When someone is fired from their job, i.e. terminated, they are generally entitled to receive notice (more often than not, in writing) of the termination. The employer may choose between the two different types of notice: 1. Working Notice; or 2. Pay in Lieu of Notice.
In a working notice situation, the employer informs the employee that their employment will end on a specified date in the future, and the employee continues to work for the employer until that date. The amount of working notice the employee is entitled to will depend on a number of factors, including but not limited to, how long they have been employed and whether the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”) or the common law rules relating to notice periods apply. Working notice is not as common as providing an employee with pay in lieu of notice, however it does occur. Working notice provides terminated employees with a reasonable period of time in which to find alternate employment, and gives employers a chance to put a more seamless transition in place, since the employee continues to perform their duties and obligations until their termination date.
Instead of informing an employee that their termination will take place at a specified date in the future, employers can let that employee go right away. If this is the option taken, the employer must pay the employee the amount they would have earned had the employee remained working over their notice period. This is known as pay in lieu of notice, or termination pay. Pay in lieu of notice is the much more common situation, with employers generally providing terminated employees one lump sum payment, or a salary continuance for the duration of the notice period. Importantly, while termination pay is often referred to as “severance pay”, severance is a distinct legal concept and is different from termination pay. While many employees are entitled to termination pay, not all employees are entitled to severance pay. The Ministry of Labour has a handy guide about who is eligible for severance pay under the ESA.
Most, but not all, employees are covered by the ESA. This Ministry of Labour guide can help determine whether a particular employee is covered or not. The ESA provides for a minimum amount of notice that a terminated employee must receive under the law:
|Period of Employment||Notice Required|
|Less than 1 year||1 week|
|1 year but less than 3 years||2 weeks|
|3 year but less than 4 years||3 weeks|
|4 year but less than 5 years||4 weeks|
|5 year but less than 6 years||5 weeks|
|6 year but less than 7 years||6 weeks|
|7 year but less than 8 years||7 weeks|
|8 years or more||8 weeks|
This minimum notice must be provided by an employer, and cannot be contracted out of through the provisions in an employment contract. Ontario courts have regularly recognized that employees who have not signed an employment contract are entitled to a much longer minimum notice period (“Common Law Notice Period”) than the minimum notice period under the ESA.
Most properly drafted employment contracts include a termination provision that sets out how much notice terminated employees are entitled to. Termination provisions allow the parties to agree to any amount of notice that they deem appropriate, so long as the minimum standards provided for under the ESA are met. While termination provisions can increase in the minimum notice period, such provisions are generally used to avoid the Common Law Notice Period and to ensure the lower ESA minimums apply. For more information about terminations, check out the Ministry of Labour’s termination guide. If you are an employer seeking to terminate an employee, contact the Toronto employment lawyers at NULaw to ensure that you are meeting your legal obligations and minimizing your potential legal risk. If you are an employee who has been fired, contact the Toronto employment lawyers at NULaw to protect your legal rights, and ensure that you are receiving the maximum amount of notice that you are entitled to. Contact us online or at 416 481 5604 to book a consultation today.