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Richmond hotel refused to pay severance, blamed COVID-19

Richmond's Four Points by Sheraton recently lost its appeal to the B.C. Employments Standards Tribunal.
Four Points by Sheraton in Richmond.

A provincial adjudicator recently rejected Four Points by Sheraton’s appeal that it should be exempt from paying severance due to COVID-19.

The Richmond hotel was taken to the B.C. Employment Standards Tribunal by a former employee after she was laid off in May 2020 along with other employees.

L.T. Leung had worked at the hotel as a front desk agent and later as a front desk supervisor for more than six years but did not receive any severance.

Under the Employment Standards Act, employers must pay an employee one week’s wages as severance after the employee has been employed for three consecutive months. The amount will then increase depending on the length of service, with a maximum of eight weeks’ wages.

This is the minimum amount required by law. Many employers provide more than that.

In response to Leung’s complaint, Four Points told the Employment Standards Tribunal its operations were “significantly impacted financially” by the pandemic and the government’s restrictions at the time, which meant it was unable to employ the same number of staff as before.

“(Four Points) did confirm, though, that the hotel continued to operate, and it continued to employ some employees, including in the (Leung’s) position,” reads the decision.

The hotel claimed it was exempt under section 65(1)(d) of the Employment Standards Act as it was impossible to carry out the employment contract due to unforeseen circumstances. However, the original adjudicator found that although the COVID-19 pandemic was an unforeseen event, financial hardship was not enough to show it was impossible.

Four Points was ordered to pay her severance, the associated vacation pay and interest. The hotel also got a mandatory administrative penalty.

Four Points’ appeal

Four Points appealed the original decision, claiming the original adjudicator had made a mistake in deciding the exemption would not apply.

It argued that if there was no productive work for the specific employee due to an unforeseen event, the employment contract would be impossible to perform.

The hotel also said it’s not the intention of the law for the exemption to only apply when the business closes down completely, which would be the case if the test is whether work is possible or if it’s possible to keep the business running “regardless of profitability.”

Brandon Mewhort, the Employment Standards Tribunal adjudicator considering the appeal, made note of the importance to interpret employment standards laws to ensure as many employees will be protected as possible.

He rejected Four Points’ interpretation as it would have relieved employers from paying severance to employees laid off to adjust to reduced amounts of productive work, making it “inconsistent” with the objective.

Mewhort added that whether other employees are still employed, especially those in the same position, may be relevant when considering whether it was impossible to carry on the employment contract.

“However, that does not necessarily mean a business must close entirely for section 65(1)(d) to apply – every case must be decided on its own facts,” he wrote.

Four Points’ appeal was rejected and the original order for payment was upheld.