3 Legal Issues to Watch Out for When Employment Ends

4 minute read
February 4, 2026
Employment & Labour Law, Layoffs, Termination

Jennifer Zeilikman

Here are three common issues that employers and employees should watch out for when the employment relationship ends.

1. Was it a layoff or a termination?

This may be the most misunderstood issue in employment law. It is very common to hear the statement from a recently fired employee that they “lost their job” because they were laid off. However, a layoff is a cessation of work not of employment. This means that if lawfully implemented, a layoff allows the employer to pause work without pay and without it being deemed a breach of the employment relationship (i.e. termination). It will allow the employer to essentially put work “on hold,” and not have to pay the employee their salary or wages during this period of a temporary break.

It is not simply the case that an employer can “lay off” an employee from their job, even temporarily, absent an enforceable contractual term in the employment contract. An employer only has the right to layoff an employee if that right is found in the employment contract despite there being provisions in Ontario’s Employment Standards Act, 2000 (“ESA”) regarding layoffs. In this situation, the “lay off” is wrongful dismissal and the employee is entitled to both statutory and potentially common law entitlements for failing to provide the employee with notice of termination or termination pay.

Statutory entitlements are minimum entitlements and under the common law a dismissed employee may be entitled to more. Termination pay at common law is based on “reasonable notice.” Reasonable notice is simply the amount of time that an employer should provide the employee before the employee’s job ends. The length of this notice is determined based on a variety of factors. These factors include age, position, length of service and the ability to find new alternative employment. When an employer requires the employee to work during their notice period, this is called “working notice.”

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2. Did the employee resign or was it a constructive dismissal?

It is a common occurrence where an employee resigns from their employment because there has been a change in the workplace. The employee can not tolerate this change and will offer their resignation in an effort to move on. For example, an employee may decide to leave work is because they had been exposed to a toxic work environment involving harassment or discrimination when a new manager arrives at the workplace. Another common reason is when their employer dictates new terms relating to the job duties or responsibilities.

However, when an employee has “resigned” under the above circumstances, it may not actually be a resignation but constructive dismissal. In cases of constructive dismissal, the employee’s fundamental terms of employment are changed unilaterally by the employer. An employee’s employment will usually be impacted such that it would be unreasonable to stay in the employment relationship and accept the fundamental changes in their employment. As such, the employee will then resign from their employment.

Resignations need to be freely and voluntarily given for the resignation to be valid. If the resignation that was provided by the employee to the employer is due to the employee facing significant changes to their working conditions, then that “resignation” may be a response to a constructive dismissal. In fact, an unlawful layoff, as discussed above, in which an employee “resigns,” is really constructive dismissal.

Once a claim for constructive dismissal has been made then the employee will generally claim common law and statutory damages in a wrongful dismissal lawsuit due to the employer failing to provide the employee with proper notice of termination. As such, an employee may be entitled to severance pay and / or termination pay. Depending on the circumstances, the employee may also be entitled to punitive and general damages for discrimination, harassment or bad faith.

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3. Did the employer have a valid termination clause in the employment agreement?

Arguably the most important clause in an employment contract is the termination clause. Whether or not an employment contract or employment agreement has a valid termination clause can completely change the outcome of a wrongful termination or wrongful dismissal claim in terms of what an employer has to pay to the employee upon termination.

A termination clause sets out how the employee will be terminated and what notice they are entitled to when they are terminated or fired from their job. Most employers try to limit an employee’s entitlement to notice or pay in lieu of notice to the ESA’s minimum entitlements in the termination clause. This means that the employer will try to reduce the notice period owed to the employee to only what is set out in the ESA and eliminate what could be owed to the employee under the common law.

However, employees are entitled to much longer notice periods under the common law in comparison to what would be typically owed to them in terms of notice entitlements under the ESA. Employers are on the hook to pay the employee more money in lieu of notice or provide a greater notice period before they terminate them under the common law if the termination clause fails to limit the employee to statutory minimum requirements. In consequence, it is very important for employers to get entitlements correct in an employment contract or risk that contract not being enforceable.

We cannot stress enough the importance of the employee approaching an employment lawyer using their skills to determine if the termination clause in their employment contract is valid. Failing to do so may result in the employee accepting far less than what they are actually entitled to upon termination of their employment.

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How can Zeilikman Law help?

Approaching an employment lawyer can be very helpful to both employers and employees when the employment relationship ends. Employment lawyers like the ones at Zeilikman Law can assist both employers and employees by reviewing the facts surrounding the employment law issue and help them determine what the next best steps are to take.

Employers and employees can contact our office at (905) 417-2227 or online here to schedule their own confidential consultation with Zeilikman Law.

The above article is for general information purposes only, does not constitute legal advice or create a solicitor-client relationship. Because each case is unique and factually driven, if you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere. We represent clients in the Greater Toronto Area including Toronto, North York, Markham, Vaughan, Thornhill, Newmarket, Aurora, Brampton, Mississauga, Barrie, Ajax, Whitby, Pickering and Oshawa.