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Termination and Severance

This workbook has been prepared to assist employers and employees in understanding some of their obligations and rights under the Employment Standards Act (ESA) and its regulations. It does not take the place of the ESA and its regulations and it should not be considered to offer any legal advice on your particular situation.

An employee is entitled to notice of termination (or termination pay instead of notice) if he or she has been continuously employed for at least three months. A person is considered “employed” not only while he or she is actively working, but also during any time in which he or she is not working but the employment relationship still exists (for example, time in which the employee is off sick or on leave or on lay-off).

The amount of notice to which an employee is entitled depends on his or her “period of employment”. An employee’s period of employment includes not only all time while the employee is actively working but also any time that he or she is not working but the employment relationship still exists, with the following exceptions:

  • if a lay-off goes on longer than a temporary lay-off, the employee’s employment is deemed to have been terminated on the first day of the lay-off – any time after that does not count as part of the employee’s period of employment, even though the employee might still be employed for purposes of the “continuously employed for three months” qualification;
  • if two separate periods of employment are separated by more than 13 weeks, only the most recent period counts for purposes of notice of termination.

It is possible, in some circumstances, for a person to have been “continuously employed” for three months or more and yet have a period of employment of less than three months. In such circumstances, the employee would be entitled to notice because an employee who has been continuously employed for at least three months is entitled to notice, and the minimum notice entitlement of one week applies to an employee with a period of employment of any length less than one year.

The following chart specifies the amount of notice required:

Amount of Notice Required
Period of Employment Notice Required
Less than one year One week
One year or more but less than three years Two weeks
Three years or more but less than four years Three weeks
Four years or more but less than five years Four weeks
Five years or more but less than six years Five weeks
Six years or more but less than seven years Six weeks
Seven years or more but less than eight years Seven weeks
Eight years or more Eight weeks

Note: Special rules determine the amount of notice required in the case of mass terminations – where 50 or more employees’ employment is terminated at an employer's establishment within a four-week period. For more information see the chapter on “Termination of Employment” in Your Guide to the Employment Standards Act, 2000.

Defining Termination of Employment

There are a number of expressions that describe ending employment. A few of them are "let go," "discharged," "dismissed," "fired" and "permanently laid off."

In most cases, when an employer ends the employment of an employee who has been continuously employed for at least three months, the employer must provide the employee with written notice of termination. Alternatively, the employer could provide termination pay instead of notice, or a combination of notice and termination pay (please see IMPORTANT NOTE below).

Under the Employment Standards Act (ESA), a person's employment is terminated if the employer:

  1. Dismisses or stops employing an employee, including when an employee is no longer employed due to employer bankruptcy or insolvency
  2. Constructively dismisses[1] an employee and the employee resigns, in response, within a reasonable time; and/or
  3. Lays an employee off for a period that is longer than a temporary lay-off.

IMPORTANT NOTE: If termination pay instead of notice or a combination of notice and termination pay is given, the total amount of pay received must be equal to the total amount that the employee would have received had full notice been given. The Termination Tool, can help you determine the amount of termination pay that may be owed.

If an employee has not been continuously employed for at least three months, there is no obligation to provide either notice of termination or termination pay. An employer is not required to give an employee a reason why his or her employment is being terminated. There are, however, some situations where an employer is prohibited from terminating an employee's employment even if the employer is prepared to give proper written notice or termination pay.

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An employer cannot end someone's employment (or penalize him or her in any other way) if any part of the reason for the termination is based on the employee asking questions about, or exercising a right under, the ESA, such as:

  • refusing to work in excess of the daily or weekly hours of work maximums; or
  • taking a leave of absence to which he or she is entitled.

This is called reprisal. A reprisal is a serious violation of the Act and can be costly for an employer.

An employment standards officer could issue an order requiring reinstatement or compensation for any loss that the employee suffers, or both. Please see the chapter on “Reprisals” in Your Guide to the Employment Standards Act, 2000.


Requirements During the Statutory Notice Period: Termination

During the statutory notice period, an employer:

  • must not reduce the employee's wage rate or alter any other term or condition of employment;
  • must continue to make required contributions to the employee's benefit plans; and
  • must, for each week, pay the employee the wages he or she is entitled to (if in any week the employee earns less than the amount of his or her regular wages for a regular work week, he or she must still be paid the amount of his or her regular wages for a regular work week.)

Regular Wages

These are wages other than overtime pay, vacation pay, public holiday pay, premium pay, termination pay, severance pay and certain contractual entitlements.

IMPORTANT NOTE: For more information, see the Employment Standards Act, s.5 (2).

Regular Work Week

For an employee who usually works the same number of hours every week, a regular work week is a week of that many hours, not including overtime.

Some employees do not work the same number of hours every week or are paid on a basis other than time. For them, regular wages for a regular work week is the average amount of regular wages earned in the 12 weeks in which the employee worked preceding the date of notice or, if no notice was given, the termination date.

An employer is not allowed to require an employee to take vacation during the statutory notice period unless the employee, after receiving written notice of termination, agrees in writing to take his or her vacation time during the notice period.

How to Provide Notice

In most cases, notice of termination of employment must:

  • be in writing
  • addressed to the employee; and
  • provided to him or her:
    • in person;
    • by mail (if the method of mail delivery permits delivery to be verified);
    • by fax or email (if the employee is equipped to receive fax or email);
    • by courier; or
    • in a sealed envelope at the employee’s residence with a person who appears to be at least 16 years old.

There are special rules for providing notice of termination to employees whose employment contract or collective agreement provides seniority rights, allowing an employee who is to be laid off or terminated to displace (“bump”) another employee.

In that case, the employer may post a notice in a conspicuous part of the workplace, where it will be seen by the employees, setting out the name(s), seniority, job classification and proposed lay-off or termination date of the employee(s). The notice is considered to be notice of termination, as of the date of the posting, to any employee who is bumped by the employee(s) named in the notice.

IMPORTANT NOTE: This notice of termination must still meet the length of notice requirements set out in the ESA.

Mass Termination

Special rules for notice of termination may apply when the employment of 50 or more employees is terminated at an employer's establishment within a four-week period. This is often referred to as mass termination.

Note that an establishment, with respect to an employer, means a location where the employer carries on business. When the employer carries on business at more than one location, separate locations are considered one establishment when:

  • the separate locations are located within the same municipality, or
  • one or more employees at a location have seniority rights that extend to the other location under a written employment contract whereby the employee or employees may displace ("bump") another employee of the same employer.

If a mass termination occurs, the employer must complete and submit a Form 1 (Notice of Termination of Employment) to the Ministry of Labour’s Director of Employment Standards. Notice of mass termination is not effective until the Director of Employment Standards has received the employer’s completed Form 1. A letter of acknowledgement is sent out to the employer when the completed Form 1 has been received by the Director of Employment Standards.

In addition to providing employees with individual notices of termination (or a posted notice where bumping is possible, as discussed above), the employer must post a copy of the Form 1 that was provided to the Director of Employment Standards in the workplace where it will come to the attention of the employees, on the first day of the notice period.

The amount of notice employees must receive in a mass termination is not based on the employees' length of employment, but on the number of employees whose employment is being terminated in the same four-week period. An employer must give:

  • 8 weeks' notice if the employment of 50 to 199 employees is to be terminated.
  • 12 weeks' notice if the employment of 200 to 499 employees is to be terminated.
  • 16 weeks' notice if the employment of 500 or more employees is to be terminated.

For more information on mass terminations, see the chapter on “Termination of Employment” in Your Guide to the Employment Standards Act, 2000.

Exceptions to the Mass-Termination Rules

The mass-termination rules do not apply if:

  1. the number of employees whose employment is being terminated represents not more than 10 per cent of the employees who have been employed for at least three months at the establishment; and
  2. none of the terminations are caused by the permanent discontinuance of all or part of the employer's business at the establishment.

Helpful Tips

Severance Pay

Severance pay is not the same as termination pay, which is given in place of the required notice of termination of employment. Severance pay is compensation that is paid by an employer to a qualified employee who has his or her employment severed. It compensates an employee for loss of seniority and the value of firm-specific skills, and recognizes his or her long service.

To calculate the amount of severance pay an employee is entitled to receive, multiply the employee's regular wages for a regular work week by the sum of:

  • the number of completed years of employment; and
  • the number of completed months of employment divided by 12 for a year that is not completed.

The maximum amount of severance pay required to be paid under the ESA is 26 weeks.

When Severance Occurs

A person's employment is "severed" when his or her employer:

  • Dismisses or stops employing the employee, including where an employee is no longer employed due to the bankruptcy or insolvency of his or her employer;
  • Constructively dismisses[1] the employee, who resigns in response within a reasonable time;
  • Lays the employee off for 35 or more weeks in a period of 52 consecutive weeks;
  • Lays the employee off because the employer permanently discontinues all of the business at an establishment (remember that an establishment can, in some circumstances, include more than one location); or
  • Gives the employee written notice of termination and the employee resigns after giving the employer two weeks' written notice, and the resignation takes effect during the statutory notice period.

Wrongful Dismissal

The rules under the Employment Standards Act (ESA) about termination and severance of employment are minimum requirements. An employee may have greater entitlements under common law, which he or she might choose to enforce by suing the employer in court for wrongful dismissal. The ESA prohibits an employee from both suing an employer in court for wrongful dismissal and pursuing a claim for termination pay and/or severance pay with the ministry, if the lawsuit and the claim relate to the same termination or severance of employment (although the ESA does provide that an employee who files a claim can still sue if he or she withdraws the claim within two weeks of filing it). Note that the fact that the employer has provided notice of termination or termination pay, or severance pay, in accordance with the ESA does not mean that the employee cannot sue for wrongful dismissal. Employees and employers may wish to obtain legal advice concerning their rights and obligations.

Helpful Tips

  • To see a more detailed discussion on when an employee’s employment is considered severed, the chapter on “Severance Pay” in Your Guide to the Employment Standards Act, 2000.
  • To determine whether you have an obligation to pay severance pay and the amount owing, please see the Severance Tool.

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[1]For more information on constructive dismissals, see the chapter on “Termination of Employment” in Your Guide to the Employment Standards Act, 2000.

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