employment law
conflictanalyticslab

By: Jordon Bond

When an employee in Ontario is dismissed without cause, they may be entitled to severance pay and either common law or statutory notice.

Whether an employee is eligible for common law or statutory notice depends on their length of service and the terms of the employment agreement.  Severance pay will only be available to employees who meet the length of service requirements.

Common Law Reasonable Notice

In the common law, employers may dismiss an employee without cause so long as they provide reasonable notice of termination[1]. 

Reasonable notice of termination means providing employees with notice before terminating their employment.  There are two forms that reasonable notice can take: (1) working notice or (2) pay in lieu of working notice.[2]  For example, if an employee is given 3 weeks of working notice, they will continue working for 3 weeks and then their employment will be terminated. 

Alternatively, an employer may provide pay in lieu of working notice, and simply provide the employee with payment equal to what they would have earned had they worked the notice period.  This payment must include both wages and any benefits the employee is entitled to.[3]

In Canada, the maximum amount of common law notice available is typically 20-24 months. However, the notice period typically awarded is 12 months or less[4].  The leading case on how reasonable notice is calculated is Bardal v. Globe & Mail Ltd. (“Bardal”).  In Bardal, the court provides a list of 5 non-exhaustive factors that are considered when calculating notice periods.

The 5 Bardal factors are:

  1. Length of Service: The longer the employee’s service, the more notice the employer is required to provide.
  2. Age of Employee: Employees over the age of 50 typically receive greater notice periods.
  3. Character of Employment: Typically, managerial employees are awarded more notice.
  4. Availability of Similar Employment: This factor considers an employee’s training and qualifications in their field.  High availability of similar employment would reduce the amount of notice an employee is entitled to, and vice versa.
  5. Other Factors: The courts will take the facts of each situation into consideration and may take additional factors into account when calculating reasonable notice.[5]

It is important to note that there are three scenarios where reasonable notice is not required:

  1. The contract is for a fixed-term/task.
  2. A lesser notice period has been agreed to in the employment agreement (so long as it is equal to or greater than that required by the Employment Standards Act).   
  3. The employee was dismissed for cause[6].

Statutory Notice

An employment agreement may provide for a notice period equal to that required by the Employment Standards Act.  This is known as statutory notice.

Like common law notice, statutory notice can be given as working notice or pay in lieu of working notice[7].  In Ontario, the amount of notice employees are entitled to receive is solely dependent on the length of service.  For example, if an employee has provided between 1-3 years of service, they are entitled to 2 weeks’ notice.[8]  A chart that specifies the amount of notice required for a given period of employment can be found here.

Statutory notice is not required where:

  1. An employee has been terminated for cause.
  2. The contract was for a fixed-term/task.[9]

Severance Pay

Ontario employers are required to provide severance pay (“severance”) in addition to statutory/common law reasonable notice.[10]  To be eligible for severance in Ontario, employees must:

  1. Have worked for the employer for five or more years and;
  2. Their employer:
    1. Has a payroll in Ontario of at least $2.5 million; or
    2. Severed the employment of 50 or more employees in a six-month period because all or part of the business permanently closed.[11]

To determine the amount of severance an employee is eligible to receive, multiply the employee’s regular wages for a regular work week by the sum of:

  1. The number of completed years of employment; and
  2. The number of completed months of employment divided by 12 for a year that is not completed.[12]

The maximum amount of severance an employee is eligible to receive is 26 weeks’ worth of pay.[13]

Disclaimer: The information provided in this response is for general informational purposes only and is not intended to be legal advice. The content provided does not create a legal client relationship, and nothing in this response should be considered as a substitute for professional legal advice. The information is based on general principles of law and may not reflect the most current legal developments or interpretations in your jurisdiction. Laws and regulations vary by jurisdiction, and the application and impact of laws can vary widely based on the specific facts and circumstances involved. You should consult with a qualified legal professional for advice regarding your specific situation.

[1] Doorey, D. J. (2020). The Law of Work (Second ed.). Toronto, ON: Emond Montgomery Publications, at pg. 153. [Doorey].

[2] Ibid, at pg. 153.

[3] ‘Termination Pay’, Ontario.ca, 2019, <https://www.ontario.ca/document/your-guide-employment-standards-act/termination-employment#section-6>.

[4] Doorey, supra note 1 at pg. 161.

[5] Ibid, at pg. 160-165.

[6] Ibid, at pg. 119 & 153.

[7] Ibid, at pg. 323.

[8]  ‘Written Notice of Termination’, Ontario.ca, 2019, <https://www.ontario.ca/document/your-guide-employment-standards-act/termination-employment#section-5>.

[9] ‘Exemptions to Notice of Termination’, Ontario.ca, 2019 <https://www.ontario.ca/document/your-guide-employment-standards-act/termination-employment#exemption>.

[10] Employment Standards Act, 2000, S.O., C.41, Section s. 64 [ESA].

[11] ‘Severance Pay’, Ontario.ca, 2019, <https://www.ontario.ca/document/your-guide-employment-standards-act-0/severance-pay> .

[12] ESA, supra note 10.

[13] Ibid.