When an employee is wrongfully dismissed from their job, one of the first questions they may have is about termination pay. Most employees want to know if they are entitled to termination pay when have been fired and, if so, how much termination pay they can claim.
What is termination pay?
When an employee has been dismissed from their job, the employer must provide the employee with either written notice of the termination, termination pay in lieu of that notice or a combination of both. Termination pay is simply monetary compensation to the employee in lieu of notice of the termination. Sometimes the employer will provide no notice to the employee or less notice than what the employee should have received from the employer.
The amount of termination pay can be calculated statutorily. At common law, the amount will be considered as “pay in lieu of reasonable notice.” However, it is only if the employee’s employment agreement or contract does not contain an enforceable termination clause limiting the employee’s compensation to the entitlements under the statute, that the employee may be also entitled to compensation for pay in lieu of reasonable notice at common law.
Ontario’s Employment Standards Act, 2000, (“ESA”) sets out what the employee’s minimum notice period should be statutorily. Again, ESA entitlements are minimum entitlements and an employee’s notice period owed under the ESA is based only on how long they have been working for the employer (one week of notice for every year that the employee worked the employer). An employee may be entitled to a significantly longer notice period under the common law.
The amount of common law notice is determined by using a variety of factors. These factors include:
- the employee’s age;
- length of service;
- character of employment (such as the employee’s job description or position); and
- the availability of similar employment, having regard to the experience, training and qualifications of the employee.
Ontario courts will award an employee with pay in lieu of reasonable notice up to 24 months’ common law notice depending on the various factors we have mentioned above. In exceptional circumstances, Ontario courts can award notice periods to dismissed employees of above 24 months.
Severance Pay vs. Termination Pay
Termination pay and severance pay are not the same. This is one of the most common misconceptions by the public and individuals often discuss “severance pay” and “termination pay” interchangeably as if those terms are equivalent. The confusion also arises when the word “severance package” is thrown around colloquially. However, with regard to severance pay, the employee is only entitled to severance pay compensation if they meet certain criteria that are set out in the ESA. Under the ESA, the employee must have worked for the employer for five (5) or more years. The second criterion is that the employer must have a payroll of at least $2.5 million. An employee may also be entitled to severance pay if the employee was subjected to a mass termination in accordance with the ESA. If those criteria are not met, then the employee will not be able to obtain “severance pay.”
Are there any issues that could complicate a claim for termination pay?
The main complicating issues surrounding termination pay would be what termination clause there is in the employee’s employment agreement, if any. This is because most employers will try to limit an employee’s ability to claim termination pay under the common law upon dismissal. Typically an employer aims to limit termination pay to the statutory minimum entitlements under the ESA. Reviewing an employment agreement termination clause is a rather complex task and will require the efforts of an employment lawyer to assist an employee or employer to determine if any termination clause in an employment is enforceable.
How can Zeilikman Law help?
It is very common that both employers and employees have questions about termination pay upon dismissal. Our employment lawyers at Zeilikman Law routinely help employees review their case to ensure that their rights to the correct amount of compensation in form of termination pay is protected. We also help employers determine their obligations to employees upon termination.
For more information about the issue of termination pay please review our blogs entitled:
Zeilikman Law can be contacted at (905) 417-2227 or online here to schedule your own confidential consultation with one of our employment lawyers.
