Can Your Employer Lay You Off Without Severance Pay in Ontario?
A layoff without severance can be lawful in some situations. In many others, it is a termination or constructive dismissal dressed up as a layoff.
In Ontario, the result depends on the facts. The key issues are whether the layoff is temporary or permanent, whether the employment contract permits temporary layoffs and what compensation the employee is owed under the ESA, the employment contract and common law.
Employees should not assume that a “layoff” label means they have no rights.
Permanent Layoff vs. Temporary Layoff in Ontario
A permanent layoff is generally a termination of employment. If the employer is ending the employment relationship, it must provide working notice, pay in lieu of notice or a combination, unless a narrow exception applies.
A temporary layoff is different. The employer says the employment relationship continues and that the employee may be recalled.
The ESA allows temporary layoffs within defined limits. A layoff can usually last up to 13 weeks in a 20-week period. In some circumstances, it can last longer, including where benefits continue or other statutory conditions are met.
However, the ESA rules do not automatically give every employer the contractual right to lay off an employee. If the employment contract does not permit temporary layoffs and the employee has not agreed to one, the layoff may amount to constructive dismissal.
Does an Employer Have to Pay Severance After a Layoff in Ontario?
If the layoff is actually a termination, the employer must address the employee’s termination entitlements.
Those entitlements may come from the ESA, the employment contract and common law reasonable notice. Common law notice can be significantly greater than ESA minimums, depending on the employee’s age, length of service, position, compensation and re-employment prospects.
This is why employees should be careful before accepting a layoff package or signing a release.
Termination Pay and Statutory Severance Pay Are Different
Employees often use the word “severance” to describe any money paid after job loss. Ontario law is more precise.
Termination pay is compensation for the minimum notice period required under the ESA. It may be provided as working notice, pay in lieu or a combination.
Statutory severance pay is a separate ESA entitlement. It generally applies where the employee has at least five years of service and the employer has a global payroll of at least $2.5 million. It can also apply where 50 or more employees are severed within six months because all or part of the business permanently closes.
An employee who does not qualify for statutory severance pay may still be entitled to termination pay and common law reasonable notice.
When Can an Employer Lay Off an Employee Without Payment in Ontario?
There are limited situations where a layoff may begin without immediate payment.
A properly authorized temporary layoff may not require termination pay at the start of the layoff. The answer depends on the ESA, the employment contract, workplace practice and whether the employee agreed to the layoff.
An employer may also provide working notice instead of a lump-sum payment. In that case, the employee continues working and receiving pay and benefits until the termination date.
Some ESA exceptions may also apply. For example, employees with less than three months of service may not qualify for ESA termination pay. Employees guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and not condoned may also be excluded from ESA termination and severance entitlements.
Those exceptions are narrow. An employer cannot avoid compensation simply by calling the termination “for cause.”
What Should You Do After a Layoff Without Severance in Ontario?
Ask the employer to confirm the reason for the layoff in writing. Determine whether the employer says the layoff is temporary, permanent or a termination.
Review your employment contract, termination letter, layoff notice, benefit information and any release you are asked to sign.
Do not sign a release before legal review. A release usually prevents you from pursuing further compensation, even if the offer is below your full legal entitlement.
Keep records of your job search and any income earned after the layoff. Mitigation can affect the value of a wrongful dismissal claim.
Lecker & Associates advises employees across Ontario on layoffs, termination packages, wrongful dismissal claims, temporary layoff disputes and severance negotiations. If you were laid off without compensation, early legal review can help determine whether the layoff was lawful, whether it amounts to constructive dismissal and whether the offer reflects your full ESA and common law entitlements. Our team of Toronto employment lawyers can be reached at 416-223-5391 or intake@leckerslaw.com for a confidential consultation.
How Lecker & Associates Can Help
Lecker & Associates advises employees across Ontario on termination packages, wrongful dismissal claims, fixed-term contract disputes, and severance negotiations. If your fixed-term contract ended before the agreed end date, early legal review can help determine whether the employer had the right to end the contract, whether the termination clause is enforceable, and whether the offer reflects the full value of the remaining term. Our team of Toronto employment lawyers can be reached at 416-223-5391 or intake@leckerslaw.com for a confidential consultation.
FAQ: Layoff Without Severance: Is It Legal in Ontario?
Sometimes. A properly authorized temporary layoff may not require immediate payment. A permanent layoff is generally a termination and usually requires notice, termination pay or other compensation.
There is no single amount. Entitlement depends on the ESA, the employment contract, age, length of service, position, compensation and the availability of comparable work.
Usually not at the start of a valid temporary layoff. However, an unauthorized temporary layoff may be constructive dismissal, and a layoff that exceeds ESA limits can trigger termination entitlements.
Request the employer’s position in writing. Review your contract and layoff documents. Speak with an employment lawyer before signing a release or accepting that no compensation is owed
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