Employer Frequently Asked Questions

What are the employer’s obligations with respect to termination and severance pay?

According to the Employment Standards Act, 2000 (“ESA”), an employee with at least 3 months’ service is entitled to notice of termination or termination pay in lieu of notice as follows:

Length of Service
after 3 months
after 12 months
after 2 years
after 3 years
after 4 years
after 5 years
Notice or Termination Pay
1 week
2 weeks
2 weeks
3 weeks
4 weeks
5 weeks

This pattern continues to a maximum of 8 weeks after 8 years’ service.

The Act also requires that employee benefits be continued for the relevant notice period. An employer can either provide an employee with the appropriate advanced notice or termination pay in lieu of notice.

Severance pay is a lump sum payment in addition to termination pay. Not all employers have to provide their employees with severance pay. However, an employer will be required to pay severance if the following 2 conditions are met:

  1. The employee must have worked for an employer for at least 5 years; and
  2. The company annual Ontario payroll (including all related Ontario companies) is at least $2.5 million.

The legislation requires that employees receive at least 1 week’s pay per year of service to a maximum of 26 weeks’ pay.

What is "Just Cause"?

Dismissals for just cause constitute the exception to the general rule that an employer is required to provide a departing worker with reasonable notice of his/her termination or pay in lieu of notice. Just cause is conduct, on the part of the employee, that is considered to be so serious that the employee is said to have breached his/her employment contract with the employer. In turn, this situation gives the employer the right to end the employment relationship without notice. The employer has the onus of proving that the employee committed an act which can be considered to be just cause for dismissal. An employer should consult with employment law counsel to determine whether just cause to dismiss an employee is present in a particular set of circumstances.

What obligations do employers have when terminating employees because of a sale of a business?

Employees terminated at the time of a sale of a business are entitled to all of their usual termination rights, as set out in the ESA (e.g. notice or pay in lieu of notice, severance pay (if applicable), whether statutory or otherwise, to which they would be entitled had they been dismissed in the normal course). Any such claims must be made against the employer who is selling the business and may not have any effect against the purchasing employer, if it was made clear to the employees that their employment would not be continued with the purchasing employer.

On the other hand, if a business is sold and the purchasing employer makes it known that it intends to maintain the employment relationship as it continues in the business, then any employees whose employment is continued with the new employer will have their length of service with the previous employer recognized for purposes of the ESA.

When is a worker an "Independent Contractor"?

An independent contractor is one who does not fit the criteria of an employee. There are various tests which can assist in determining whether or not a person is an independent contractor. Ultimately, whether an individual is an employee or independent contractor depends on the facts of each case. As well, whether a person is an employee or independent contract may make a difference as to which law applies to his/her situation. A written agreement stating that an individual is not an independent contractor does not necessarily determine the issue. An employer would be wise to contact employment law counsel to determine whether an individual should be properly described as an ‘independent contractor’ or ‘employee’.

What types of questions can an employer ask during an interview?

The interview provides an employer with an opportunity to meet the potential candidate and get a sense of the person’s suitability for a particular position. However, employers need to exercise caution when conducting interviews. In particular, they should concentrate on learning only that information which will help them make an informed decision about whether the candidate is the right person for the job and whether any accommodation will be required. Beware of asking questions about areas of discrimination prohibited by the Ontario Human Rights Code (e.g. race, sex, disability, age, marital status) unless the questions relate to exceptions that are provided for in the legislation.

Can an employer temporarily layoff an employee?

Under the ESA, an employer may temporarily layoff an employee for a period not exceeding 13 weeks (in a period of 20 consecutive weeks). However, if the employer continues to make payments on behalf of an employee (e.g. continuing benefit premiums), then a temporary layoff can last up to 35 weeks in a 52-week period. An employer should advise an employee, preferably in writing, about the effective date for the temporary layoff and, if possible, the expected date that the employee will be called back to work. Pursuant to the legislation, employers are not required to provide employees with termination pay or severance pay during the period of temporary layoff.

What is "constructive dismissal"?

Any substantial, unilateral change to the terms and conditions of the employment contract can trigger a claim for constructive dismissal. Generally speaking, this fundamental breach of the employment contract by the employer entitles the employee to resign in response to the breach and claim damages from his/her employer for pay in lieu of reasonable notice. What constitutes constructive dismissal includes changes to: an employee’s compensation package, duties, geographic location of work, and the work environment. Due to the complexity of this area of employment law, employers are encouraged to seek specialized legal advice.

For further information, or to request an initial consultation, please email Haynes Law.