Employment Standards Act Obligations

Under the Employment Standards Act (ESA), employers are required to provide employees minimum entitlements upon the termination of employment, which includes but are not limited to the following:

-Up to a maximum of 8 weeks of termination pay, calculated as one-week of termination pay per year worked; and

-If the employer has a payroll over $2.5 million and the employee worked for the company for 5 or more years, they would be entitled to severance pay equivalent to one week per year worked plus the fraction of the year worked prior to termination.

When you are terminated from your employment, the employer is obligated to provide these minimum ESA payments by your next scheduled pay date.  Employees’ entitlements to severance pay are greater than the requirements of the ESA, which only sets out the minimum standards. In fact, the common law, or judge-made law in Ontario, which reflect a series of cases in the employment law realm is what governs employees entitlements on termination.  According to this judge-made law, employees can be entitled to one-month per year worked, or more, termination pay, depending on the circumstances.

The Court will take into consideration a variety of factors in determining the quantum of termination pay required in the circumstances.  The factors include (a) age of employee; (b) likelihood and ease of re-employability; (c) duration of employment; (d) circumstances around the dismissal; and (e) specialization of the position and level of seniority at the company.  All of these factors are relevant to the analysis into the appropriate termination pay in the circumstances.

It is important to note that, when an employee is terminated, they may be offered the minimum requirements under the ESA, and asked to sign off on a Full and Final Release, preventing you from bringing any future employment-related claim whatsoever in exchange for accepting the initial offer. Based on our discussion, the ESA entitlements are a minimum, and the employee should be discouraged from signing the Release absent a consultation with experienced employment counsel. If you do, in fact, retain an employment lawyer to negotiate an enhanced severance package, the employer will still be required to pay your minimum entitlements owing under the ESA, irrespective of a signed Release, while the negotiation is ongoing.

If you have any questions or concerns about your severance package, please do not signed the settlement documents at first instance before consulting with an experienced employment lawyer regarding your rights and obligations.

What Are Your Employers’ Obligations on Termination?

Employers have various obligations upon terminating an employee from employment, including but not limited to complying with the Employment Standards Act, 2000, S.O, 2000, c.41 in Ontario.

If you have been terminated from your employment without cause, your employer is required to pay a minimum number of weeks of compensation in accordance with the Employment Standards Act in Ontario, equivalent to one-week of pay per year worked, up to a maximum of 8 weeks’ of termination pay. It is illegal for an employer to pay a termination package that does not comply with at least the minimum standards set out in the Employment Standards Act.

The minimum standards include a requirement to pay termination pay, severance pay, and continue employer benefits through the statutory notice period.  Termination pay must be paid on the basis of one-week per year worked, up to a maximum of 8 weeks.  Severance pay is different than termination pay.  Only those employees that have been employed for longer than 5 years for an employer with a payroll of greater than $2.5M will be entitled to severance pay upon termination of their employment. The Employment Standards Act governs the formula to calculate severance pay should you be entitled.

Employers are required to pay terminated employees their base minimum statutory entitlement 7 days after termination or on the employees’ next pay date, whichever is later.  This statutory pay must be distributed irrespective of whether the employee has executed a signed release, which an employer will typically require in order to formalize the severance.

Employees that are employed in certain designated, federally regulated sectors (i.e., telecommunications, banks, airlines, etc.) are entitled to benefits as outlined in the Canadian Labour Code, which codifies a set of employer obligations upon terminating employees in the designated sector.  Many of the rights and obligations therein are similar to those enumerated in the Employment Standards Act.

If you have been terminated from your employment, consult with an experienced employment lawyer to determine if your employer has upheld its obligations on termination.

What is “Wrongful Dismissal”?

Many laypeople talk about being ‘wrongfully dismissed’ from their employment – without understanding what the legal concept of wrongful dismissal really is.

Employers have the right to terminate an employee, at any time, for any reason whatsoever if they are not alleging just cause for dismissal, so long as the employer provides the terminated employee with sufficient notice of termination, or payment in lieu thereof.

The Employment Standards Act sets out the statutory minimum requirements that an employer must comply with upon the termination of an employee in Ontario. There is a presumption at law, absent an express clause in an employment contract restricting the amount of termination pay, that an employee is entitled to ‘common law’ notice pay, in addition to the statutory minimums as governed by the ESA.

Reasonable notice at common law is governed by precedent cases and requires a fact-specific inquiry – there are no hard-and-fast rules to determine the length of reasonable notice; however, one-month per year worked is a rule-of-thumb often employed in Ontario. Accordingly, a claim for ‘wrongful dismissal’ is the basis for an allegation that the employer has not provided sufficient severance upon termination, and the employee is seeking damages a result.