🛑 Severance in Ontario is not complicated 🛑. The following 🔟 simple principles will help everyone understand what severance is, who gets severance, and how much severance is worth:
- Severance is money that employers have to pay employees when they terminate them. Technically, in Ontario, there are two kinds of severance: Common Law Severance and Employment Standards Act Severance. Common Law Severance is worth far more than Employment Standards Act Severance. Learn more here. ✅
- Everyone is implied to be entitled to Common Law Severance. However, only workers who have five or more years of service at a large employer are entitled to Employment Standards Act Severance. Learn more here and here. ✅
- Employment contracts can limit how much Common Law Severance someone is entitled to, but an employment contract cannot limit how much Employment Standards Act Severance someone gets. Learn more here. ✅
- Any contract that purports to limit severance below Ontario’s Employment Standards Act’s minimum severance entitlements is void. ✅
- There is no formula for calculating Common Law Severance and thus there is no “rule of thumb”. This is because no two cases are the same. A sixty-year-old lawyer earning $500,000 per year is not owed the same “rule of thumb” amount of severance as a twenty-year-old dishwasher earning minimum wage. On the contrary, Employment Standards Act Severance has a simple formula. Learn more here and here. ✅
- There are four main factors relevant to the determination of Common Law Severance: character of employment; length of service; age of the employee; and availability of similar employment. Learn more here. ✅
- We use precedents to calculate how much Common Law Severance someone is entitled to. For example, if someone is a sixty-year-old lawyer earning $500,000 per year who worked for twenty years, we look at the range of severance awarded in cases where an employee was around sixty years old, employed as a professional, made $250,000 – $1,000,000 per year and had lengthy, but not extraordinary service. Learn more here. ✅
- The maximum amount of Common Law Severance someone is entitled to is around two years’ severance. However, in rare cases of extraordinary length of service, individuals can recoup a few extra months of severance. The minimum amount of Common Law Severance is around two months because the courts recognize that everyone takes around at least two months to start working again. Learn more here. ✅
- If someone is not provided with enough severance when they are terminated, it is a “wrongful dismissal”. A wrongful dismissal lawsuit is concerned with fighting for more severance. Learn more here. ✅
- If someone finds another comparable job after getting terminated, technically, their right to Common Law Severance is extinguished as soon as they start working again. At the same time, courts can limit how much Common Law Severance someone gets if they fail to look for a new job. This is called the rule of mitigation. Learn more here. ✅
Most employment law firms that focus on employee-side cases will provide a free phone consultation to calculate how much severance someone is owed.
Jeff is a lawyer in Toronto who works for a technology startup. Jeff is a frequent lecturer on employment law and is the author of an employment law textbook and various trade journal articles. Jeff is interested in Canadian business, technology and law, and this blog is his platform to share his views and tips in those areas.