Termination of Employment
As a practical matter, there are three sources of pay in lieu of notice:
- Termination Pay
- Severance Pay
- Reasonable Notice
The Employment Standards Act defines “termination pay” as one (1) week per year of employment to a maximum of eight (8) weeks. An employer can either require the employee to work the notice or can provide pay in lieu of notice.
Severance pay is defined in the Employment Standards Act and entitles a dismissed employee to an additional one (1) week per year of employment to a maximum of twenty-six (26) weeks. However, severance pay is payable only if the employee has been employed for five (5) years or more and the employer has discontinued all or part of its business at an establishment and the employees is one (1) of fifty (50) or more employees who have lost their employment within a six (6) month period; or the employer has a payroll in Ontario of at least 2.5 million dollars.
These are the statutory minimums and it can be seen that a long-term employee would be entitled up to 34 weeks pay (26 weeks plus 8 weeks) as a statutory minimum.
The third source of notice is the reasonable notice at common law as mentioned above. This notice includes both termination and severance pay but is based upon a different set of factors. These are factors applied by Judges and have been repeated in countless cases but generally speaking, the factors boil down to the following:
- length of employment
- degree of responsibility in the workplace
- and the age of the employee
Historically these were to add up to a genuine pre-estimate of how long it would take for the individual to find similar alternative employment. What this really means is that somebody who has been in upper management for many years is going to get a longer period of notice than somebody who has been in upper management for a shorter period of time. As well, upper managers are generally entitled to more notice or pay in lieu of notice than lower managers. It should be understood however that there is no specific rule that applies to everyone and it can be different in each and every case.