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Can Employers Fire Employees Without Paying Severance?

In light of the difficult economic circumstances surrounding COVID-19, some Ontario employers may be considering whether they should fire employees to cut costs. While it may seem cost-effective to terminate employees, employers could be exposing themselves to paying out large sums in severance to those employees and opening themselves to substantial legal fees. 

What does “Severance” Really Mean? 

Severance is commonly used interchangeably with separation or termination pay but actually refers to the entirety of an employee’s legal entitlements upon the termination of their employment without cause. This can include everything from the employee’s minimum entitlements under the Ontario Employment Standards Act, the common law, and any other contractual entitlements agreed to between the employer and employee. 

When Do Employers Owe Employees Severance?

When an employer terminates an employee through no fault of their own, it is a termination without cause. This can include circumstances of economic difficulty where an employer must terminate employees to stay fiscally afloat, or where an employee’s position is being eliminated. 

Upon termination without cause, an employee would be immediately entitled to their statutory entitlements in Ontario, which must be paid out to them on a timely basis. Regardless of whether an employee is negotiating their right to additional common law, contractual or other entitlements with their employer, an employer cannot withhold the employee’s statutory entitlements. 

When Don’t Employers Owe Employees Severance? 

In rare circumstances, employers do not owe an employee severance for termination. The most common scenarios are when an employer has just-cause for an employee’s termination and when the employee is terminated while on probation. 

If an employer meets the high threshold of establishing just-cause at common law, an employee would only be entitled to their statutory entitlements for termination. However, if an employer can demonstrate that an employee’s conduct reached the even higher threshold of just-cause for termination under the Ontario Employment Standards Act, an employee would also not be entitled to their minimum statutory entitlements. 

The Courts do not take kindly towards employers who dishonestly allege just-cause for an employee’s termination to avoid paying severance and will award damages in addition to what the employee is entitled to for termination without cause against such employers.

The other common scenario where an employee is not owed severance in Ontario occurs when they are terminated while on probation. The employer is however expected to provide the employee a “fair and reasonable opportunity” to demonstrate their suitability for the role. 

Given the complexity and risk involved in terminating employees, employers should consult an employment lawyer to avoid common and costly pitfalls. 

Contact Us

If you are an employer who is seeking information about proper dismissals, or an employee who has been dismissed, our team of experienced workplace lawyers at Achkar Law can help. Contact us by phone toll-free at1 (800)771-7882 or email us at [email protected] and we would be happy to assist.

If you are a small or medium-sized company looking for full-service support, visit our CLO program page for our strategic solutions.

Disclaimer: This blog is not intended to serve as or should be construed as legal advice and is only to provide general information. It is in no way particular to your case and should not be relied on in any way. No portion or use of this blog will establish a lawyer-client relationship with the author or any related party. Should you require legal advice for your particular situation, fill out the contact form, call (800) 771-7882 or email [email protected]