jeff@goldsteinlawyers.ca 647-838-6740

Who Is Entitled to Severance Pay Under the Employment Standards Act

Under the Employment Standards Act (“ESA”) in Ontario, terminated employees are entitled to both Termination Pay (s.57) and Severance Pay (s.65) under certain circumstances.  While severance pay has a different meaning under the common law, and all employees are entitled to reasonable notice of termination or payment in lieu thereof in accordance with the common law, except those that have signed an employment contract with an enforceable termination clause, the meaning of severance pay has a specific definition under the ESA.

Entitlement to severance pay

64 (1)   An employer who severs an employment relationship with an employee shall pay severance pay to the employee if the employee was employed by the employer for five years or more and,

(a)   the severance occurred because of a permanent discontinuance of all or part of the employer’s business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or

(b)   the employer has a payroll of $2.5 million or more.

Based on the above-noted definition, in order to be entitled to severance pay, in addition to termination pay, under the ESA, an employee must be employed for over 5.0 years with the same employer with a payroll over $2.5MM.  In the event of termination from employment, an employer is required to pay the minimum obligations under the ESA, which can include both termination pay, benefits continuation for the statutory notice period, and severance pay entitlements if the employees are eligible based on the definition referenced above.

It is imperative that, as an employer, you comply with your minimum obligations under the ESA or else you can be sanctioned by the Ministry of Labour and by a Court should your former employee wish to commence Court Action. If you are an employee, have your severance package reviewed by an employment lawyer to ensure that your rights are fully accounted for.

Notice Periods for Long Service Employees

In order to terminate an employee for cause, an employer must demonstrate that the employee engaged in serious misconduct (i.e., theft, physical harassment or sexual harassment) or that the company placed the employee on a progressive disciplinary plan that sets various performance targets that were not met. In a progressive disciplinary plan, the employee is provided with the opportunity to perform in a satisfactory manner that enables him or her to maintain employed. However, if the plan objectives are not met and the employee continues to engage in poor performance, this may constitute grounds for a just cause termination.

In a recent case called Saikaly v. Akman Construction Ltd.an Office Manager was found to have been wrongfully terminated for cause.  It was found that the employee did not commit any wrongdoing that would rise to the level required for a just cause termination; as such, the employee was entitled to notice of termination or payment in lieu thereof.  In awarding severance pay, the employee received over $150,000.00 plus almost $10,000.00 towards legal costs, representing 24 months of pay.

The employee denied that he ever engaged in any wrongdoing or that he was notified by the employer of the reason for the termination of employment.  The Plaintiff commenced a Court Action for wrongful dismissal and the Defendant did not respond. Later, the Defendant was noted in default, the consequences of which is that the defaulting party is deemed to admit all allegations in the Claim.

As a 60-year old employee with managerial duties, the Court found that it would be especially challenging for this individual to obtain new employment. If you are provided with a severance package or terminated from your employment for cause, it is important to obtain legal advice to ensure that you take the proper steps to obtain the compensation you deserve.

At Goldstein Law Firm, we have expertise in obtaining severance packages for wrongfully dismissed employees.

Employee Rights After Wrongful Dismissal in Ontario

As many people experience, losing a job is never easy.  We are called by employees’ on a weekly basis that are terminated from their employment without cause.  Many people believe that they have been ‘wrongfully dismissed’ from their employment, without understanding what actually constitutes a wrongful dismissal in Ontario.  Under the Employment Standards Act (ESA) in Ontario, an employee that is terminated without cause is entitled to certain minimum obligations, including the right to advanced notice of termination of payment in lieu thereof.

Advanced notice of termination, otherwise referred to as working notice, occurs when an employer advises an employee that their employment will terminate at a specific point in time in the future. During a working notice period, the employee has the obligation to continue working until the notice period expires. It is often a challenge for an employee to stay motivated to work for a company that has terminated them but forced to continue working.

Why Would an Employer Give Working Notice Rather than Payment in lieu Thereof?

For employers, it can make financial sense to provide advanced notice of termination instead of payment in lieu thereof, subject to the employee actually completing their work and assisting the company during the working notice period. Given that the working notice period counts towards an employees severance entitlements when the period expires, the employer may have no more severance obligation to the terminated employee.  Accordingly, the employee’s employment will end with no actual cash outlay required by the employer.

Conversely, when payment in lieu of notice is provided by an employer, a large lump sum or salary continuance payment is typically required, which typically can be expensive for the employer, and in exchange for which the employee’s employment will terminate immediately, and no additional value will be provided to the company.  Employers typically try to balance the uncomfortable nature of working notice with the financial constraint associated with paying severance by way of payment in lieu of notice.

What is a Wrongful Dismissal?

A wrongful dismissal does not relate to the fact the employee was terminated from their employment (unless the employee was wrongfully terminated for cause without a justifiable reason). In fact, an employer can terminate your employment at any time, for any reason, so long as it is not a discriminatory ground protected by the Ontario Human Rights Code (i.e., disability, pregnancy, age, gender, sexual discrimination, etc.).  Rather, a wrongful dismissal occurs when an employer does not satisfy its severance obligations to a terminated employee.  An employer must provide advanced notice of termination or payment in lieu thereof in accordance with the ESA and the common law in Ontario (in certain cases); otherwise, the termination will be deemed a wrongful dismissal.

With respect to ESA entitlements, an employee is entitled to, among other things, termination pay equivalent to one-week per year worked, up to a maximum of 8 weeks termination pay.  In addition, if the employee has worked for a period of 5 or more years for an employer with a payroll over $2.5 million, they will also be entitled to severance pay under the ESA, which is calculated at approximately one-week per year worked.

For example, an employee with 10 years of service for a company that is eligible for both termination pay and severance pay under the ESA, would be entitled to a minimum advanced notice of termination or payout in lieu thereof 18 weeks pay (8 weeks of termination pay and 10 weeks of severance pay).  If the minimum entitlements under the ESA are not offered to an employee that has been terminated without cause, then the termination would be deemed a wrongful dismissal.

Employment Standards Act (ESA) Entitlements Are Minimum Obligations

Terminated employees in Ontario are often entitled to common law or reasonable notice in Ontario, which exceeds those entitlements as designated in the ESA.  By default, an employee is entitled to reasonable notice of termination or payment in lieu thereof, unless an enforceable termination clause is contained in a duly executed employment contract that limits the amount of severance to the statutory (ESA) minimum.  If no such enforceable termination clause is contained in the employment contract, the terminated employee would be entitled to reasonable notice of termination, which can often vastly exceed the minimum obligations under the ESA.

If you have been terminated without cause from your employment in Ontario, it is important that you have received your minimum entitlements. In addition, you ought to consult with an employment lawyer in Ontario to determine whether you are also entitled to reasonable notice of termination or payment in lieu thereof and whether the employer has sufficiently accounted for your rights to a severance package.

If you believe that your former employer has violated your rights, you may have been wrongfully dismissed from your employment. Goldstein Law will be able to analyze your case, including the severance package, employment contract, and other relevant documents, to determine whether you have a case for wrongful dismissal.  Call 647-838-6740 to speak to a lawyer to discuss a potential wrongful dismissal suit.

What Termination Notice Period Are You Entitled to in Ontario?

An employee that has been employed in Ontario for more than three months in an indefinite employment relationship (separate from a fixed-term contract), is entitled to a statutory minimum amount of advanced notice of termination or payment in lieu thereof in accordance with the Employment Standards Act in Ontario, should the employer opt to terminate the employment.

The exception to the general rule is when an employer terminates the employee for cause, in which case the employee is not entitled to any notice of termination. The notice is either provided (1) by way of advanced notice by the employer, during which time the employee continues to work for the company until the end of the notice period; (2) by a payment in lieu of notice equivalent to the value of salary and benefits the employee would have received has they continued working through the notice period; or (3) a combination of advanced notice of termination and payment in lieu thereof.

If payment in lieu of notice is provided to the employee, the payout must be made on the employee’s regular pay date or seven days after the termination, whichever is later.

Employment Standards Act – Notice Periods

The Employment Standards Act in Ontario outlines the minimum termination pay and severance pay obligations of employers. Keep in mind, these are minimum obligations and do not represent an employee’s full legal entitlements on termination of employment. The following is a table outlining the statutory minimums under Ontario’s ESA:

Length of Employment Minimum Notice Required
Under 3 months None
3 months to under 1 year 1 week
1 year to under 3 years 2 weeks
3 years to under 4 years 3 weeks
4 years to under 5 years 4 weeks
5 years to under 6 years 5 weeks
6 years to under 7 years 6 weeks
7 years to under 8 years 7 weeks
8 years or more 8 weeks

The statutorily mandated minimum notice period generally does not constitute a reasonable severance package in accordance with the common law in Ontario; accordingly, if you have only been offered the minimum ESA entitlements, you have a wrongful dismissal claim. Please contact an employment lawyer in Toronto at Goldstein Law Firm for a free consultation to discuss your rights.

Severance Pay for Long-Term Employees

With the aging of our population, a number of workers that have been employed by the same company for a long-period are either entering into retirement or oftentimes, are terminated due to a restructuring, as companies seek to bring on new, younger employees. In determining how much severance is owed to a long-term employee at an advanced age, reviewing precedents (i.e, other cases in Ontario employment law where judges have granted severance pay to employees in similar circumstances), is the best guide to determine how much you are entitled to.

In determining what is fair and reasonable in the circumstances, a Court will consider a number of factors, including but not limited to the employee’s age, the length of service with the company, and the level of job specialization. The main consideration underpinning this assessment is ‘how long is it expected to take for the terminated employee to obtain alternate comparable employment after the termination?’

Employees that have spent a long period of time with one company are not well-versed in the contemporary means available to apply for jobs; and accordingly, may have more difficulty in their job search. In addition, though employers cannot discriminate against employees on the basis of age, it is a common understanding that employees of a more advanced age typically find it more challenging to obtain a job as they approach 65 years of age. Accordingly, employees that have been terminated without cause with a long length of service and at an advanced age will be entitled to substantial severance packages.

The case of Lalani v. Canadian Standards Association is an example of a case whereby a 60-year old employee with 30+ years of service was awarded two-years of severance.

Please note that the vast majority of severance packages are inadequate. As a senior employee with a long length of service, you may be entitled to 100’s of thousands of dollars. It is imperative that you contact a qualified employment lawyer to discuss your termination prior to signing back any severance package.

Is the deadline in my severance package enforceable?

The short answer is NO. Clients frequently call our employment law firm following a job loss advising that they only have one or two days to return their severance package or they would lose the offer from the company. This is not accurate.

Your legal rights do not expire at some pre-defined and arbitrary date as imposed by the employer. In fact, you are entitled to the minimum Employment Standards Act payments (i.e., termination pay and severance pay) irrespective of whether you sign back the severance package on time, late, or at all. The employer is obligated by legislation (i.e., the Employment Standards Act) to provide an employee that has been terminated without cause in Ontario with the following entitlements:

-One week of termination pay per year worked, up to a maximum of 8 total weeks of termination pay; and
-One week of severance pay per year worked, with an adjustment for the number of weeks worked, if the following conditions are satisfied:
(a) The employee has been employed with the company for 5 or more years prior to the termination of employment; and
(b) The company’s annual payroll exceeds $2.5MM.

Both of the above-referenced conditions must be satisfied in order to be eligible for severance pay under the Employment Standards Act. Nevertheless, the employee is entitled to termination pay in any event. In addition to your statutory entitlements, if the employee has not signed an employment agreement with an enforceable termination clause, then they will be entitled to advanced notice or pay in lieu thereof in accordance with the common law in Ontario, which is a substantially enhanced severance entitlement over and above the Employment Standards Act.

With respect to the severance package deadline, your legal rights only expire after the basic limitation period in Ontario runs out, which is two years. Accordingly, if your employment contract does not nullify your right to common law severance pay, you have up to two years to seek recourse. This does not change if your employer includes a deadline in the severance package – as your years of service and dedication to the company will be recognized by a Court irrespective of any deadline (other than the two-year basic limitation period in Ontario).

If you have any questions about your severance package in Ontario, feel free to contact our employment law firm for a free consultation.

Executive Employment Law

Goldstein Law is an employment law firm with experience in assisting executives of large corporations in negotiating valuable severance packages in the event of a termination of employment. We receive inquiries from employees quite often alleging that they have been wrongfully dismissed from their employment, merely because they were terminated.

Under the Employment Standards Act in Ontario and the common law, employers are at liberty to terminate an employee without cause at any time for any reason whatsoever, so long as it is not a discriminatory reason. In the event of termination on account of discriminatory ground, which are outlined as prohibited grounds of discrimination in the Ontario Human Rights Code, a few examples of which, including termination due to disability, pregnancy, ethnicity, gender, etc. Absent a discriminatory ground for the termination of employment, and assuming a legitimate business purpose for ending the employment relationship, the employer has certain obligations under the Employment Standards Act and common law that must be abided by.

If the employers’ obligations are fully satisfied, which will include the payment of the minimum amounts of termination pay as prescribed by the Employment Standards Act (and severance pay if certain criteria are satisfied), and advanced notice of termination or payment in lieu thereof in accordance with the common law (absent a fully enforceable termination clause in the employment agreement which can serve to nullify the terminated employees rights to an enhanced severance)

Accordingly, if you have been terminated from your employment without cause in Ontario, please call an employment lawyer today to discuss your legal rights and to review your severance package for free.

Lowes Closing Stores – Employment Terminations in Ontario

A report has been recently published in the National Post that Lowes, a large home improvement retailer will be closing up to 31 stores in Ontario. Employment terminations are sure to result from these store closures.

Before signing a Release, ensure you consult with an employment lawyer to determine whether the employer has provided you with a fair severance package.