What is Termination Pay in Ontario?

The average worker in Ontario knows that when their employer terminates their employment without cause, that they are entitled to a few weeks’ pay, which they refer to as “severance pay.”

However, many are unaware of what severance pay encompasses and what their entitlements are. To understand your potential severance package, you must first know the answer to the question, what is termination pay in Ontario? Luckily, you’re in the right place.

If you’ve been terminated recently, are in the process of negotiating a severance agreement with your employer, or have questions regarding your rights in the workplace, you should always seek the advice of an Ontario employment lawyer. If you’re out of work, the last thing you need is to miss out on money that you need to keep you financially afloat.

It’s important to note that this information does not apply to unionized or federally-regulated workers. Federal employees must follow the rules outlined in the Canada Labour Code, while severance pay rules for unionized employees are outlined in their collective agreements.

So What is Termination Pay? 

If your employer terminates your employment without cause, they must notify you before your employment officially ends, provided that you’ve been with them for at least three months. You have a legal right to receive notice of termination or pay in lieu of notice before you are officially dismissed.

According to the Employment Standards Act, the minimum notice required is one week for each full year worked with the employer, up to a maximum of eight weeks. If you signed an employment contract that provides more notice, however, that is your minimum entitlement.

If you didn’t sign an employment contract, or if your contract doesn’t have a legally enforceable termination clause, your notice period is determined by common law, which establishes a reasonable notice period based on how long it should take you to find a comparable job.

Common law notice periods are generally much longer than the legal minimums. Many employers choose to pay the employee instead of providing notice, which is the money you would have received during the notice period, including bonuses, commissions, RRSP contributions, benefits, etc. This payment is referred to as termination pay.

Speak with an employment lawyer if you’ve recently been terminated or are about to be terminated to ensure that you receive the correct amount of notice and/or termination pay.

What is Severance Pay According to the Law?

Legally, if you’ve been employed by your employer for at least five years, and your employer has a global payroll of at least $2.5 million, or they terminated 50 or more employees within a six-month period due to a complete or partial closure and your employer “severed” your employment, you’re entitled to a minimum of one week’s pay for every year of service, up to a maximum of 26 weeks. This is in addition to your termination pay.

You may be entitled to severance pay if your employer:

OR

Your employer provides you with notice of termination, but you give two weeks’ notice and resign during the notice period.

As with termination pay, it’s essential to consult with an employment lawyer to ensure that you receive the correct amount of severance pay.