Fired Without Severance! Can It Happen?

Fired Without Severance! Can It Happen?

In today’s challenging economic climate, some Ontario employers may contemplate the necessity of terminating employees as a means to reduce operational costs. While this approach may appear as a cost-effective solution, it’s vital for employers to fully understand the potential implications of such actions. Termination may expose employers to significant severance obligations, entailing substantial financial commitments and legal complexities. In this article, we delve into the important legal considerations and consequences of employee termination in Ontario, shedding light on the factors that every employer should carefully weigh.

Severance Pay: What Does It Really Mean

When we talk about “severance,” it often gets used interchangeably with terms like separation pay or termination pay. However, it encompasses much more than a simple payout when an employee’s job ends without a specific cause. Severance pay comprises the full scope of an employee’s legal entitlements in the event of employment termination. This encompasses a range of elements, including the employee’s minimum rights as per the Ontario Employment Standards Act, the principles of common law, and any other contractual entitlements mutually agreed upon by the employer and the employee. In this section, we’ll delve deeper into what severance pay entails and the critical aspects you should be aware of as an employer or an employee.

Severance: When Do Employers Owe It To Employees

There often comes a time when an employer has to let go of an employee through no fault of the employee’s own. This scenario is known as a “termination without cause.” It can encompass various circumstances, such as economic hardships forcing the employer to downsize to remain financially viable or situations where an employee’s role is no longer required.

Severance Entitlements

In the event of a termination without cause, employees become immediately eligible for their statutory entitlements in Ontario. These statutory entitlements are mandated by employment laws and must be disbursed to the employee promptly. These entitlements form the foundation of the severance package, ensuring that employees receive their due compensation.

Statutory Entitlements

Statutory entitlements in the context of employment termination in Ontario encompass various elements that terminated employees are legally entitled to receive. These entitlements are mandated by the Ontario Employment Standards Act and provide the baseline rights and benefits that employees should receive. Here’s a breakdown of the key statutory entitlements:

  • Notice of Termination: Employees are entitled to notice of termination or pay in lieu of notice. The notice period or the amount of pay depends on the employee’s length of service with the employer. It’s designed to provide employees with time to seek alternative employment.
  • Severance Pay: Severance pay is applicable to employees who have worked for an employer for at least five years and are terminated in a group termination or mass layoff situation. It provides additional compensation beyond the notice period, calculated based on the employee’s years of service.
  • Vacation Pay: Employees are entitled to any accrued and unpaid vacation pay up to the date of termination.
  • Unpaid Wages: Any unpaid wages, including regular wages, overtime pay, or any other forms of compensation, should be provided to the employee.
  • Benefits Continuation: In some cases, terminated employees may have the right to continue receiving certain employment benefits, such as health and dental coverage, for a specified period after termination.
  • Pension Contributions: If the employer provides a pension plan, the employee’s rights related to pension contributions should be addressed as per the Employment Standards Act.
  • Statutory Holidays: Employees are entitled to pay for any statutory holidays that fall within the notice period.

These statutory entitlements serve as the minimum requirements under Ontario employment law. However, employees and employers can agree to more favorable terms through employment contracts or negotiations. It’s important to note that the specific entitlements and their calculation may vary based on factors like the employee’s length of service, the reason for termination, and the terms outlined in any existing employment contracts.

Understanding these statutory entitlements is crucial for both employers and employees to ensure that employment terminations are handled in compliance with Ontario’s employment standards and that employees receive their due compensation.

When Employers May Not Owe Severance to Employees

In specific circumstances, employers are not obligated to provide severance pay to terminated employees. These scenarios typically arise when there are justifiable reasons for the employee’s termination or when the termination occurs during the probationary period.

Termination with Just Cause: If an employer can prove that they had just cause for terminating an employee according to common law standards, the employee is entitled only to their statutory entitlements for termination. However, if the employer can demonstrate that the employee’s actions meet the even more stringent criteria for just cause under the Ontario Employment Standards Act, the employee may not receive their minimum statutory entitlements. It’s essential to note that dishonestly alleging just cause to avoid paying severance can lead to legal consequences, including additional damages awarded to the employee by the courts.

Probationary Period Termination: Another situation where an employee may not be owed severance in Ontario is when they are terminated while still in their probationary period. Employers are expected to provide a “fair and reasonable opportunity” to the employee to demonstrate their suitability for the role during this period.

Navigating these legal nuances can be complex and poses potential risks for employers. To avoid common and costly pitfalls associated with employee terminations, it’s advisable for employers to seek guidance from a severance lawyer. An experienced legal professional can help employers make informed decisions, ensure compliance with employment standards, and mitigate legal risks in the termination process.

Related Reading

Severance Pay in Ontario: What Makes a Good Offer?

EI and Severance Pay In Ontario

Salary Continuance vs Lump Sum Severance

Is Severance Pay Taxable in Ontario

Contact Achkar Law

If you are an employer who is seeking information about proper dismissals, or an employee who has been dismissed, our team of experienced severance lawyers at Achkar Law can help.

Contact us by phone toll-free at 1 (800) 771-7882 or email us at [email protected] and we would be happy to assist.