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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.

Although termination and severance are often spoken together in the same phrase, they are very different. These concepts are among the most common areas of confusion for both employees and employers. A frequent cause of termination and severance is staff and/or business change. These can be charged, emotional events, which makes it all the more important to understand your obligations and to comply with the Employment Standards Act (ESA).

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.

Under the Employment Standards Act, 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 the bankruptcy or insolvency of the employer;
  2. Constructively dismisses an employee and the employee resigns, in response, within a reasonable time; 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 calculator included in this section will help you determine your financial obligations in that regard.


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. The ESA does not require an employer to give an employee a reason why his or her employment is being terminated. There are, however, some situations where an employer cannot terminate 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 of employment is based on the employee asking questions about the ESA 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 specified in the ESA.

This is called reprisal. A reprisal is a serious violation under the ESA and can be costly for an employer if they are found to be in contravention.

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 the ESA Guide for more information.


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 whatever contributions would be required to maintain 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):

http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_00e41_e.htm#BK7.


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 wage for a regular work week is the average amount of regular wages earned during the weeks in which the employee worked in the 12 weeks immediately 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 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
  • provided to him or her:
    • in person;
    • by mail (if the method of mail delivery permits delivery to be verified);
    • by fax or e-mail (if the employee is equipped to receive fax or email);
    • by courier; or
    • by being left in a sealed envelope at the employee’s residence with a person who appears to be at least 16 years old.

There is an optional alternative way of providing notice where the employment contract or collective agreement of the employees concerned allows them to “bump” each other on the basis of seniority.

In that case, the employer may post a notice in the workplace where it will be seen by the employees, setting out the names, seniority and job classification of those employees whose employment the employer intends to terminate, and the proposed layoff or termination date. The posting of the notice is considered to be notice of termination, as of the date of the posting, to any employee who is bumped by the employees named in the notice.

IMPORTANT NOTE: This notice of termination must still meet the length of notice requirements set out in the ESA. There are also special rules regarding how notice is provided when there is a Mass Termination.


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: 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 if:

  • 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 submit the Form 1 (Notice of Termination of Employment) to the Director of Employment Standards. Notice of mass termination is not considered to be effective until the employer submits this form.

In addition to providing employees with individual notices of termination (or posted notice where bumping is possible, as discussed above) the employer must post a copy of the Form 1 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.

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.

If an employer does not provide termination notice, or does not provide enough notice, the employee will generally be entitled to termination pay to make up for the lack of notice or the insufficient notice.

Helpful Tips

  • To see a more detailed discussion about notice of termination and termination pay, visit this page.
  • To determine whether you have an obligation to pay termination pay and the amount owing, please see the Termination Pay Calculator.

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.

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 the employee and the employee 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 ESA about termination and severance of employment are minimum requirements. An employee may have greater entitlements under the common law, which he or she might choose to enforce by suing the employer in court for wrongful dismissal. While an employee cannot both sue an employer in court for wrongful dismissal and pursue a claim for termination pay or severance pay with the ministry if the lawsuit and the claim relate to the same termination or severance of employment, the fact that the employer has provided notice of termination or termination pay and severance pay in accordance with the ESA does not mean that the employee could no longer 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, click here.
  • To determine whether you have an obligation to pay severance pay and the amount owing, please see the Severance Pay Calculator.
 

Questions? Call the Employment Standards Call Centre at 1-800-531-5551

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