In a perfect world, we wouldn’t have to worry about severance pay. We would find a job we love and are good at. We’d happily work our way up in the organization until we retire a few years early with an awesome pension.
We’re not in that ideal world though; corporations aren’t as stable as they used to be. The expectations on employees at the bottom of the organization are just as challenging as the demands those at the top of the organization face. So, whether we like it or not, we may be given our walking papers at least once during our career. This article focuses on severance pay for workers in Ontario including those who were let go, and those who quit.
SEVERANCE VS TERMINATION PAY IN ONTARIO
There is often confusion between these two types of compensation:
– TERMINATION PAY, as stated by the Ontario Employment Standards Act (ESA) entitles non-unionized employees (who have worked more than three months with the organization) to one week’s notice or pay, per year of service, up to eight weeks maximum.
– SEVERANCE PAY is for longer term employees (five years or more) at large organizations. The ESA specifies working for a company whose payroll is higher than $2.5 million dollars or is doing mass layoffs. It entitles workers an additional one week of severance per year of employment, up to 26 weeks.
An easy way to look at it; a “severance package” is compensation for being terminated without cause. All non-unionized employees in Ontario qualify for termination or severance pay when they are let go as long as:
– The employee has worked for a minimum of three months with the organization.
– They are laid off or terminated without cause.
– They quit in consideration of constructive dismissal (we’ll explore “constructive dismissal” further down in this article).
WHAT IS CONSIDERED “FIRED WITH CAUSE”
You may be relieved to know that to justify a termination as “for cause”, there are pretty high standards that need to be met. The employee’s misconduct must be considered severe and deliberate by the Ministry of Labour and Ontario courts. Additionally, usually more than one mis-step is required for an employer to terminate their relationship without any pay or notice.
That’s why most employers don’t rely on reasons and dismiss their employees without cause. Being dismissed “without cause” could mean many things including layoffs, the business changing directions, or simply feeling the employee isn’t “a good fit”.
CAN I GET SEVERANCE IF I QUIT?
Sometimes, yes. “Constructive dismissal” is the term for an employee resigning, because the employer is in breach of contract. If the employer’s breach is serious enough, the worker will receive severance the same as if they were let go.
It may not be necessary to have a physical contract. If the employee can show that the organization didn’t live up to the obligations of the employment relationship, they’re able to justify severance. Some cases we’ve seen, for example, have the employer altering the terms and conditions of the workplace with the intent of driving the employee out. So, if you feel your employer has been trying to make you quit, it’s a possibility. Collect evidence such as emails, memos, even keeping a journal of your negative experiences at work.
Constructive dismissals can be very hard to prove. The Government of Ontario does offer some help and guidelines. They recommend resigning as soon as possible after the employer initiates the change. While it’s not defined, the ESA requires the employee to “resign within a reasonable period in order for the employer’s actions to be considered a termination of employment”.
If you’re unsure about qualifying for “constructive dismissal”, whether you’ve already quit or are starting to think about it, an expert associate from the Duarte & Lesperance Professional Corporation can help you navigate the process.