That’s a more complicated question then all of those “online severance calculators” make it seem. Before we delve into the factors which play a role, both employees and employers need a little context and exposition on how the Ontario wrongful dismissal system works.
Firstly, you need to understand that “notice” and “severance”, though often used interchangeably in common parlance, mean different things. Under the Employment Standards Act, severance pay is defined and is an amount of money an employer needs to pay an employee on termination if certain conditions are met. In addition to severance, employers must give notice of termination to employees.
An employee is only entitled to severance pay if they have been employed for 5 years or more and:
- the termination occurred because of a permanent discontinuance of all or part of an employer’s business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or
- the employer has a payroll of $2.5 million or more.
If an employee is entitled to severance pay, they are to be paid severance in a lump sum amount equivalent to one week of non-overtime wages per completed year of employment up to a maximum of 26 weeks, within 7 days of termination.
Entitlements to severance are relatively well defined. It is the notice requirements of termination that require a more nuanced analysis.
Reasonable Notice of Termination
In Ontario, employers can give notice of termination to employees in two ways. Either,
- An employer can give notice ahead of time; or
- An employer can fire an employee right away, but provide “pay in lieu of notice” equivalent to what would have been earned over the notice period.
The first step in calculating the amount of notice depends on whether that employee’s termination is subject to a valid employment contract. If the employment contract contains a clause that sets out the amount of notice an employee gets upon being fired and the contract is valid, then the employee is entitled only to the reasonable notice set out therein. These contracts may be invalid or void ab initio (unenforceable from the beginning) for many reasons, including if they provide for less termination entitlements than the minimums established by Employment Standards Act.
If there is no contract, or the contract is not enforceable, then an employee is entitled to what the Ontario Courts call “reasonable notice”. Reasonable notice is always more than the minimum notice. The amount of reasonable notice depends on many factors and is calculated by the Courts after considering all of the surrounding factors. Considerations include (1) age, (2) length of service, (3) character of employment and (4) availability of similar employment. Employees are entitled to more notice if:
- they are older;
- they worked somewhere a very short or a very long period of time;
- their job was very specialized and it will be difficult to find comparable employment; or
- the employer convinced them to leave another stable job.
An employee might also be entitled to further money on termination if the employer:
- acted badly in the manner of termination;
- fired you for a discriminatory reason;
- fired the employee for insisting on his/her rights under the ESA;
Contact Justin W. Anisman
Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning Zibarras LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.