Insight

Differentiating Between Termination and Severance Pays in Ontario

Everything to know about termination pay and severance pay when laid off from work in Ontario.

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Black and white photo of man in dark suit with glasses

Michael Walter

September 30, 2022 12:00 AM

If you've been laid off in Ontario, you may be wondering what kind of pay you're entitled to. There are two types of payments that you might receive: Termination pay and severance pay. Under the Employee Standards Act of 2000 (ESA), employers are mandated to compensate their employees upon termination of employment. So, what's the difference between the two?

This article by Walter Group Law, employment lawyers in Mississauga, will outline the difference between the two payments, so that you know what to expect.

What is Termination Pay?

Termination pay refers to the payment that an employer is required to give their employee in place of a notice of termination. If your Ontario employer decides to end your employment, they are legally required to provide you with termination pay.

Usually, your written employment contract will indicate how much notice you are entitled to receive. However, if you do not have a written employment contract, the minimum amount of notice you are legally entitled to under the ESA is:

  • Employed for less than a year: One week's notice
  • Employed for less than three years: Two weeks' notice
  • Employed for less than four years: Three weeks' notice
  • Employed for less than six years: Five weeks' notice
  • Employed for less than seven years: Six weeks' notice
  • Employed for less than eight years: Seven weeks' notice
  • Employed for eight years and above: Eight weeks' notice

The amount of compensation you should be given upon termination will also correspond with the amount of notice you are entitled to. In other words, if you are supposed to receive two weeks' notice, your employer should give you two weeks' worth of pay in place of that notice.

The least amount of money you are entitled to according to your employment contract is set by the Employment Standards Act, and if your contract states that you will be paid less than what the ESA requires, then that part of the contract is considered void. The ESA requirements will establish what your employer is legally obligated to provide you.

In addition to the ESA’s minimum notice requirements, you may be entitled to additional notice under common law. Common law notice is when a court can offer an extended notice period above the ESA minimum requirements. If you need help understanding how much common law notice you are eligible for, give us a call to consult with an experienced employment lawyer.

What is Severance Pay?

If you are terminated from your job and meet the eligibility requirements, you could receive severance pay in addition to termination pay. The amount of compensation is based on years of service with the employer and is intended to help ease the transition into unemployment.

According to the ESA, an employer is considered to have severed an employee's employment when:

  • The employer terminates the employee, either because they are unable or unwilling to continue employing them;
  • The employer “constructively dismisses” an employee, and the employee resigns from their position in response, within a reasonable period afterward;
  • The employer makes the employee redundant for 35 weeks or more in any period of 52 consecutive weeks;
  • The employer lays the employee off due to the permanent end of business operations at an establishment; or
  • The employer provides notice of termination per ESA requirements and the employee provides written notice at least two weeks before resignation.

If you're based in Ontario, you might be wondering about the rules surrounding severance pay. How many weeks' worth of severance are employees entitled to, and is it mandatory for all employers?

To be eligible for severance pay under the ESA, you must have worked for your employer for more than 5 years. Likewise, any of the following must be satisfied:

  • The severance occurred because the employer decided to permanently discontinue all or part of their business, resulting in the termination of 50 or more employment relationships within six months; or
  • The employer's payroll must be over $2.5 million per year

If these criteria are satisfied, the eligible employee is entitled to a week of severance pay for each year of service, up to a maximum of 26 weeks.

To calculate severance pay, the employee's regular wages for a regular work week should be multiplied by the sum of the following:

  • The number of years the employee has worked for the company ; and
  • The number of months not accounted for in the above clause, divided by 12

How an Employment Lawyer Can Help You with Severance or Termination Pay in Ontario

If your employment has been terminated and you're not sure whether you qualify for termination or severance pay, or if you believe that your employer owes you more than they are offering- get in touch with an experienced employment lawyer.

It's often difficult to tell whether the severance package you've been given includes all of the necessary amounts of termination and severance pay, as well as common law reasonable notice. If you want your severance package evaluated to ensure you're receiving equitable and appropriate compensation for the loss of your employment, contact Walter Law Group at (905) 822-2646 or visit their website https://pwlaw.ca/.

At Walter Law Group, we can help determine whether you are eligible for severance pay and negotiate on your behalf to ensure that you receive the full amount to which you're entitled. We can also help if your employer has failed to provide proper notice of termination or offer sufficient compensation in lieu thereof. Give us a call to arrange a meeting with one of our experienced employment lawyers. We would be happy to review your case and offer advice on the best course of action.

Don't go through this difficult time alone- contact Walter Law Group today.

Walter Law Group has over 30 years of legal experience and has helped clients with employment, disability, and personal injury claims. With a deep understanding of the law and a commitment to justice, the firm ensures that every client receives the best possible outcome. Led by Michael Walter, a passionate and experienced lawyer, Walter Law Group delivers legal excellence in a wide range of practice areas.

Headline Image: credit iStock/ sesame

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