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Can My Employer Deny Severance Pay In Canada

An employee terminated without cause is entitled to termination pay and, in some scenarios, severance pay. We often see these two terms used in the wrong context by employers and employees. Understanding the difference between termination pay and severance pay is essential before commencing formal litigation.

What is Termination Pay?

Termination pay can be paid to a dismissed employee in place of the required notice of termination. If there is a written employment agreement between the employer and employee, the amount of notice the employee will likely be entitled to would be set out in the agreement. Usually, if a contract is in place, the employer will limit this notice based on the Employment Standards Act (ESA), which could be a week per year of service.

If there is no contract in place, or if the contract is unenforceable, the employee will likely be entitled to common law notice pay, which could be up to a month per year of service.

What is Severance Pay?

The ESA entitles a dismissed employee to severance pay if:

  • the employer employed the employee for five years or more;
  • the employer has a payroll of $2.5 million or more; and
  • the employee is one of fifty employees dismissed within a six-month period.

This is further outlined in Section 64 of the ESA, which states:

64 (1) An employer who severs an employment relationship with an employee shall pay severance pay to the employee if the employee was employed by the employer for five years or more and,

(a) the severance occurred because of a permanent discontinuance of all or part of the employer’s business at an establishment, and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or

(b) the employer has a payroll of $2.5 million or more.

Section 65 of the ESA outlines how severance pay would be calculated:

65 (1) Severance pay under this section shall be calculated by multiplying the employee’s regular wages for a regular workweek by the sum of,

(a) the number of years of employment the employee has completed; and

(b) the number of months of employment not included in clause (a) that the employee has completed, divided by 12.  2000, c. 41, s. 65 (1).

The ESA further outlines that the maximum amount of severance pay that can be paid to an employee is 26 weeks.

Can My Employer Deny Paying Severance to Me?

Based on the above clauses, if you are an employee who:

  • worked for five or more years with your employer;
  • your employer meets the payroll requirements of section 64 of the ESA; and
  • the employee is one of fifty employees dismissed within a six-month period

then your employer cannot deny your severance pay to you, which is statutorily guaranteed.

If your employer denies you severance pay or tries to pay you severance in lieu of your notice pay, do not accept or sign any agreement. Speak to an experienced employment lawyer at Achkar Law right away about your situation.

Contact Us 

If you are an employer facing a wrongful dismissal claim or an employee who believes you’ve been wrongfully dismissed, our team of experienced employment and human rights 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.

If you are a small or medium-sized company looking for full-service support with a same-day response, 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]