Employment Law for Business and Human Resources Professionals, 4e

CHAPTER 14
Termination and Severance Pay
Requirements Under the Employment
Standards Act

Copyright © 2019 Emond Publishing. All rights reserved.

 2

Introduction
• Under employment standards legislation, employees are entitled to receive
notice of termination or pay in lieu of notice
• This is meant to provide an employee with paid time to look for another
job
• The notice requirements of the ESA do not replace common law
requirements, but actions cannot be commenced under both
simultaneously
• In most situations, statutory termination requirements are modest
compared with common law requirements
• Generally speaking, only relatively senior employees or those with many
years of service choose to go to court to assert their common law
entitlement
Copyright © 2019 Emond Publishing. All rights reserved.
 3

Overview of ESA Termination Requirements

• Section 57 requires employers to provide dismissed

employees with between one and eight weeks’ notice of
termination
• While there are exceptions to this requirement, they are
limited
• Section 58 applies when an employer dismisses many
employees within a short period of time
• Sections 63 to 66 require employers to pay severance pay
in certain circumstances
Copyright © 2019 Emond Publishing. All rights reserved.
 4

Temporary Layoffs (Section 56)

• A temporary layoff is a layoff that lasts for a specified period of
time before employees are recalled
• An employer is not required to provide notice of a temporary
layoff, even if it offers no recall date
• An employee who retains recall rights and who is also entitled
to termination pay because of a layoff of 35 weeks or more may
either keep the recall rights and not receive payment at that time
or give up recall rights and receive the termination pay
immediately

Copyright © 2019 Emond Publishing. All rights reserved.

 5

Temporary Layoffs (Section 56)

• Under the ESA, a layoff is temporary in the following
circumstances:
• It lasts no more than 13 weeks in a period of 20 consecutive
weeks.
• It lasts more than 13 weeks in a period of 20 consecutive weeks
but lasts less than 35 weeks in any period of 52 consecutive
weeks, subject to certain stipulations.
• It lasts longer than 35 weeks in a 52-week period, the employee
is represented by a union, and the employer recalls the
employee within the time set out in an agreement between the
employer
Copyright and Allthe
© 2019 Emond Publishing. union.
rights reserved.
 6

Termination Notice or Pay in Lieu Requirements

• Termination occurs when an employer:

• Dismisses or stops employing the employee

• Lays the employee off for a period exceeding that of a temporary

layoff
• Constructively dismisses the employee, and the employee resigns in
response within a reasonable period
• Individual notice or pay in lieu of notice periods range from one to eight
weeks, depending on length of service
• An employer must continue paying the employee’s benefits during the
statutory notice period
Copyright © 2019 Emond Publishing. All rights reserved.
 7

Termination Notice or Pay in Lieu Requirements

• A termination notice must be in writing and must be delivered to the

employee in person or by mail, fax, or email
• When the terminated employee has bumping rights, the notice of
termination must be posted in the workplace
• The employer must uphold the terms of employment, including wages
and benefits, if the employee works during the notice period
• An employer may bring an employee back to work temporarily after the
termination date without affecting the original date of termination as
long as the recalled employee works within a 13-week period after the
termination date

Copyright © 2019 Emond Publishing. All rights reserved.

 8

Termination Notice or Pay in Lieu Requirements

• A mass termination occurs when an employer terminates 50 or more employees in

a period of four consecutive weeks
• Mass notice requirements range from 8 to 16 weeks, depending on the number
of people terminated
• In the event of a mass termination, an employer must notify the Director of
Employment Standards and post that notice in the workplace
• When terminated as part of a mass termination, employees are subject to special
notice requirements if they wish to leave before the end of the notice period

• They must give at least:

• one week’s written notice if they have been employed for less than two years,
or

• two weeks’ written notice if they have been employed for two years or more
Copyright © 2019 Emond Publishing. All rights reserved.
 9

Termination Notice or Pay in Lieu Requirements

• The mass termination requirements do not apply when the

employer is terminating 10 percent or less of its workforce
at an establishment and none of the terminations are
caused by the permanent discontinuance of part of the
employer’s business.

Copyright © 2019 Emond Publishing. All rights reserved.

 10

Termination Notice or Pay in Lieu Requirements

• In some situations, an employer is not required to give either notice or pay in lieu of notice
to a dismissed employee:

• Term or task employees, if hired for less than a year

• An employee on temporary layoff

• An employee who is guilty of wilful misconduct, disobedience, or non-trivial wilful

neglect of duty

• An employee who has refused an offer of reasonable alternative employment

• An employee who does not return from a temporary layoff within a reasonable time

• An employee who is terminated during or because of a strike or lockout

• Certain types of construction or shipbuilding employees

• When the employment contract is frustrated by an unforeseeable event

Copyright © 2019 Emond Publishing. All rights reserved.

 11

Severance Pay
• Severance pay is a one-time lump-sum payment that is made in addition to any
notice or pay in lieu of notice requirements
• It is only available to employees of five years’ or more service, and where the
employer’s payroll is at least $2.5 million
• A person’s employment can be severed in the same way as termination, with two
additions:
• When the employee is laid off because of the closure of an establishment

• In some cases, when the employee resigns after being terminated

• Many of the same exceptions apply as in the termination provisions, with some
differences, including:
• The employee retires on a full pension, excluding CPP benefits

• The employee is engaged in certain types of onsite maintenance

Copyright © 2019 Emond Publishing. All rights reserved.

 12

Severance Pay
• Severance pay can be found in sections 63 to 66 of the ESA and O. Reg. 288/01,
Section 9. It is only available when the employer either has an Ontario payroll of at
least $2.5 million or has severed the employment of 50 or more employees in a six-
month period because all or part of the business closed.
• A person’s employment is severed when the employer:

• Dismisses or stops employing the employee

• Constructively dismisses the employee, who resigns as a result

• Lays the employee off for 35 or more weeks out of 52

• Lays the employee off because of a permanent establishment closure

• Gives the employee written notice of termination, the person resigns after giving two
weeks’ written notice, and the resignation takes effect during the statutory notice
period

Copyright © 2019 Emond Publishing. All rights reserved.

 13

Severance Pay
• Statutory severance pay is calculated by multiplying the
employee’s regular wages for a regular workweek by the sum of:
• The number of completed years of employment, and

• The number of completed months of employment divided by 12 for a

year that is not completed

• Unless agreed otherwise, statutory severance payment must be

paid in a lump sum
• As with termination pay, an employee who both retains recall
rights and is entitled to severance pay must choose one
• The maximum amount of severance pay is 26 weeks’ pay.
Copyright © 2019 Emond Publishing. All rights reserved.
 14

When ESA Payments Must Be Made

• Employers must pay dismissed employees outstanding

wages, vacation pay, and termination and severance pay
no later than seven days after employment ends or on the
day that would have been the employee’s next payday,
whichever is later
• However, with the agreement of the employee or the
approval of the Director of Employment Standards, the
employer may make severance payments in installments
over a period of up to three years

Copyright © 2019 Emond Publishing. All rights reserved.

 15

Continuity of Employment
• Section 9 of the ESA addresses the effect of a
sale or transfer of an employer’s business to a
new owner
• An employee who continues to work after the sale
of his employer’s business will retain his rights and
length of service
• An exception to this rule arises if there is at least a
13-week gap in employment
Copyright © 2019 Emond Publishing. All rights reserved.