which the employee is entitled.

Period of employment calculation when termination after recall

Situations may also arise in which a long service employee who had been laid off for 35 weeks in a period of 52 consecutive weeks elects to retain recall rights - or the union elects to retain them on the employee’s behalf - and then, after more than 13 weeks elapse, accepts a recall, only to have the employer terminate the employee's employment two weeks later. How is the employee's length of service calculated for purposes of notice of termination in this case? Because of the "period of employment" rule in s. 8 of O Reg 288/01, only the last two weeks of employment would be considered in calculating the employee's period of employment. As a result, the employee would be entitled under the ESA to one week's notice or one week's termination pay. (Note: While the employee's period of employment is only two weeks, the employee was "continuously employed for three months or more" within the meaning of s. 54 and so meets the s. 54 threshold for being is entitled to notice or termination pay in accordance with s. 57(a).)

Subsection 4(7) provides that where the employee renounces the right to be recalled (subject to the restriction in paragraph 2 of ss. 4(4) that prevents an employee on whose behalf the trade union elected to retain the right to be recalled from renouncing that right before the date agreed upon by the employer and trade union), or the rights expire, the employer is required to pay the employee the termination pay and severance pay to which the employee is entitled immediately, and the employee is deemed to have abandoned the right to be recalled.

Section 5 - Revocation

Section 5 of O. Reg. 764/20 provides that Reg. 764/20 is revoked on the first anniversary of the day it is filed.  As the regulation was filed on December 17, 2020, it will be automatically revoked on December 17, 2021.

As such, employees, unions and employers who had been operating under the terms of this regulation will be subject to the provisions in s. 67 of the ESA 2000 as of December 17, 2021.

This means, for example, that as of December 17, 2021, employees have the exclusive right to elect to retain their recall rights, employers are required to pay the termination pay and severance pay of employees who have retained their recall rights into trust in accordance with s. 67(7), and employees’ ability to renounce their recall rights and be paid termination and severance pay will no longer be restricted by any agreement that may have been entered into by the union and the employer under this regulation establishing a date before which those rights could not be renounced.

Section 6 – Commencement

The Regulation was filed on December 17, 2020.