Being laid off or terminated without cause is an unsettling experience. It often leaves employees feeling vulnerable and uncertain about their next steps. However, in Ontario, employees have significant rights under both provincial legislation and common law. The termination process is not merely a formality; it is a legal transaction that an employer must execute correctly to avoid a wrongful dismissal claim. Your employer may have presented you with a severance package and an aggressive deadline, but that offer is rarely the final word.
This guide outlines the critical steps you should take immediately following a layoff to protect your entitlements and secure the compensation you deserve.
The Critical First Step: Do Not Sign Anything
The single most important instruction in the immediate aftermath of a termination is to refuse to sign any release, severance offer, or exit agreement.
Your employer’s initial offer is designed to resolve your legal entitlements quickly and, from their perspective, efficiently and cost-effectively. By signing a release, you are agreeing to accept the stated amount as full and final compensation, waiving your right to sue for potentially higher common law entitlements. Once signed, this agreement is difficult to challenge or revoke.
The two primary sources of your termination entitlements are:
- The minimum requirements are outlined in the Employment Standards Act, 2000 (ESA); and
- Common law reasonable notice, which is often significantly higher.
Your employer is legally obligated to meet the ESA minimums. They cannot contract out of these minimums. However, unless your employment contract explicitly limits your entitlements to the ESA minimums in a legally enforceable way, you are likely entitled to the more generous common law notice.
Understanding the Type of Termination
In Ontario, a layoff can be a temporary layoff or a termination of employment. The distinction is crucial, particularly if the word “layoff” was used, as a temporary layoff can often be treated as an immediate termination.
Distinguishing a Layoff from a Termination
In the context of the ESA, an actual temporary layoff has strict time limits. For example, not more than 13 weeks in 20 weeks, or up to 35 weeks in 52 weeks if the employer continues to make payments for certain benefits. If a layoff exceeds these limits, it is considered a termination as of the first day of the layoff.
Most importantly, under common law, an employer generally does not have an implied right to impose a temporary layoff. If your employment contract does not explicitly permit a temporary layoff, the act of sending you home without work or pay may be considered a constructive dismissal. This means the employer has unilaterally breached a fundamental term of your contract, and you are entitled to treat the employment relationship as ended and sue for wrongful dismissal, regardless of the ESA’s temporary layoff rules.
Reviewing Your Employment Contract
The terms of your original employment contract largely determine your severance entitlement. You must locate and carefully review this document.
An employer’s ability to limit your compensation to the ESA minimums depends on the presence and enforceability of a termination clause. Ontario courts are highly scrutinizing of these clauses. If the clause is poorly drafted, ambiguous, or violates the ESA minimums, it may be deemed void, in which case you default to the significantly higher common law reasonable notice.
Determining Your True Entitlements
The difference between the statutory minimums and common law entitlements can be significant. The severance offer you received is likely an offer based on the minimums, which is almost always a fraction of what is legally owed.
Statutory Minimums (Employment Standards Act)
The Employment Standards Act provides two potential minimum entitlements: Termination Pay (also known as “notice”) and Severance Pay.
Termination Pay (Notice)
Based on continuous service, employees with at least three months of service are entitled to one week of notice or pay in lieu for every completed year of employment, to a maximum of eight weeks.
Statutory Severance Pay
This is owed in addition to termination pay, but only if the employee has five or more years of service and the employer has a payroll of at least $2.5 million annually, or the termination is one of 50 or more employees in a six-month period due to a permanent discontinuance of business. If eligible, the payment is one week’s pay per year of service, plus a pro-rata amount for a partial year, up to a maximum of 26 weeks.
Common Law Reasonable Notice
In the absence of a binding and enforceable termination clause, an employee is entitled to common law reasonable notice. This is not capped at the ESA maximums and is determined by a court based on a set of factors first established in the seminal case of Bardal v. Globe & Mail Ltd.
The Bardal factors consider:
- Character of the employment: Seniority, managerial level, and responsibility.
- Length of service: Generally, longer service translates to a longer notice period.
- Age of the employee: Older employees, who may face greater difficulty re-employment, are typically granted longer notice.
- Availability of similar employment: The ease or difficulty with which an employee can find comparable alternative work.
Although there is no strict formula, common law notice typically ranges from three weeks to one month of pay per year of service, with notice periods occasionally extending up to 24 months in exceptional cases.
The Obligation to Mitigate Damages
A critical legal concept you must understand is the duty to mitigate (i.e., reduce) your losses. After being terminated, you have a legal obligation to take reasonable steps to search for new comparable employment. Any income you earn from a new job during the common law notice period will reduce the severance amount your former employer owes you.
Exploring Other Legal Claims
A termination without cause is not always an isolated event. Your departure may also open the door to other legal claims.
Human Rights Violations
The Ontario Human Rights Code prohibits discrimination in employment based on protected grounds, including age, disability, family status, gender, and race. If a discriminatory factor was even a small component of the decision to terminate, or the manner of your termination was discriminatory, you may have a claim at the Human Rights Tribunal of Ontario (HRTO). These claims can result in damages for injury to dignity, feelings, and self-respect, in addition to compensation for lost wages and other related expenses.
Bad Faith or Aggravated Damages
In certain circumstances, the manner of the dismissal itself can lead to further damages. The Supreme Court of Canada decision in Wallace v. United Grain Growers established a duty of good faith and fair dealing in the manner of termination. If the employer’s conduct during the dismissal process was untruthful, misleading, or unduly insensitive, a court may award aggravated damages for mental distress. This is often an issue if the employer made false allegations, was dishonest, or terminated the employee in an overly public or humiliating manner.
The Essential Role of an Employment Lawyer
Navigating termination is complex, emotionally taxing, and rife with legal technicalities. Your employer has legal counsel to draft their initial offer and protect their interests; you need your own to protect yours.
An employment lawyer will:
- Review and analyze your severance package to determine if the offer is fair under the ESA and common law;
- Evaluate your employment contract to determine the enforceability of any limiting clauses;
- Calculate your true common law entitlements based on the Bardal factors and recent case law precedents;
- Negotiate a significantly enhanced severance package on your behalf, often without the need for litigation; and
- Identify any additional claims, such as human rights violations or bad faith conduct.
Employers often impose tight deadlines to pressure you into signing. These deadlines are arbitrary and not legally binding on your right to seek legal advice or commence a claim. However, be aware of the two-year statutory limitation period for commencing a wrongful dismissal action in Ontario.
Don’t Leave Money on the Table
Losing a job is a professional setback, but it should not be a financial disaster. Your entitlements upon a without-cause termination are a fundamental element of Canadian employment law, designed to provide a financial bridge to your next career opportunity.
Do not allow the fear of the unknown or an artificially tight deadline to push you into accepting less than you are owed. Protect your rights, gather your documents, and consult with experienced counsel to ensure you receive your full and proper severance. The few days you take to seek legal advice could translate into months of additional pay in your final settlement.
Haynes Law Firm: Helping You Secure Your Entitlements After a Layoff in Ontario
The period immediately following a layoff is when crucial decisions must be made. Do not navigate this alone. To discuss your specific termination entitlements and explore your options for maximizing compensation, contact Haynes Law Firm in Toronto. We are dedicated to helping employees who have been wrongfully dismissed achieve the fair resolution they deserve.
Our team brings extensive experience to level the playing field against your former employer, led by Paulette Haynes, who is recognized for her effective negotiation and litigation skills. We work diligently to find efficient and economical resolutions for your wrongful dismissal claim. Contact us online or call 416-593-2731 to schedule a consultation.
