ONTARIO LAW REGARDING SEVERANCE

To understand whether you may have relied on the Ministry of Labour’s advice to your detriment, you need to understand something about severance entitlements. There are two types of laws that govern severance entitlements in Ontario. One is called the Employment Standards Act, 2000 (the “ESA”), and the other is called the “common law”. The ESA is a piece of written legislation (see: http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_00e41_e.htm). The common law, however, is a system of law that is used in Canada (except for Quebec) which is developed by courts and tribunals (see a brief description of common law on Wikipedia: http://en.wikipedia.org/wiki/Common_law)

The Employment Standards Act (“ESA”)

The ESA is the law that establishes certain minimum standards that apply to employment relationships, including the termination of employment. The ESA provides that when a person is fired without cause, he or she is entitled to a certain amount of notice of termination (or termination pay in lieu thereof) and in many cases, an additional amount for severance pay. For example, an employee may be entitled to up to 8 weeks of notice or termination pay in lieu thereof, and a further 26 weeks of severance pay. However, these are just the minimum entitlements. These minimum termination and severance entitlements are similar to a minimum wage rate, which is there to provide minimum protection to employees. Almost all non-union employees have much more significant severance entitlements under the common law.

The Common Law

Ontario’s (and much of Canada’s) system of law is called the “common law”. The common law is not a written piece of legislation (like the ESA). It is a collection of thousands and thousands of court and tribunal decisions that have evolved over many years. The common law is very important when it comes to determining an employee’s termination/severance entitlements and an employer’s termination/severance obligations.

Under the common law, a person is owed significantly
more termination/severance than the minimums provided for in the ESA.

Under the common law, the calculation of severance entitlements depends on various factors, including the position held by the employee, length of employment and the employee’s age, and possibly other factors which may affect how long it will take that employee to find another job.