Your Quick Guide to Severance Pay Entitlement in Ontario

Guide to Severance Pay Entitlement in Ontario | Leckers Law

The Ontario Employment Standards Act outlines rules Ontario employers and employees must follow, including providing minimum entitlements that employers must pay an employee in the event of termination without cause or constructive dismissal.

Notice Pay vs. Severance Pay

Notice pay (also referred to as termination pay or pay in lieu of notice) is the first minimum entitlement that an employer must offer a terminated employee. Generally, this entitlement provides for 1 week’s pay per year of completed service to a maximum of 8 weeks. Notice pay can be fulfilled by way of:

  • lump sum payment (one large payment);
  • working notice (written notice that your job will end on a specified date until which you must keep working); or
  • salary continuance (money paid over a gradual period after one’s employment has ended).

Severance pay is the second minimum entitlement satisfied by an employer upon the termination of an employee. This entitlement provides for an additional week’s pay per year of completed service to a maximum of 26 weeks. However, in order to qualify for severance pay, an employee must have been employed for at least 5 years and the employer must have a payroll of at least $2.5 million.

Generally, severance must be paid as a lump sum, either 7 days after the employee’s termination or on their next regular payday, whichever is later. There are some exemptions that would allow an employer to make payments in installments. However, such exemptions are complex and rarely granted by the Ministry of Labour.

When Is an Employee Disentitled to Severance Pay?

There are circumstances wherein an employee would not be entitled to severance pay, such as when the worker:

  • is terminated for wilful misconduct (commonly known as terminated for cause);
  • has resigned (unless it was a constructive dismissal);
  • refused an offer of “reasonable alternative employment” with the employer;
  • has retired; or
  • is employed in construction.

Common Law

Note that the above standards for severance pay (and notice pay) are meant to provide for minimum standards. Essentially, politicians and legislators have prescribed minimum payments for employees that are terminated based on the above. There is also a greater entitlement at common law, which can only be limited by an enforceable employment agreement. This is what the courts have said you are entitled to if you are terminated from your employment.

What to Do If You Have Been Terminated

If your employer terminated your employment, the first thing to do is contact Lecker & Associates. Our Toronto employment lawyers will give you a better and more fulsome overview of your rights and the appropriate steps to take to resolve your case.

Call us today or send us a message via our contact form to schedule an appointment.