Severance pay (often used interchangeably with “termination pay”) is a payment that an employer is required to make to a fired employee. In almost all cases, employees in Ontario who are dismissed from their jobs are legally entitled to at least some form of severance pay and/or termination pay.
1. Why does the Government of Ontario website give me a smaller number than the law firm severance calculators?
The Government of Ontario website gives information on the minimum notice and severance pay required by the Employment Standards Act, 2000 (the “ESA”). The ESA requires about 1-2 weeks of termination and/or severance pay per year of service. ESA pay is, generally, the absolute minimum and may not reflect your full entitlement.
Law firm “severance calculators” reach their figures based on the common law of wrongful dismissal, which is created and enforced by judges. Your entitlement to common law severance is based on a number of factors, primarily age, length of service, character of employment, and availability of similar employment. Common law severance will typically be two to four times your ESA pay. Remember: the law firm severance calculators you see on line, are just a gimmick. They are there to get you in the door.
2. Do I get both ESA pay and common law severance?
In most cases, yes. If you are covered by Ontario law, you are presumptively entitled to both ESA pay and common law severance, assuming you have not signed an agreement giving up your right to common law severance.
3. Why would anyone agree to give up their right to common law severance?
You may have done so without realizing it when you signed your employment contract. Few employees appreciate the significance of this legalese, but may be in for a disappointment when they speak to an employment lawyer.
4. It looks like my employment agreement says I only get ESA pay. Is it hopeless?
Not necessarily. Employment agreements are notoriously difficult to draft in Ontario. Because the law in this area is constantly changing, even sophisticated lawyers have difficulty drafting termination provisions that are enforceable. If your employment agreement is unenforceable, you are entitled to common law severance just the same as if you had no contract at all.
5. I have no employment contract. Why is my employer only giving me ESA pay?
ESA pay is rock-solid. It is easy to calculate. It cannot be reduced or given up. Failing to pay ESA pay can be costly for employers.
Determining common law severance, on the other hand, is more art than science. It falls within a range of reasonability which can be as wide as 6 to 8 months’ pay. What’s more, it is limited to the amount of time you spend unemployed post-termination. For instance, even if your common law entitlement is 24 months, you may only get your ESA pay, if you land a new job right after being fired. Employers are therefore entitled to withhold it up until they are ordered by a judge to pay it.
6. Why would I start a new job if it reduces my common law severance?
Because the one legal responsibility you have as a plaintiff in a wrongful dismissal action is to make “reasonable efforts” to secure comparable, alternate employment. That usually involves putting out job applications, attending interviews, and if a reasonable offer is made, accepting that offer. If you fail to do so, it can seriously reduce your wrongful dismissal damages.
7. Will I have to go to trial?
It’s possible, but not likely. Your employer does not want to spend legal fees any more than you do. For this reason, the vast majority of straightforward wrongful dismissal cases settle before trial.