Receiving a layoff notice is stressful and confusing. For many employees in Ontario, it raises more questions than answers: Is this temporary? Will my employer recall me? Am I entitled to severance?

While some layoffs are entirely legal and based on business realities, others are “sham layoffs”, a tactic some employers use to cut ties with employees without following proper termination protocols.

So, how do you tell the difference between a lawful layoff and one that’s simply a disguise for permanent termination? We explain what a sham layoff looks like and the five key signs to watch for.

What Is a Sham Layoff?

A “sham layoff” happens when an employer claims your layoff notice is temporary, perhaps blaming economic conditions or operational changes, but has no real intention of bringing you back. This tactic is sometimes used to avoid providing proper notice, severance pay, or other termination entitlements under Ontario employment law.

Temporary layoffs are legal under the Employment Standards Act (ESA), but they come with clear limits. If a layoff exceeds the permitted duration or lacks recall plans, it may be considered a termination, even if the employer avoids using the word in the notice.

Here are five red flags that suggest your layoff notice may not be what it seems.

1. There’s No Clear Recall Date or Timeline

A proper layoff notice should clearly state how long the layoff will last and what steps, if any, the employer is taking to bring employees back. If your employer doesn’t provide a timeline or keeps pushing back your return-to-work date without a valid explanation, it could signal that the layoff is not truly temporary.

The ESA allows temporary layoffs of up to 13 weeks within a 20-week period, or up to 35 weeks under certain conditions with continued benefits. Anything beyond that is legally considered a termination, and you may be owed severance.

2. Your Position Has Been Refilled or Eliminated

If someone else has taken over your job, or your position disappears entirely during the layoff period, that’s a major warning sign. Employers who intend to recall an employee typically won’t replace them in the meantime. If your employer reassigned your duties or publicly advertised your position, it could be an indication of a sham layoff.

What this suggests: The employer never planned to reinstate you and may be using the layoff notice to avoid the costs associated with formal termination.

3. You’re Being Pressured to Resign

Employers may encourage laid-off workers to resign voluntarily. They might suggest it’s “better for your record” or offer a minimal payout in exchange for signing away your rights. If this happens, proceed with caution.

Resigning means: You could forfeit your right to severance or other entitlements. If you’re under pressure to quit, even subtly, it may be part of a broader attempt to sidestep legal obligations.

4. The Company Is Still Hiring or Expanding

Layoffs are supposed to be used when a company is facing financial difficulties or operational restructuring. If your employer cites budget constraints while simultaneously hiring, opening new locations, or expanding services, ignore that contradiction at your peril.

Look for internal hiring posts, new team announcements, or promotional campaigns; these may signal a healthy company, indicating your layoff notice may lack a legitimate business justification.

5. You Weren’t Laid Off Before, But Suddenly You’re on the List

Some seasonal businesses regularly use layoffs as part of their operational model. But if you’ve worked for your employer for years without ever being laid off, and they suddenly add you to the list without any change to your role or responsibilities, it’s worth asking why.

Pattern change: Sudden layoffs of select employees may suggest targeted dismissals rather than necessary workforce reductions. If performance or interpersonal issues were raised before your layoff notice, this could be a disguised termination.

What Can You Do?

If you’ve received a layoff notice, don’t assume it’s legal or final, especially if any of the signs above sound familiar. The reality is that some employers take advantage of workers’ uncertainty to avoid proper payouts. But Ontario employment law provides protections, and those misled by sham layoffs can claim termination pay, severance, and damages.

Before signing anything or waiting too long, consider these steps:

  • Document everything. Keep records of your layoff notice, communications with your employer, and any job postings or changes at the company.
  • Track timelines. Know how long you’ve been laid off and when your recall should have occurred under ESA rules.
  • Get legal advice. An employment lawyer can review your situation and help determine whether your layoff constitutes a termination.

We’ve helped thousands of employees in Ontario understand their rights and pursue fair compensation. If you’re facing an uncertain layoff notice or think your employer may be using a sham layoff to avoid severance, we’re here to help.

Book a no-charge initial assessment and find out where you stand.