Employees who are terminated without cause in Ontario from their position are generally entitled to receive severance or termination pay that reflects their total continuous tenure with an employer. But what happens if there was a break in employment before returning to the same employer? For some employees, there may be circumstances where the employee has an employment break between two different stints with the same employer. How does the law review determine the value of the separation package in this situation?
Both the Employment Standards Act, 2000 (“ESA”) and Ontario common law contain rules that determine when employment is considered “continuous” and when a break in employment may reset an employee’s tenure. Whether that earlier service is recognized can significantly impact the value of a separation package.
This article explains how continuous employment works in Ontario, how the ESA’s 13-week rule applies, and when courts may still recognize prior service despite a break in employment.
TL;DR: How ESA treats breaks in employment?
A break in employment does not always reset an employee’s years of service in Ontario. Under the Employment Standards Act, a break exceeding 13 weeks may interrupt continuous employment, but Ontario courts may still recognize prior service under common law depending on the employment relationship, contracts, and employer conduct.
Continuous employment under Ontario employment law
Continuous employment refers to an employee’s unbroken length of service with an employer. This concept is important because an employee’s years of service directly impact:
- Termination pay
- Severance pay
- Common law notice entitlements
- Vacation entitlements in some circumstances
- Eligibility for certain statutory protections
When an employee is dismissed without cause, employers typically calculate the employee’s separation package using the employee’s total recognized service.
However, disputes can arise when there has been a break between periods of employment with the same employer or related employers.
How the Employment Standards Act treats breaks in employment?
Under Ontario’s Employment Standards Act, 2000, there are specific provisions that outline when an employee’s prior service must continue to be recognized despite changes in the employment relationship.
These situations include: how an employer should determine the value of a separation package
Building Service Providers
If the employer is a building services provider and there is a change in building services providers, employees may retain their prior service with both the previous and new provider for ESA purposes.
If the employer provides a termination or severance package, it should reflects the employee’s total tenure with both the prior and subsequent building services providers.
Sale of a Business
If a business is sold and the employee is transferred to the purchaser, the purchaser must provide a separation package that reflects the total tenure of the employee with both the prior employer and the subsequent employer.
The ESA’s 13-week rule
The ESA has an important exception to these rules. If there is a break in employment that is more than 13 weeks after the employee’s last day with the previous employer, the Employment Standards Act does not consider the person’s employment to be continued from the previous employer.
This means the employee’s prior service may not count toward statutory termination pay or severance entitlements under the ESA.
Employees are often surprised to learn that even relatively short interruptions in employment can affect how their service is calculated under employment standards legislation.
How Ontario common law treats employment breaks?
Under common law, if there is a break that is more than 13 days due to the employee’s own decision, to determine whether there is a break in employment, the courts consider the following:
- The significance of the break in context with the overall employment
- How the employer treated the tenure
If an employer recognizes the employee’s full tenure despite the break for severance purposes in a termination letter or employment agreement, it is more likely that the employee’s separation package would reflect the total working period completed for the employer.
Factors that determine whether an employer will recognize continuity of employment include:
- The wording in an employment agreement
- The wording in the termination letter
- The reasons for the break in employment
- The length of the break of employment
- The overall nature of the working relationship
Can an employer reset your years of service?
Not always.
Some employers attempt to characterize a returning employee as a “new hire” after a break in employment. However, courts will closely review the facts to determine whether the employee’s prior service should still count.
The employer’s own conduct becomes an important factor. If the employer continued to recognize seniority, vacation entitlement, or years of service after the employee returned, this may support a finding of continuous employment.
Because common law entitlements can substantially exceed minimum ESA entitlements, whether prior service is recognized can significantly impact the value of a severance package.
Key takeaways about continuous employment in Ontario
- Continuous employment affects severance and termination entitlements
- The ESA recognizes continuity in certain situations, including business sales and building service provider changes
- A break exceeding 13 weeks may interrupt continuous employment under the ESA
- Ontario courts may still recognize earlier service under common law despite a longer break, depending on the circumstances
- Employment agreements, termination letters, and employer conduct all matter when determining continuity of service
Frequently asked questions: Continuous employment
Does a break in employment reset severance pay in Ontario?
Not necessarily. While the ESA may not recognize continuous employment after a break exceeding 13 weeks, Ontario courts may still consider earlier service under common law depending on the circumstances.
What is considered continuous employment in Ontario?
Continuous employment generally refers to an employee’s total uninterrupted service with an employer. In some situations, prior service may still count even after a break in employment or business transition.
Can an employer refuse to recognize previous years of service?
An employer may attempt to do so, but courts will examine the full employment relationship, including contracts, policies, and how the employer treated the employee’s tenure.
Does prior service count after a business sale?
Yes. Under the ESA, employees who continue working after a sale of business may retain their prior service for termination and severance purposes.
Conclusion
Determining whether employment is considered “continuous” can have a major impact on an employee’s severance entitlements in Ontario. Although the ESA provides statutory rules regarding breaks in employment, Ontario courts may still recognize prior service under common law depending on the circumstances.
Employees should not assume that a break in employment automatically eliminates earlier years of service.
How can Whitten & Lublin Employment Lawyers help?
If you have been terminated from your employment and there was a prior break in service, you may still be entitled to compensation that reflects your full tenure. An experienced Ontario employment lawyer can review your employment history, contracts and termination package to determine whether your earlier service should be recognized.
Contact Whitten & Lublin employment lawyers online or by phone at (416) 640-2667 to discuss your situation.
