Not All Employees are Entitled to Severance Pay

A common misconception among both employers and employees is that anyone who is fired from his or her job in Ontario is entitled to severance pay; that simply is not the case. However, saying that a dismissed employee is not necessarily entitled to “severance” pay does not mean that the employee is not entitled to anything. What employees are entitled to varies.

As is explained in more detailed on this blog’s page explaining wrongful dismissal (see: What is Wrongful Dismissal) when people think of “severance” what they are actually thinking of is “notice.” “Notice” and “severance” are legal terms with defined meanings.

Pursuant to the Ontario Employment Standards Act, 2000 virtually all employees employed in Ontario are entitled to notice of termination of employment. (See section 54 of that law.)

Yet only certain, prescribed employees are entitled to “severance.” Pursuant to section 64 of the ESA, an employee is only entitled to “severance” 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. [On this point see: The Requirement to Pay Severance in Ontario - The Decision in Paquette c. Quadraspec Inc., 2014 ONCS 2431.]

If the employee meets those criteria, then the employee is entitled to a severance payment. Severance must be paid as money. While the employer may make the severance payments in instalments, that is true only if the Director of Employment Standards or the employee agrees. The instalment period cannot exceed three years, and if the employer misses an instalment payment, then the balance becomes due immediately. (ESA, s. 66)

If the employee is not entitled to “severance,” then, as mentioned, her or she is still likely entitled to “notice.”

Notice, unlike severance, does not have to be provided as money. Notice can be just that, notice. Under Ontario law employers are permitted to advise their employees that their employment will end on a future fixed date. Provided that sufficient notice is provided, a point often in issue in wrongful dismissal cases, nothing more is owed to the employee once that date arrives.

Employers can provide their dismissed employees with “pay in lieu of notice.” That is to say, instead of advising an employee that his or her employment will end on a fixed date in the future, employers can simply let the employee go on the date of termination, provided that the employer provides the employee with their pay until the end of the notice period (either in a lump sum or by way of salary continuance,) maintains their benefits’ entitlements, and otherwise complies with the law.

But, just because an employer may provide the dismissed employee with a payment in lieu of notice does not mean that the employer must provide the employee with such a payment. Notice can be provided by way of working notice, meaning that, for some employees, they will never receive a cash payment in consideration of their termination.

Takeaways for Employees with Labour Pains

Being fired is one of the worst things that can happen to someone. It produces a number of emotions, not the least of which being anger. If you have been fired from your job, whether for cause or not, it is likely best to seek legal advice before taking any decisions.

There are a number of factors that must be considered in deciding whether a dismissed employee has a wrongful dismissal case; whether the employee received “severance” is only one factor. All factors and options should be considered with the assistance of an experienced employment lawyer.

The professional, experienced and cost-effective employment lawyers for employees at Ottawa's Kelly Santini LLP would be happy to be of service to you. To reach the author of this blog, Sean Bawden, email sbawden@kellysantini.com or call 613.238.6321 x260.

Takeaways for Employers

The takeaway for employers is that you have options. Most employers will not be required to provide a dismissed employee with a cash payment.

However, terminating an employee is not as straightforward as a lot of employers may think, and getting it wrong can be very costly. There are illegal reasons for termination and violating the law can produce serious consequences. Before taking any decisions regarding termination of employment, it is prudent to speak to an experienced employment lawyer.

The professional, experienced and cost-effective employment lawyers for employers at Ottawa's Kelly Santini LLP would be happy to be of service to your business or organization. To reach the author of this blog, Sean Bawden, email sbawden@kellysantini.com or call 613.238.6321 x260.

Contact Us

To reach the author of this blog, Sean Bawden, email sbawden@kellysantini.com or call 613.238.6321 x260.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

Sean Bawden, publisher of Labour Pains, can be reached by email at sbawden@kellysantini.com or by phone at 613.238.6321.

Sean P. Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP. He is also a part-time professor at Algonquin College teaching Trial Advocacy for Paralegals and Small Claims Court Practice.