Severance Pay Ontario Play in Termination Agreements

The decision to terminate an employee is never easy, but it’s often made even more difficult when that decision is met with a termination package. If you’re facing termination, or have been recently fired by your employer and are receiving a severance pay ontario offer, it is vital to understand what that package means for you and how much you are actually entitled to. Severance pay is the financial bridge that you need to get from your old job to your new one and should be a major factor in your considerations as you consider the offer.

In Ontario, there are a few key considerations that go into what constitutes a fair severance package. These criteria draw from both common law and the Employment Standards Act (ESA) and are non-negotiable in any negotiations you may undertake with your employer upon your departure.

ESA requires that your employer provide you with a minimum severance pay Ontario of 1 week of regular pay for every year of service, up to 26 weeks. This is a legal requirement and is the foundation of your entitlements. However, it’s important to note that common law considerations may result in a more favorable severance package, based on various factors such as length of employment, position and your age at the time of termination.

What Role Does Severance Pay Ontario Play in Termination Agreements?

For example, let’s say your employer has been in business for three years and you worked 35 hours per week at $18 per hour plus 4% vacation pay. Your employer would be required to pay you 3 weeks of termination pay. This is because the formula to calculate your severance pay is, “one week of regular pay for each full year of service” up to a maximum of 26 weeks.

If you work for a large organization, the ESA has additional rules that require it to offer more compensation than if you were employed by a small business. This is because larger employers have the resources to cover the loss of an employee’s salary and are more likely to be able to attract replacement employees.

Despite these requirements, it is still possible for your employer to try and reduce your severance package by using illegal termination clauses in your employment contract that aren’t compliant with the ESA. This is why it is so important to have a lawyer review any termination agreements before you sign them.

Even if your employer is firing you for a legitimate reason, it’s important to remember that cause must be very serious and harm the employer’s operations, such as theft or fraud rising to the level of gross misconduct. Without cause, it is a high bar for employers to meet and in many cases, courts and the Ministry of Labour would not allow an employer to fire an employee with no notice at all and with no payment whatsoever. To avoid a wrongful dismissal lawsuit, it’s critical to consult an experienced Toronto employment lawyer. They can help you determine if you have a case and the best strategy for defending it.