Employees often face significant uncertainty about their rights and entitlements when a company closes down in Ontario. In certain circumstances, employees may be entitled to severance pay, termination pay, unpaid wages, and other compensation. However, understanding the Employment Standards Act, 2000 (ESA) and other applicable legal frameworks can be challenging.

Achkar Law helps employees understand and assert their rights when a company shuts down. Whether you need assistance reviewing your employment contract, calculating severance pay, or recovering unpaid wages, legal guidance can help ensure you receive what you may be entitled to under Ontario law.

Understanding Employee Rights When a Company Closes Down

In Ontario, employment standards legislation protects employees when a company ceases operations. Depending on the circumstances, employees may be entitled to notice of termination, pay in lieu of notice, severance pay, and compensation for unpaid wages.

When an employer shuts down operations, they must generally provide written notice of termination or pay instead of notice. The required notice depends on factors such as the employee’s length of service and the terms of the employment contract. Employees should carefully review their contracts to determine their entitlements under both statute and common law.

It is important to understand the distinction between termination pay and severance pay. Termination pay provides income during the notice period, while severance pay is intended to compensate long-serving employees whose employment is severed. Additionally, any unpaid wages—such as regular pay or vacation pay—must be paid upon termination. Consulting an employment lawyer can help ensure proper compensation.

Employment Contract and Termination

Employment contracts often contain terms relating to notice and termination. Reviewing these contracts is essential for understanding what is owed when a company closes.

Even if an employment contract includes termination terms, those terms must meet or exceed the minimum standards in the ESA. If not, the statutory minimums will apply. In some cases, common law entitlements may be significantly greater than those outlined in the contract.

Legal advice can clarify the enforceability of termination clauses and ensure employees are aware of their rights. This may include assistance calculating notice periods, pay instead of notice, and identifying potential claims for wrongful dismissal.

Severance Pay and Termination Pay in Ontario

Employees in Ontario may be entitled to termination pay, severance pay, or both. Termination pay compensates employees when they do not receive a working notice of termination. Severance pay is available in specific circumstances, such as when the employer has a payroll of $2.5 million or more, or when 50 or more employees are terminated within six months.

Severance pay under the ESA is calculated as one week per year of service, up to a maximum of 26 weeks. However, employees may also have common law entitlements that exceed ESA minimums.

Full entitlements may also include unpaid wages, vacation pay, and benefits. If these are not paid, legal action may be necessary. Employees should seek legal advice to ensure their severance and termination entitlements are properly calculated.

Layoffs and Bankruptcy

A temporary layoff in Ontario generally cannot exceed 13 weeks in any period of 20 consecutive weeks. In certain cases, the layoff can extend up to 35 weeks with continued benefits. If these conditions are not met, the layoff is deemed a termination, triggering entitlement to termination pay or notice.

If an employer becomes bankrupt, employees may be eligible for the federal Wage Earner Protection Program (WEPP), which provides compensation for unpaid wages, vacation pay, and termination or severance pay owed at the time of bankruptcy.

Employees should act quickly to understand their rights in these situations. Legal advice can help determine eligibility and guide the process of filing claims or pursuing further legal action.

Business Sale and Transfer

When a business is sold and continues to operate under new ownership, Ontario law generally treats the new employer as a continuation of the old one. This means employees who are rehired by the purchaser typically maintain their original service date.

If the new owner offers continued employment on substantially similar terms, employees may not be entitled to severance from the former employer. However, if an employee is not retained, they may be entitled to termination and severance pay based on their total length of service with the previous employer.

In complex transitions, legal advice is recommended to ensure fair treatment and appropriate compensation.

Unemployment Benefits for Ontario Workers

When a company closes down, many employees may qualify for Employment Insurance (EI) benefits. These benefits provide temporary income support while employees look for new work.

To qualify, employees must meet eligibility requirements, including working a minimum number of insurable hours within the previous 52 weeks. Applicants will need a Record of Employment (ROE) from the employer and must apply through Service Canada.

While EI provides short-term assistance, it may not replace the full value of severance or other entitlements under the ESA or common law.

Seeking Legal Advice

Understanding your rights during a company closure can be complex. Seeking legal advice helps ensure you do not miss out on compensation owed to you.

An employment lawyer can:

• Review your employment contract
• Assess your eligibility for severance, termination pay, or unpaid wages
• Advise on your rights in the case of layoffs or bankruptcy
• Assist with claims to the Ministry of Labour or civil court

Contact Achkar Law

If your employment has been affected by a company closure, contact Achkar Law. Our team assists clients with employment contract reviews, severance negotiations, unpaid wage claims, and wrongful dismissal matters across Ontario.

We can help you understand your legal rights and pursue the compensation you may be entitled to. Call us today for legal guidance.

Call toll-free: 1-800-771-7882 | Email: [email protected]