Termination Pay Ontario: What You're Entitled To (With Examples)

As an employment lawyer who has met with hundreds of terminated employees, the first question I get asked when meeting with clients is:

‍“How much severance pay am I entitled to when terminated without cause in Ontario?”

It’s a critical question, and the answer is typically more complex than what the average severance calculator on the web can provide. Given you're doing your research during a very stressful time, after being terminated without cause or wrongfully terminated, I've done my best to eliminate that complexity and clearly outline what to consider when evaluating your termination pay in Ontario (with examples).

When evaluating termination or severance pay for provincially regulated employees in Ontario, you need to consider three key components:

1. Your minimums as mandated by the Employment Standards Act, 2000 (ESA) of Ontario
2. Whether or not you have an employment contract
3. Common law entitlements and your particular circumstances – age, length of service, position,  availability of comparable employment, amongst others

Many employees focus solely on the minimum notice and severance pay required by the ESA. However, most situations require a more detailed analysis – especially if you want to maximize your termination pay. That’s why it’s critical to discuss your case with an employment lawyer before signing any termination papers.

Note: This information does not apply to unionized employees, whose rights are governed by collective agreements. Additionally, every situation is unique, so please consult with an employment lawyer to discuss your specific case. This post includes legal information but is not legal advice.

1. Your Minimums as Mandated by the Employment Standards Act, 2000 (ESA) of Ontario

The Employment Standards Act, 2000 (ESA) sets out the minimum entitlements for employees terminated in Ontario. These include notice of termination or pay in lieu of notice, vacation pay, and benefits continuation. To begin, let's define what each of these mean and how they could apply to your situation.

Notice of Termination (aka Working Notice)

Under the Employment Standards Act (ESA), if you have been employed for at least three months and are terminated without cause, your employer must provide you with either notice of termination or pay in lieu of notice. Notice of termination (also known as working notice) means you are informed of your employment's end date and continue working through the notice period.

The required notice period as mandated by the ESA is based on your length of service:

• 1 week of notice per year of service, up to a maximum of 8 weeks.

This means that even if you’ve worked for your employer for more than 8 years, the ESA limits the required notice (or pay in lieu of notice) to 8 weeks.

It's important to note that the ESA sets minimum standards. Depending on your employment contract or common law entitlements, you may be entitled to a longer notice period.

In our experience, with the clients we serve, pay in lieu of notice is more common than notice of termination.

Pay in Lieu of Notice

If an employer in Ontario decides not to provide you with notice of termination (also known as working notice), they must compensate you with pay in lieu of notice. This means you are paid for the notice period without having to work during that time.

Pay in lieu of notice must equal what you would have earned if you had worked through the notice period, including:

• Wages
• Bonuses
• Commissions
• Vacation pay
• Benefits continuation

To qualify for pay in lieu of notice, you must have been employed for at least three months. While there is no cap on the dollar amount (as it depends on your earnings), the notice period under the ESA is capped at 8 weeks.

Notice period entitlements based on your length of service:

• At least 3 months, but less than 1 year: 1 week of notice
• 1 year but less than 3 years: 2 weeks of notice
• 3 years but less than 4 years: 3 weeks of notice
• 4 years but less than 5 years: 4 weeks of notice
• 5 years but less than 6 years: 5 weeks of notice
• 6 years but less than 7 years: 6 weeks of notice
• 7 years but less than 8 years: 7 weeks of notice
• 8 years or more: 8 weeks of notice (maximum)

Important to Note:
An employer in Ontario cannot withhold your minimum entitlements under the ESA except in very limited circumstances (such as willful misconduct). You should never be required to sign a release to receive your minimum ESA entitlements.

Severance Pay

Severance pay is distinct from pay in lieu of notice. To be eligible for severance pay in Ontario, you must have worked for your employer for at least 5 years and meet one of the following criteria:

• Your employer’s payroll exceeds $2.5 million, or
• 50 or more employees are terminated within a 6-month period (mass layoff)

Severance pay is calculated as 1 week of pay per year of service, up to a maximum of 26 weeks.

Unlike pay in lieu of notice, severance pay typically does not include additional amounts for vacation pay, bonuses, or benefits continuation. Instead, it is a monetary payment designed to compensate long-term employees for the loss of job security and seniority.

It’s advisable to consult with an employment lawyer to understand your full entitlements based on your specific circumstances.

Frequently Asked Questions About Notice of Termination, Pay In Lieu of Notice, & Severance Pay

"Can my employer give me working notice instead of pay in lieu?"

• Yes. If your employer provides proper working notice, they do not have to provide pay in lieu of notice. However, if you are entitled to severance pay under the ESA, your employer must still pay that in addition to the working notice.

"What’s the difference between pay in lieu of notice and severance pay?"

• Pay in lieu of notice compensates you for the notice period your employer didn’t give. Severance pay is additional compensation owed in specific cases, such as when the Ontario employer has a large payroll or is conducting a mass layoff, and you've been working with your employer for at least 5 years.

"Can I get both pay in lieu of notice and severance pay?"

• Yes, you can receive both pay in lieu of notice and severance pay if you meet the requirements for each. These are not mutually exclusive, meaning you can receive both payments if applicable.

Here are Two Examples of ESA Pay in Lieu of Notice and Severance Entitlements:

Example One: Part-time Employee in Ontario Working with Employer for 5 Years

• Employment Status: Part-time
• Years of Service: 5 years
• Termination Pay Entitlement: The employee is entitled to 5 weeks of notice or 5 weeks of pay in lieu of notice. As a part-time employee, if the employee has a variable weekly income, the pay in lieu of notice would be based on the employee’s average wages over the last 12 weeks.
• Vacation Pay: The employee is entitled to 4% of total wages for any unused vacation time.
• Benefits Continuation: Any benefits must continue for the 5-week notice period.

Example Two: Full-time Employee Working for Large Employer for 15 Years

• Employment Status: Full-time
• Years of Service: 15 years
• Termination Pay Entitlement: Under the ESA, this employee is entitled to 8 weeks of notice or 8 weeks of pay in lieu of notice.
• Severance Pay: Since the employee worked for a large employer with a payroll of over $2.5 million, and had 15 years of service, they would be entitled to 15 weeks of severance pay on top of the 8 weeks of termination pay.
• Vacation Pay: The employee is entitled to 6% vacation pay.
• Benefits Continuation: The employer must continue any benefits for the 8-week notice period.

2. Whether or Not You Have an Employment Contract

One of the key considerations when evaluating your termination pay is whether or not you have a written employment contract. If you do, the terms of your contract may impact what you’re owed. Some contracts include termination clauses that limit your entitlements to the ESA minimums, while others are less restrictive or otherwise fail to effectively limit your entitlements.

It’s essential to have your employment contract reviewed by an employment lawyer, as not all termination clauses are enforceable. If the clause doesn’t comply with the ESA or contains other legal flaws, you may still be entitled to common law notice, which provides more generous compensation than the ESA minimums.

3. Common Law Notice

If you don’t have an enforceable termination clause in your contract, or if you don’t have a contract at all, you will be entitled to common law reasonable notice. This is a lengthier notice period determined by a judge. When determining the length of common law notice an employee is entitled to, a court will look at the employee’s particular circumstances to decide how long it should take them to find new work.  

The circumstances include:

• Your age: Older employees may have a harder time finding new employment, leading to higher compensation.
• Your length of service: The longer you’ve worked for your employer, the more notice or severance you may be entitled to.
• Your position: Higher-level or more specialized roles often warrant more notice.
• The availability of comparable employment: If it’s difficult to find a similar job in your field, you may be entitled to a longer notice period.

This list is not exhaustive. Any circumstance which may impact your job search can be considered by a court in determining your notice period. For example, in the past, courts have considered an employee’s pregnancy and poor economy and job markets in making a common law notice assessment. 

These factors come from the landmark Bardal v. Globe & Mail Ltd. case and are regularly used by Ontario courts to calculate severance beyond ESA minimums.

Common Law Example: Part-time Employee with 5 Years of Service as an Accountant (55 Years Old)

• Employment Status: Part-time Accountant
• Years of Service: 5 years
• Bardal Factors:
  • Age: The employee is 55 years old, which may make it more difficult to find a comparable job, especially in a specialized role like accounting.
  • Length of Service: 5 years, showing moderate loyalty to the company.
  • Position: Accountant – a skilled position, but with reasonable availability, though it might be harder to find employment at an older age.
  • Availability of Comparable Employment: Finding a new job at age 55 may take longer due to age-related challenges in the hiring process.‍
• Minimum Notice of Termination Under ESA: 5 weeks of notice or pay in lieu of notice.‍
• Severance Under Bardal Factors: Given the Bardal factors, particularly the employee’s age (55 years old), a part-time accountant with 5 years of service could expect 4 to 6 months of notice under common law.

Important Consideration: Human Rights

In some cases, your termination may involve a violation of your human rights, which can lead to additional entitlements.

Under Ontario’s Human Rights Code, employees are protected from discrimination based on characteristics that include:

• Race
• Sex (including sexual harassment and pregnancy)
• Gender
• Age
• Disability
• Sexual orientation
• Family status

If you believe your termination was linked to any of these protected grounds, it may have been discriminatory.  

Frequently Asked Questions

"What should I do if I believe my termination was discriminatory?"

• If you suspect your termination involved discrimination, talk to a lawyer about your options. These include filing an application with the Human Rights Tribunal of Ontario for general damages, lost wages, and other remedies to make you whole, or including a request for damages under the Human Rights Code in a wrongful dismissal claim. There are costs and benefits to each route and a lawyer can help you decide which option works best for your interests. 

How This Applies to You: A Step-by-Step Guide To Termination Pay In Ontario

After reading the above, you might be wondering how this all applies to your situation – let’s break it down step by step. Here’s how to assess your circumstance and determine what you may be entitled to:

• Step 1: Identify your length of service.
  Start by calculating how long you’ve worked for your employer. This will help you understand your ESA minimums.
• Step 2: Confirm if you and your employer meet Ontario's severance eligibility
  If you've been working for your employer for at least 5 years, their payroll exceeds $2.5 million, or 50 or more employees were terminated within a 6-month period (mass layoff), you're likely entitled to severance – 1 week of pay for every year of service, up to 26 weeks.
  
• Step 3: Review your employment contract.
  Does your contract limit you to ESA minimums, or could you be entitled to more under common law? (an employment lawyer can help here)
• Step 4: Assess your unique circumstances.
  Factors like your age, role, and job market conditions could impact your common law notice entitlements.
• Step 5: Consult an employment lawyer.
  Before signing anything, it’s essential to get professional advice to maximize your severance.

The Takeaway: Speak With a Lawyer Before Signing Anything

When you’re terminated in Ontario, it’s critical to understand that every situation is unique. Between the ESA minimums, your employment contract, the common law, and possible human rights considerations, there are multiple elements that could affect your severance.

Before signing any severance offer or termination documents, it’s crucial to consult with an employment lawyer. Many employees settle for less than they’re entitled to simply because they didn’t seek legal advice. 

If you’ve been terminated in Ontario and want to know your rights, Kompa Law is here to help. We specialize in employment law and can assist you in understanding and maximizing your severance entitlements. Request a callback to learn more.