Severance Pay

If you work in the province of Ontario and the company falls under its jurisdiction, you may be covered under the Employment Standards Act, 2000. The Act sets minimum standards that an employer is required to follow. If it doesn’t, you can file a claim with the Ministry of Labour. If you are still working for the company, you may be able to file a claim without disclosing your name. The Act protects you if you are trying to exercise your rights.
If you stop working for the company for any reason other than voluntary resignation and if you worked for at least 5 years and the company has a payroll of $2.5 million or more, or the employer has terminated 50 or more employees within six months period, you may be entitled to severance pay which compensates you for loss of seniority and job related benefits. It also recognizes your long service. Severance pay is in addition to termination pay, which you may be entitled to in place of notice of termination.
The amount of severance pay is one-week pay for each year’s service for a maximum of 26 weeks.
Severance pay must be paid 7days after the employment ends or the next payday, whichever occurs later. If the employee agrees, the employer may pay severance pay in instalments. The director of employment standards, Ministry of Labour may also permit the employer to pay severance pay in instalments. The period of payment cannot be longer than three years. If the employer fails to make the scheduled payment, the severance pay becomes due immediately.
If the employee is paid on the basis other than the hours worked such as commission, the wages earned in the last 12 weeks of employment are used in calculating average weekly earnings.
An employee is not entitled to severance pay if he or she:
            .           has refused an offer of “reasonable alternative employment” with the employer;
            .           has refused “reasonable alternative employment” that is available to the employee through
                        a seniority system;
            .           is severed and retires on a full pension (not including Canada Pension Plan benefits);
            .           has his or her employment severed because of strike, as long as the employer can show that
                        the economic effects of the strike caused the closing of part or all of the business;
            .           is employed in construction, including employees who are working off-site and who are
                        commonly associated in work or collective bargaining with employees who work at the
                        construction site;
            .           is employed in the on-site maintenance of buildings, structures, roads, sewers, pipelines,
                        mains, tunnels or other works;
            .           is free to choose whether or not to work when the employer him or her work, and the
                        employee is able to refuse work when it is offered, without penalty;
            .           is guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and
                        was not condoned by the employer; or
            .           has lost his or her employment because the contract of employment is impossible to
                        perform or has been frustrated by an unexpected or unforeseen event or circumstance. This
                        does not include bankruptcy or insolvency or when the contract is frustrated or impossible
                        to perform as the result of an injury or illness suffered by an employee.     
If your employment relationship is governed by the collective agreement and you are a member of the trade union, the provisions of this Act do not apply to you. It is assumed that the collective agreement would provide greater benefits than the minimum standards of the Act. If there are issues to be resolved, it is expected, the collective agreement will provide a mechanism to resolve those issues.
There may come a time when you or the employer disagree with the officer’s decision, in that case, both parties have a right to appeal the officer’s decision to Ontario Labour Relations Board within 30 days. It does not cost you money to request an appeal but the employer may be required to pay money to the Ministry if it is found to be owing. The Ministry distributes the money in accordance with the referee decisions. The Board’s decision is final and binding on both parties.
It is important that you must attend any hearing called to deal with your claim. If you fail to do so but the employer attends, you not only lose the chance to submit evidence to support your position but also miss a chance to challenge employer’s evidence. The officer or the referee may accept the employer’s evidence and make the decision on that basis. 
This information is provided for guidance and should not be considered as a legal advice.

This article is provided by Rajinder K. Batra, who is a retired Employment Standards Officer with the Ministry of Labour with 15 years experience in these matters.

If you have any questions regarding your employment, please contact the writer by e-mail at

If you don’t have access to e-mail; you can fax your question at (905) 331-1805.

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