All About Termination and The ESA in Ontario

When an employee gets terminated without cause in Ontario, their employer is typically required to provide them with working notice of termination or pay in lieu of notice.

How notice is calculated is based on whether the employee is entitled to common law notice, statutory notice under the Employment Standards Act, 2000 (ESA), or some formula calculated in the employment contract.

Statutory notice under the ESA is often much lower than common law entitlements, as the ESA establishes minimum floors for employment contracts. An employer may choose to exceed the amount specified by the ESA, but they are not required to. If the parties do not have a contract governing the employment relationship or the contract does not have a valid provision pertaining to termination, then the employee is entitled to common law “reasonable notice”.

Common Law Entitlement to Notice

In the event that the employment agreement does not contain a valid termination clause, an employee can turn to the common law entitlement to “reasonable notice”, which can be significantly more generous than the ESA entitlement. For a more detailed calculation of the common law entitlement to notice, see the previous post: when is an employee entitled to common law notice?

It is generally accepted that reasonable notice can be up to a maximum of 24 months, however, exceptional circumstances give way to a higher threshold. In Lynch v Avaya Canada Corporation (2023 ONCA), for example, the Ontario Court of Appeal upheld the lower Court’s decision that a notice period of 30 months was appropriate.

Statutory Notice of Termination Under the ESA

In some situations, an employee may be terminated and not be entitled to notice, such as when an employee is terminated with cause. Exceptions to an entitlement of working notice are addressed in section 2 of Ontario Regulation 288/01:

• An employee found “guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”
• An employee whose employment is scheduled to end when a particular task or term is complete
• An employee whose employment contract is now impossible to perform
• An employee who is terminated after refusing reasonable alternative employment

What is Working Notice?

Working notice is when an employer tells an employee that they will be terminated in advance of their termination. Employers are required to provide working notice of termination to any employees who had been continuously employed for three months or more. The amount of working notice that an employer is required to give an employee varies based on the length of the employee’s service.

Required Minimum Working Notice Periods Provided in the ESA

• One week of notice if the employee worked for three months to one year
• Two weeks of notice if the employee worked for one to three years
• Three weeks of notice if the employee worked for three to four years
• Four weeks of notice if the employee worked for four to five years
• Five weeks of notice if the employee worked for five to six years
• Six weeks of notice if the employee worked for six to seven years
• Seven weeks of notice if the employee worked for seven to eight years
• Eight weeks of notice if the employee was worked for eight years or more

Employer Option to Provide Pay In Lieu of Working Notice

Instead of providing working notice to an employee who will be terminated, an employer may choose to pay an employee the amount that the employee would have received during the working notice period. In this case, the employer would continue any benefit contributions that would have taken place during the notice period.

Statutory Severance Under the ESA

A terminated employee may also be entitled to statutory severance pay under the ESA, but that entitlement is distinct from the notice of termination or pay in lieu of notice. An employee is entitled to severance pay under the ESA if the employee was employed for five or more years and either the employee is one of fifty or more employees that were severed within six months due to the employer ending all or some of their business or the employer’s payroll is $2.5 million or more. The exceptions for severance entitlement under the ESA are similar to those of notice, with some examples provided above. A detailed list of exceptions can be found in section 9 of Ontario Regulation 288/01.

The amount of severance pay that an employee receives, up to a maximum entitlement of 26 weeks, is calculated by using the following formula:

For example, if Bob had worked for six years and three months, then Bob would be entitled to his wage for an average week times 6.25, because he had six complete years and 3/12 of an additional year.