By: Sean O’Donnell

These blog posts are meant to provide educational content and are not to be taken as legal advice.

 

Severance Pay in Ontario – What You Need To Know

If you have recently been dismissed from a job in Ontario, you may be entitled to severance pay, which is meant to compensate employees for losses such as seniority and vacation entitlements. 

The rules surrounding severance pay in Ontario are set out in the Employment Standards Act (ESA). This blog post is meant to provide you with insight into Severance Pay in Ontario. Here’s the facts:

What is Severance Pay?

Severance pay is pay given to long-standing employees who are dismissed from their jobs for the following reasons:

• Dismissed from their job absent of misconduct;
• “Constructively” dismissed;
• Laid off for 35 weeks (does not have to be consecutive) in a 52 week period; and
• Laid off due to the business closing

In addition, employees who provide two weeks’ written notice of resignation after the employer has issued a termination notice (within the statutory notice period) are also included.

Who Qualifies for Severance Pay in Ontario?

If you have been employed with a company for at least five years, and your employer either pays annual wages in excess of $2.5 million, or will be cutting the business back and at least 50 people will be losing their jobs in a 6 month period, you may qualify for severance pay.

The Ministry of Labour has an online severance entitlement tool to help you determine if you qualify.

Are There Exemptions?

Yes! 

There are several reasons why you may meet the above criteria but are not entitled to severance. Exemptions can be tricky and therefore, it is a good idea to consult with an employment lawyer. You can also call the Employment Standards Information Centre at 1-800-531-555. 

A few examples of situations where you will not be entitled to receive severance pay include:

• When an employee has refused an offer of  “reasonable alternative employment”; 
• When a business is forced to closed due to a strike; and
• When the employee is guilty of wilful misconduct, disobedience or wilful neglect of duty.

How Much Severance Pay Are You Entitled To?

The basic calculation is that for every year worked, you will get one week’s pay to a maximum of 26 weeks. 

The Ministry of Labour has an online severance pay calculator to help you determine how much you will qualify for. 

When Will Severance be Paid?

If you are entitled to severance pay, the employer must pay you by the later of 7 days after your job ends, or your next regular payday.

If you agree in writing or the employer applies to the Director of Employment Standards at the Ministry of Labour and the Director approves, they can pay you in smaller payments or installments. However, if they miss a payment, they must provide the rest of your severance pay immediately. 

The employer must give you all of your severance pay within 3 years. If they fail to follow these rules you can make a claim to the Ministry of Labour.

Bear in mind that you should always consult with an employment lawyer to determine if you are entitled to common law reasonable notice, which exceeds the minimum entitlements, such as severance pay, under the ESA.

For further information about severance pay, please contact us.