Severance Pay & Termination Package Laws in Ottawa

Our Ottawa employment lawyers assist clients who had been terminated from employment in their claims for termination and severance pay.  If you are a non-unionized employee in Ontario and have been terminated or dismissed without cause, you are generally entitled to notice of termination or pay in lieu of notice and possibly severance pay.

For employees under Ontario jurisdiction, the Employment Standards Act (“ESA”) sets out the minimum standards that apply when an employee has been terminated. This includes minimum entitlements regarding the amount of notice an employee is entitled to, the amount of “termination pay” (pay in lieu of notice), and whether an employee is entitled to “severance pay”.

An employment contract can provide for greater amounts of notice, termination pay, or severance pay than is required under the ESA (although parties are not allowed to contract out of the minimum statutory requirements).

The first place to look to determine the amount of notice, termination pay or severance pay an employee is entitled to is the employment contract.  An employment lawyer will be able to advise you on whether these provisions of the contract are valid and enforceable.

Where the employment contract is silent, or there is no written agreement, the common law often provides for a greater amount of notice, or pay in lieu, than required under the ESA.

Termination Pay Under the ESA

In Ontario, under the ESA, employees who have been employed for a period of three months or longer are entitled to notice of termination or payment in lieu of notice (also known as “termination pay”). The length of notice required is based on the length of employment: from one week of notice for persons employed less than one year up to eight weeks of notice for persons employed eight years or longer.  If an employer does not provide notice, then the employer must provide termination pay equal to the amount of salary the employee would have received under the notice period.

During the notice period, an employer must continue to make contributions to any benefit plans.

Ontario regulation 288/01 lists the employees who are not entitled to notice or termination pay. According to subsection 2(1) of the regulation, these include an employee:

• whose employment is to terminate on expiry of a term or completion of a specific task;
• who is temporarily laid off;
• who is guilty of wilful misconduct, disobedience, or non-trivial wilful neglect of duty that has not been condoned by the employer;
• whose contract is impossible to perform or frustrated due to an unforeseeable event;
• who is terminated after refusing offer of reasonable alternative employment with the employer;
• who is terminated after refusing alternative employment through a seniority system;
• who is on temporary layoff and does not return to work within reasonable time after being requested to do so;
• who is terminated during or as a result of a strike or lock-out;
• who works in construction;
• who is terminated upon reaching age of retirement, only if termination does not contravene the Human Rights Code; and
• who builds, alters, repairs certain ships.

Severance Pay Under the ESA

Under the ESA, some employees are entitled to “severance pay”, which is different than “termination pay”.  Severance occurs when:

• the employer dismisses, refuses, or is unable to continue to employ the employee;
• the employee is constructively dismissed and resigns within a reasonable period;
• the employee is laid off for 35 weeks or more during a 52-week period;
• the employee is laid off because of a permanent discontinue of the business at an establishment; and
• the employee is given written notice of termination, the employee gives at least two weeks’ notice of resignation, and the resignation is to take effect during the statutory notice period

 An employee will be entitled to receive severance pay if the employee was employed at least five years, the employer has a payroll of at least $2.5 million dollars, and the employee is one of at least 50 employees whose was severed within 6 months as a result of a permanent discontinuance of the employer’s business at an establishment.

Severance pay is calculated by multiplying the employee’s weekly wages by his or her number of complete years of employment, and the number of complete months of employment divided by 12, to a maximum of 26 weeks.

Certain employees are not entitled to severance. These include an employee:

• whose employment is severed due to the permanent discontinuance of all or part of the employer’s business as a result of a strike;
• whose employment contract is impossible to perform or has been frustrated;
• who, after having their employment severed, retires and receives a full pension (excluding CPP);
• who refused reasonable alternative employment;
• who refused reasonable alternative employment through a seniority system;
• who is guilty of wilful misconduct, disobedience, or non-trivial wilful neglect of duty not condoned by the employer;
• who works in construction; and
• who is engaged in on-site maintenance of buildings, structures, roads, sewers, pipelines, mains, tunnels or other works.

The Employment Contract and Common Law

If there is no written employment contract, or it is silent on the issue of notice, payment in lieu, or severance, the employee may be entitled to notice or termination pay under the common law in an amount greater than the minimums set out under the ESA.  The courts take a case-by-case approach and look at a number of factors to determine what amount of notice is reasonable in the situation.

Have You Been Terminated in Ottawa?

If you have been terminated from your employment and want to what compensation you are entitled to, contact one of our lawyers today for a consultation by completing our online contact form, or calling our office at (613) 518-2416.