Understanding Termination of Employment in Ontario

Losing your job can bring about many questions regarding what you are entitled to, if you were treated fairly upon dismissal, and if you were let go for justifiable reasons. Many people think that severance pay is the umbrella term to cover all of the relevant issues regarding what is owed upon termination of employment in Ontario. This is not the case. Let’s look at some employment law basics regarding severance pay, notice pay, termination pay and wrongful dismissal to clear up some of the confusion.

What is severance pay?

Not every employee who is terminated from their employment is owed severance pay. According to the Employment Standards Act (“ESA”) in Ontario, an employee is generally entitled to severance pay if they meet the following criteria: They were employed by the employer for five years or more and,

(a) the severance occurred because of a permanent discontinuance of all or part of the employer’s business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or

(b) the employer has a payroll of $2.5 million or more. 

If these criteria are met, then an employee is entitled to severance pay and it is calculated based on the regular wages the employee was receiving and the number of years and months of employment.

There are some exceptions that impact severance pay and require consultation with an employment lawyer to navigate. Employees may not be eligible for severance pay if they are guilty of wilful misconduct, or if they work in certain types of construction or on-site maintenance, or if there are certain unforeseen events that can impact the ability of the contract to be fulfilled.

Calculating severance pay in Ontario

Accurately calculating severance pay depends on a variety of factors. There are a variety of online severance pay calculators that offer to provide an estimate of what an employee is owed upon termination, however since not everyone is entitled to severance pay, and notice pay varies depending on the province in question and the type of job, the best method of determining what you are owed in Ontario is to contact an experienced employment lawyer.

Termination Pay

It should be stressed that termination pay is not severance pay. These types of pay are different and these terms are not interchangeable. Termination pay is given in place of the required notice and is based upon different criteria than that used to determine entitlement to severance pay as set out above. If your employer wants to terminate you immediately, they must give you the proper termination pay since they did not give sufficient advance written notice of termination.

Employees who have worked for at least 3 months are entitled to written notice of termination. An employer can avoid providing written notice of termination only if they provide the proper amount of termination pay.

What is notice pay?

In Ontario, notice pay is covered under section 57 of the ESA and is determined by the termination date and the length of the employee’s employment. Employers must always give employees reasonable notice or notice pay, so long as they were not terminated for cause or their specific job or industry is an exception to this rule. The goal of notice is to allow employees the opportunity to find another employment opportunity. During the notice period, the employee can continue working and receiving their salary and benefits, or they can discontinue work and receive pay in lieu of notice.

You cannot receive notice pay if you are terminated for cause.

Can you receive a combination of notice and pay in lieu of notice?

Yes. In Ontario, an employer can let you go immediately without any notice. However, they will owe you the right amount of termination pay to make up for the lack of notice. The employer can also give you some combination of notice and pay to replace the fully required notice that you are owed.

How much notice am I entitled to?

According to the ESA, notice of termination depends on the duration of employment. Additionally, there are other relevant factors that impact the amount of notice owed, including the type of job in question, any pre-negotiated agreements (such as severance agreements or employment contracts) and the regulations of the industry the job is in.

With the variety of factors that can impact the amount of notice owed in Ontario, it is best to speak with an employment lawyer about your specific situation before signing any offer from your employer.

Common law notice

The ESA provides only the minimum standards and entitlements that employees are owed upon termination. It is important to know that there is another option to obtain greater entitlements upon termination and this is known as common law notice. This can be obtained through a negotiated settlement or through the courts. For this option, it is best to obtain the services of an employment lawyer who can guide you through the process in Ontario so that you can maximize what you are owed from your employer.

Again, employees may have greater entitlements than that which is initially offered by their employer when they are let go. As such, it is wise to not sign any offers before considering all of the factors that can weigh into the compensation you are owed upon termination.

Wrongful Dismissal

Employers can usually terminate your employment for a variety of reasons, including simply because they want to. Legally, an employee can be let go for reasons less serious than breach of duties or poor performance. What is required in these situations when an employee is let go through no fault of their own is that the employer must provide the proper amount of notice or pay in lieu of notice.

If the employer does not provide the right amounts of notice or pay, it is known as wrongful dismissal. The exception to this is if the employee was let go for reasons that are classified as just cause which can include various forms of misconduct, including, but not limited to, theft, dishonesty, criminal charges and workplace violence and harassment.

Constructive dismissal

Another important term in employment law is constructive dismissal. This occurs when an employer substantially changes the employment terms without the consent of the employee. The employee can then treat their employment as having been terminated. This is unique as the employee is not considered to be resigning, but rather is making the case that they have been terminated due to the changes in the work situation. As such, a wrongful dismissal claim can be made by the employee.

Constructive dismissal requires proving that a significant change has been made to the employment contract. As such, the help of an experienced employment lawyer should be sought in order to determine if you have been constructively dismissed. Minor changes to the workplace or your work responsibilities may not be considered enough to qualify as a constructive dismissal.

If you are an employee who was recently let go and you have questions regarding your rights and what is owed to you financially, please contact the employment law lawyers at Merovitz Potechin LLP.