Frequently Asked Question by Employers
What Are an Employer’s Obligations for Termination and Severance Pay?
According to the Employment Standards Act, an employee with at least three months’ service is entitled to notice of termination or termination pay in lieu of notice as follows:
|Length of Service||Notice or Termination Pay|
|After 3 months||1 week|
|After 12 months||2 weeks|
|After 2 years||2 weeks|
|After 3 years||3 weeks|
|After 4 years||4 weeks|
|After 5 years||5 weeks|
This pattern continues to a maximum of eight weeks after eight years’ service.
The Employment Standards Act also requires that employee benefits continue 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 conditions are met:
- The employee must have worked for an employer for at least five years; and
- The company’s global payroll is at least $2.5 million.
The legislation requires that employees receive at least one week’s pay per year of service to a maximum of 26 weeks’ pay.
Note that not all employees are governed by the Employment Standards Act. Those who work in federally regulated workplaces, for example, are covered by federal legislation.
The statutory requirements are minimums. Courts may also award common law damages in line with case law. Common law damages are assessed by considering several factors initially introduced in a landmark case called Bardal v. Globe & Mail Ltd. The Bardal factors include:
- The age of the employee;
- The character of the employment;
- The length of service; and
- The availability of similar employment, having regards to the employee’s experience, training, and qualifications.
What Obligations Do Employers Have When Terminating Employees When Selling a Business?
Employees terminated at the time of the sale of a business are entitled to all their usual termination rights, as set out in the Employment Standards Act (e.g., notice or pay in lieu of notice, severance pay, if applicable), whether statutory or otherwise, to which they would be entitled if dismissed in the ordinary course.
Termination 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 continue with the purchasing employer.
On the other hand, if the purchasing employer made it clear to the employees that their employment would continue, then any employees whose employment is continued with the new employer will have their length of service with the previous employer recognized as per the Employment Standards Act.
When is a Worker an “Independent Contractor”?
Various tests can assist in determining whether a worker is an Independent Contractor vs. Employee, but ultimately, it will depend upon the facts of each case. Whether a worker is an employee or independent contractor may make a difference as to which law applies to their 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 an employment lawyer to determine whether an individual qualifies as an ‘independent contractor’ or an ‘employee’.
What Types of Questions Can an Employer Ask During an Interview?
The interview provides an employer with an opportunity to meet a potential candidate and get a sense of the person’s suitability for a particular position. However, employers should exercise caution when conducting interviews. In particular, interviewers should concentrate solely on ascertaining information that will help evaluate a candidate’s suitability for the role and whether accommodations will be required. Beware of asking questions about areas of discrimination prohibited by Ontario’s Human Rights Code, such as race, sex, disability, age, marital status, unless the questions relate to exceptions provided for in the legislation.
Can an Employer Temporarily Lay Off an Employee?
Under the Employment Standards Act, an employer may temporarily lay off 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 within 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 of return. According to the legislation, employers are not required to provide termination pay or severance pay during the temporary layoff period.
What is “Constructive Dismissal”?
Any substantial, unilateral change to the terms or conditions of the employment contract can trigger a claim for constructive dismissal. Generally speaking, a fundamental breach of the employment contract by the employer entitles the employee to resign in response to the breach and claim damages from their employer for pay in lieu of reasonable notice. Fundamental changes that may constitute constructive dismissal include unilateral changes to:
- Compensation packages;
- Duties and responsibilities;
- The geographic location of work; and
- The work environment.
Due to the complexity and nuance of constructive dismissal, employers are encouraged to seek specialized legal advice before making any significant changes.