If you've been terminated from your job in Ontario, you likely have questions about your severance entitlements. Unfortunately, many employers offer far less than employees are legally entitled to, counting on workers not knowing their rights.
This guide explains how severance is calculated in Ontario, the critical difference between Employment Standards Act (ESA) minimums and common law entitlements, and the factors that can significantly impact how much you should receive.
Two Types of Severance: ESA vs. Common Law
In Ontario, there are two frameworks that determine severance pay: the Employment Standards Act (ESA) and the common law. Most employees are entitled to the higher of the two.
Employment Standards Act (ESA) Minimums
The ESA sets the absolute minimum employers must provide:
- Termination Pay: 1 week per year of service, up to 8 weeks maximum
- Severance Pay: 1 week per year of service (if eligible), up to 26 weeks maximum
Note: ESA severance pay only applies if you've worked 5+ years AND the employer has $2.5M+ payroll or terminated 50+ employees.
Common Law Entitlements
Common law typically provides much more generous compensation—often 2-3x the ESA minimum or more:
- Based on the concept of "reasonable notice"
- Can be 12-24+ months of compensation
- Considers multiple factors, not just years of service
- Includes salary, benefits, bonuses, and other compensation
Factors That Determine Your Severance
Courts consider these key factors when determining reasonable notice (the "Bardal factors"):
1. Length of Service
Generally, longer service means longer notice periods. A rough guideline is 1 month per year of service, but this varies significantly based on other factors.
2. Age
Older employees typically receive longer notice periods, recognizing the greater difficulty in finding comparable employment at an older age.
3. Position and Seniority
Management and specialized positions often warrant longer notice periods due to the smaller pool of comparable positions and longer job search times.
4. Availability of Similar Employment
If your role is highly specialized or the job market in your field is tight, this can increase your notice period.
Sample Severance Scenarios
These examples illustrate how severance can vary dramatically based on circumstances:
| Scenario | ESA Minimum | Common Law Range |
|---|---|---|
| Software Developer, 32, 3 years, $120k | 3 weeks | 3-6 months |
| Marketing Manager, 45, 8 years, $150k | 8 weeks | 8-14 months |
| VP Finance, 55, 15 years, $250k | 8 weeks + 15 wks sev | 18-24 months |
Note: These are illustrative examples only. Your actual entitlement depends on your specific circumstances.
What's Included in Severance?
Common law severance isn't just about base salary. It should compensate you for everything you would have earned during the notice period:
- Base salary
- Bonuses (annual, signing, retention)
- Commissions
- Stock options and RSUs
- Health and dental benefits
- Pension contributions
- Car allowance and other perks
- Vacation pay
Watch Out: Employment Contract Termination Clauses
Some employment contracts contain termination clauses that attempt to limit your severance to ESA minimums. However, many of these clauses are unenforceable because they:
- Were drafted incorrectly
- Violate the ESA in some way
- Are ambiguous or unclear
- Haven't been updated with changes to the ESA
An employment lawyer can review your contract to determine if the termination clause is enforceable.
What Should You Do?
- Don't sign anything immediately - Most employers give you time to consider. Use it.
- Review your employment contract - Check for termination clauses that may (or may not) limit your entitlements.
- Calculate what you should receive - Consider your age, service, position, and other factors.
- Consult an employment lawyer - A professional review can quickly tell you if you're being offered a fair deal.