TL;DR:
Severance pay is one of the most misunderstood areas of employment law. Many workers assume they’re only entitled to ESA minimums, but those are only the legal minimum and minimum standards, while many employees, especially a non unionized employee, may have much higher common law entitlements. Understanding the difference is the key to protecting your income and your future, because common law reasonable notice often exceeds ESA minimums and may reach up to 24 months for some long service employees.
Understanding severance pay in Ontario
Severance pay in Ontario is the compensation you may be owed when your employment ends, whether through termination of employment, a layoff, constructive dismissal, or restructuring. This is often far more than the minimums under the Employment Standards Act (ESA). For many Ontario employees, especially most non unionized employees terminated without cause, common law entitlements are based on reasonable notice, and common law severance can reach up to 24 months of pay. Your entitlement can turn on factors like age, tenure, job type, regular wages, and how long it may take to find comparable work, as well as whether a termination clause in your employment contract is enforceable or whether a wrongful dismissal claim may apply.
This guide explains the difference between ESA termination pay, ESA severance pay, working notice, notice of termination, and common law reasonable notice; who qualifies; how the legal minimum and ESA maximum of eight weeks for termination pay fit into the bigger picture; and why many employees may be owed more than minimum standards. It is written for Ontario employees who have been laid off, terminated without cause, constructively dismissed, or presented with a severance offer and need to assess their rights, including issues affecting long service employees and compensation items such as benefits, pension contributions, or car allowances. Before accepting a severance offer, obtain legal advice so you understand your rights and the employee’s severance pay you may actually be entitled to. Whitten & Lublin’s severance pay page can give you a fuller understanding.
The legal framework: Employment Standards Act (ESA)
Ontario’s Employment Standards Act sets the legal minimum and minimum standards for termination pay and statutory severance pay. But these minimums rarely reflect your full legal entitlements. Many non-unionized employees who are laid off may also have common law entitlements that exceed the ESA minimums.
Statutory vs. common law severance
Statutory severance pay (ESA severance pay) applies only when:
- You have five or more years of service and your employer has a payroll of $2.5 million+.
- You were part of a mass layoff where 50 or more employees are terminated within a six-month period because of a closure.
Employees laid off for 35 weeks or more may also qualify for ESA severance. ESA severance is capped at 26 weeks in Ontario.
Common law severance, however, is based on:
- Age
- Length of service
- Job type and seniority
- Difficulty finding comparable work
Common law severance often results in much higher compensation.
Severance pay vs. termination pay under the ESA
Untangling the complexities of severance packages can be messy but here are the definitions laid out for you:
- Defining Termination Pay in Ontario:
Termination pay is what your employer owes when they end your employment without cause and fail to provide proper notice. It’s meant to cover the notice period you should have received. Under the ESA, termination pay is based on length of service and capped at eight weeks.
- Defining Severance Pay in Ontario:
Severance pay compensates you for your years of service and the impact of losing long‑term employment. It is separate from termination pay and often significantly increases your total entitlement. Under the ESA, severance pay can be up to 26 weeks.
Together, termination pay and severance pay form your Severance Package, and under the ESA they can total up to 34 weeks, so understanding both is essential to protecting your rights.
Eligibility for severance pay
You may be entitled to severance pay if you were:
- Laid off
- Terminated without cause
- Constructively dismissed
- Let go due to restructuring or redundancy
- Terminated after a long period of service
Whether an employee qualifies can depend on ESA rules as well as broader common law rights for a non-unionized employee.
Even if your employer claims just cause, the legal standard is extremely high. Many “cause” allegations do not hold up, and many employees may have wrongful dismissal claims. You should obtain legal advice before taking steps, so as you may still qualify for severance pay. You may even be able to get severance after quitting your job.
Calculating severance pay
Want to know how much severance pay you may be owed? Use Whitten & Lublin’s Ontario severance pay calculator.
This tool provides a helpful range based on Ontario common law but remember, calculators cannot account for every detail. Your full legal entitlements may be significantly higher. They are only estimates because the severance pay calculator only accounts for regular wages for the work week, and doesn’t include bonuses and commissions, unless included in the salary input.
Factors Influencing the Amount of Severance Pay
Your severance entitlement depends on:
- Length of service: longer service often means higher severance
- Age: older employees may receive more due to job market challenges
- Job type: senior or specialized roles often qualify for higher severance
- Salary: calculations often start from your regular weekly earnings, and bonuses or commissions can also affect the amount
- Availability of comparable work: if your field is limited, severance may increase
- Employment contract terms: some contracts attempt to limit severance, but many fail legally
Understanding these factors is essential before accepting any offer.
What happens during layoffs?
Layoffs are common but your rights remain strong.
Rights During a Layoff
If you’ve been laid off, you may still be entitled to:
- Termination pay
- Statutory severance pay
- Common law severance
- Benefits continuation
- Compensation for lost income
Temporary layoffs can also become terminations under Ontario law if they exceed ESA limits. When termination and severance amounts are owing, the employee’s severance pay must generally be paid within 7 days after employment ends or on the next regular pay day.
Notice period requirements
Employers must provide:
- Written notice, or
- Pay in lieu of notice, or
- A combination of both
The ESA sets minimum notice periods, but common law notice periods are often much longer, sometimes months or more than a year.
Common myths about severance pay
Many Ontario workers misunderstand their rights. Here are the most common myths:
- “I only get one or two weeks per year of service.”
False. That’s only the legal minimum under the ESA and not the common law reasonable notice many employees may be entitled to.
- “My employer said it’s a standard package.”
There is no standard. Every case is unique.
- “I signed the employment contract, so I’m stuck.”
Many termination clauses are unenforceable, and Ontario courts often find an invalid termination clause unenforceable.
- “I was laid off, so I don’t get severance.”
Layoffs can trigger severance rights.
- “I need to accept the offer quickly.”
You don’t. You have the right to review a severance offer and obtain legal advice before accepting it.
Understanding the truth helps you stay in control.
Next steps if you believe you’re entitled to more
Consulting a Lawyer
Before signing a severance offer or anything else, obtain legal advice from an employment lawyer. Severance packages are often far lower than what employees are legally entitled to. A lawyer can help you:
- Understand your full legal entitlements, including common law entitlements and reasonable notice
- Identify unfair or unenforceable contract terms
- Determine whether a termination clause may be unenforceable
- Negotiate a better severance package
- Protect your income and future
Whitten & Lublin has represented thousands of employees across Ontario. We’ve helped them secure fair compensation and take control of their employment outcomes.
Understanding your full legal entitlements
Your full entitlements may include:
- Termination pay
- Statutory severance pay
- Common law severance
- Benefits continuation
- Bonus and RSU’s
- Damages for bad‑faith conduct
- Compensation for lost income
Don’t leave money on the table. Get clarity before you act.
Summary
Severance pay in Ontario is more complex and more valuable than most employees realize. ESA minimums are only the starting point. Your common law severance may be significantly higher, depending on your age, tenure, job type, and job market conditions.
Before accepting any severance package, get informed, get empowered, and get advice. Take control with Whitten & Lublin in your corner.
FAQs
How does severance pay work in Ontario?
Severance pay compensates you when your employment ends. ESA sets minimums, but most employees qualify for higher common law severance. ESA severance pay only applies to qualifying employees, while many non-unionized employees may also have common law entitlements beyond the legal minimum.
How much is severance pay in Ontario?
Under common law, it depends on age, tenure, job type, and job market conditions. Use the severance calculator for an estimate. As a general guide, ESA termination pay is capped at eight weeks and ESA severance can be up to 26 weeks, but common law reasonable notice may be much higher.
What’s the difference between termination pay and severance pay?
Termination pay covers your notice period under the ESA and may be provided as working notice or pay in lieu, while severance pay is separate compensation for eligible long-service employees. Severance pay compensates you for long‑term service and the impact of losing your job.
Am I entitled to severance if I was laid off?
Often, yes. Layoffs frequently trigger severance rights under both ESA and common law. If a layoff becomes a termination of employment under ESA rules, the employee may be generally entitled to termination pay and, for qualifying employees, ESA severance pay.
Can I get severance pay if I quit my job?
Sometimes, in cases of constructive dismissal, including where an employee resigns because the employer’s conduct effectively ends the employment relationship you may qualify for severance pay. You should obtain legal advice before quitting on the basis of constructive dismissal as you cannot treat it the same as without cause termination.
