When terminating an employee in Ontario, employers must follow legal requirements outlined in the Employment Standards Act, 2000 (ESA). However, meeting these statutory minimums may not be enough. Employees may be entitled to additional compensation under common law, which takes a broader view of fairness, considering the employee’s circumstances. Understanding how these two frameworks interact is essential to mitigate against potential liability for employers.
In this article:
If You Have an Enforceable Employment Contract
Mass Termination Rules
If You Do NOT Have an Enforceable Employment Contract
Constructive Dismissal
Ensuring Compliance and Minimizing Risk
If you have an enforceable employment contract:
Under the ESA, employees with at least three months of continuous employment are entitled to written notice or termination pay instead (in lieu) of notice. No notice is required for those employed less than three months. Notice is generally calculated at approximately one week per completed year of service, up to eight weeks. This includes time not actively worked—such as during sick leave or parental leave—as long as the employment relationship continues.
It is important to note that notice requirements are not the same as that of severance pay. Severance pay is a separate payment which is only available to employees who have completed five or more years of continuous employment with the employer. In addition, the said employer must have a global payroll of at least $2.5 million or have severed the employment of 50 or more employees in a six-month period. Severance entitlements are calculated based on the employee’s length of uninterrupted service, at a rate of 1 week per year of service, up to a maximum of 26 weeks.
Mass Termination Rules
In cases of mass termination, where 50 or more employees are dismissed within four weeks, employers must give extended group notice: 8 weeks (50–199 employees), 12 weeks (200–499), and 16 weeks (500 or more). This notice is an alternative to the individual notice entitlements. The employer must provide either the standard individual termination notice or the mass termination notice, whichever is greater.
If you do NOT have an enforceable employment contract:
The common law imposes a duty to provide “reasonable notice”, unless the employee has a valid contract with an enforceable termination clause that is drafted in accordance with the ESA limitations. Courts assess reasonable notice based on the employee’s age, length of service, position, and the availability of similar employment. Common law notice can typically range from a few months to up to 24 months in exceptional cases.
Constructive Dismissal
Another consideration is constructive dismissal, which occurs when an employer unilaterally changes a fundamental term of employment—such as a significant change in pay, role, or work location—without the employee’s agreement. If this happens, the employee may be entitled to treat the change as a dismissal and pay in lieu of notice or severance.
Ensuring Compliance and Minimizing Risk
Simply meeting the ESA requirements does not guarantee legal compliance. To minimize legal and financial risk, employers should ensure their contracts include clear and enforceable termination clauses and seek legal advice when planning terminations. For more information, please contact a member of our team or refer to the ESA and related legal resources.
Written by Preksha Mehta and Alisha Thakkar.
