Severance Pay in Ontario
What You Are Actually Owed
Most Ontario employees receive severance offers that fall far below their legal entitlement. This guide explains the two layers of severance - ESA minimums and common law notice - and the difference between them, which can be worth tens of thousands of dollars.
What’s in this guide
1. The Two Layers of Severance Pay
- 1 week/year of service
- Maximum 8 weeks termination pay
- ESA severance: 1 wk/yr if 5+ yrs AND payroll over $2.5M (max 26 wks)
- Absolute minimums - cannot be waived
- Based on age, service, position, market
- Approximately 1 month per year of service as a starting point
- Maximum approximately 24 months
- Almost always higher than ESA minimums
2. ESA Termination Pay and Severance Pay
| Entitlement | Calculation | Maximum | When It Applies |
|---|---|---|---|
| Termination pay (s.57) | 1 week per year of service | 8 weeks | All employees with 3+ months of service |
| Severance pay (s.64) | 1 week per year of service | 26 weeks | Only if: 5+ years service AND employer payroll over $2.5M, OR mass layoff |
3. Common Law Notice - How It Is Calculated
Common law notice is determined by courts using the Bardal factors:
| Factor | Impact on Notice |
|---|---|
| Length of service | The most important factor. Courts often start at 1 month per year of service. |
| Age | Older employees receive more notice - harder to find comparable work. Employees in their 50s-60s with long service may approach the 24-month cap. |
| Position and seniority | Senior, specialized, or managerial roles receive more notice than entry-level positions. |
| Availability of similar work | If comparable jobs are scarce in your field, notice increases. |
| Special inducement | If you left secure employment to take this job, courts may award additional notice. |
4. What to Do With Your Severance Offer
You are almost never required to sign right away. Take the offer home. There is no legal obligation to decide on the spot.
If you received a verbal offer, ask for the full terms in writing before responding or consulting anyone.
A 30-minute free consultation often reveals that what was offered is a fraction of the legal entitlement. The additional amount secured almost always far exceeds any legal fees.
Your contract may contain a termination clause limiting you to ESA minimums. Many such clauses are legally unenforceable - a lawyer can assess yours.
Apply immediately after termination. Delays cost you weeks of benefits.
5. Negotiating Your Severance Package
| Component | What to Check |
|---|---|
| Notice/pay in lieu | Is it only ESA minimums? Common law notice is typically much higher and almost always worth negotiating. |
| Benefits continuation | Do health, dental, and life insurance continue through the notice period? Required under ESA. |
| Bonus and commissions | Are unpaid bonuses or commissions for the notice period included? Frequently omitted. |
| Stock options and equity | What happens to unvested options? Can represent significant value. |
| Reference letter | Has a positive reference been offered? This has real economic value and can be negotiated. |
6. Severance Pay and Wrongful Dismissal
If your employer offered inadequate severance (less than your common law notice entitlement), you have been wrongfully dismissed - even if the termination itself was lawful. The remedy is the common law notice amount you should have received.
You have two years from the date of termination to make a wrongful dismissal claim in Ontario court. Do not wait - limitation periods run from the date you were terminated, not the date you signed (or did not sign) a release.
7. Frequently Asked Questions
Just Received a Severance Offer?
Do not sign before speaking with us. Our Toronto employment lawyers review severance offers in a free consultation. The additional amount we typically secure far exceeds our legal fees.
Review My Severance Offer →Our lawyers offer free initial consultations, no obligation to retain.
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