Termination Pay in Ontario: ExplainedIan
An unexpected termination can be a difficult time for any employee. A key aspect of employment termination is understanding the complexities of termination pay, which can be challenging for both employers and employees. This article seeks to clarify the rules for termination pay in Ontario, ensuring you are well-informed about your rights and responsibilities.
What Establishes Termination of Employment?
Termination pay comes into play when an employer decides to end an individual’s employment.
The Employment Standards Act, 2000 (ESA) defines termination as situations including:
- An employer dismissing an employee, inclusive of circumstances stemming from employer bankruptcy or insolvency.
- An employee faces a constructive dismissal, leading them to resign within a reasonable duration.
- An employee is laid off for a longer term than a temporary layoff.
When terminating an employee without cause, an employer is not required to specify the reason for termination. There are instances where termination is impermissible. For instance, employers are prohibited from terminating or penalizing an employee if the underlying reason involves the employee exercising their rights under the ESA or making inquiries pertaining to it. An employer also cannot terminate an employee on any of the protected grounds under the Human Rights Code in Ontario.
Who Qualifies for Termination Pay or Notice?
If employees suddenly lose their job, notice period pay can help them manage their finances. An employee terminated without cause or constructively dismissed may be entitled to their ESA minimums, and depending on the terms of their contract, also common law reasonable notice period.
An employer can provide termination pay through working notice, pay in lieu of notice, or a combination of both. However, not everyone will be entitled to these benefits. Under the ESA, those who have worked less than three months are not entitled to statutory notice period pay. There are special rules for certain industries, such as those working in construction.
It’s also important to know the difference between termination pay and severance pay. Termination pay refers to the entitlement to notice period pay for employees fired without cause, while the entitlement to severance may be granted to longer-term workers and depends on specific rules under the ESA.
It’s crucial to speak to one of our employment lawyers as we can help you understand your rights and entitlements to termination pay.
How Is Termination Pay in Ontario Calculated
Under the ESA, employees who work a minimum of 3 months are entitled to one week of notice period pay for every year of service completed, up to 8 weeks. These are known as statutory minimum entitlements.
Employees with more than three months but less than one year of service can receive up to one week of termination pay. Employees with one to three years of service may be entitled to two weeks of termination pay. The entitlement to termination pay increases by one week for every additional year of service, up to eight weeks for eight years or more of service.
Common law reasonable notice period pay is calculated using the Bardal factors, including:
- The nature and character of the employment;
- Age of the employee;
- Length of service; and
- The likelihood of securing comparable employment.
It is not an exact science, and each case depends on the specific situation. Courts generally award up to 24 months of common law reasonable notice period pay.
If you are an employee who has been terminated or an employer considering terminating an employee, it is best to contact an employment lawyer as early as possible. An employment lawyer can help you understand your rights and obligations, and advise you on the best course of action.
Understanding the complexities of employment termination is essential for both employers and employees in Ontario. The ESA provides statutory minimums that employees who are terminated without cause or constructively dismissed may be entitled to. Some employees may be entitled to common law reasonable notice period.
Terminating a working relationship should be approached with clarity, fairness, and due diligence. Whether you’re an employer seeking to make informed decisions or an employee aiming to grasp your entitlements, it’s always crucial to consult with specialized employment lawyers to navigate these complexities effectively.