The Difference Between a Termination and a Layoff Explained

By: Sean O’Donnell

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


The loss of a job and its consequences will have a significant impact on your life, whether it’s expected or not. The terms “termination” and “layoff” are often used interchangeably to describe an employer initiated job loss, however, they have significant differences legally so it is important to understand the difference between the two.

What is a Termination?

A termination occurs when an employer decides to end the employment of an employee.

According to the Employment Standards Act, 2000 (ESA) an employee is considered terminated if the employer:

  • dismisses or stops employing an employee, including where an employee is no longer employed due to the bankruptcy or insolvency of the employer;
  • “constructively” dismisses an employee and the employee resigns, in response, within a reasonable time; or
  • lays an employee off for a period that is longer than a “temporary layoff”.

If you have been employed longer than three continuous months, then the employer must give you at least one week of written notice for each year of employment, to a maximum of eight weeks.  If not, they must pay termination pay in lieu of notice- or a combination of the two. For example, they could give a two year employee one weeks’ notice plus one weeks’ termination pay.

If you have worked at the company for five years or more, and the employer has an annual payroll of $2.5 million or more, you will also be entitled to ESA severance pay.  The minimum set out by the ESA, relative to severance pay, is one week for every year worked with the company, to a maximum of twenty-six weeks.

What is a Layoff?

A layoff is when an employer temporarily reduces or stops the employee’s work without ending their employment contract. Layoffs often occur in seasonal work or when work slows down. With a layoff, there is an expectation that the employee will be called to work again in the future, although the employer is not obligated to provide a recall date.

According to the ESA a “temporary layoff” can last:

  1. not more than 13 weeks of layoff in any period of 20 consecutive weeks; or
  2. more than 13 weeks in any period of 20 consecutive weeks, but less than 35 weeks of layoff in any period of 52 consecutive weeks, where:
  • the employee continues to receive substantial payments from the employer; or
  • the employer continues to make payments for the benefit of the employee under a group or employee insurance plan (such as a medical or drug insurance plan) or a retirement or pension plan; or
  • the employee receives supplementary unemployment benefits; or
  • the employee would be entitled to receive supplementary unemployment benefits but is not receiving them because he or she is employed elsewhere; or
  • the employer recalls the employee to work within the time frame approved by the Ministry of Labour Director of Employment Standards; or
  • the employer recalls the employee within the time frame set out in an agreement with an employee who is not represented by a trade union; or
  1. A layoff longer than a layoff described in “b” where the employer recalls an employee who is represented by a trade union within the time set out in an agreement between the union and the employer.

If an employee is laid off for a period longer than set out above the employer is considered to have terminated employment, and generally the employee will be entitled to termination pay.

Further, the employer may violate the ESA where the employee does not agree in writing, in an employment contract, or otherwise, to being laid off.  Such situations are deemed to be terminations of employment.

So, What’s the Difference?

Essentially a termination is permanent, while a layoff is expected to be temporary.

Always bear in mind that the above entitlements are an employee’s minimum entitlements, and often they are entitled to common law reasonable notice, which can vastly exceed the ESA minimums. 

If you have been terminated or laid off and you feel the process was not properly handled by your employer, contact SJO Legal for a consultation today.