Ontario Employment Standards: Termination and Severance

Ontario’s Employment Standards Act, 2000 (ESA) and its regulation O. Reg. 288/01 set out what an employer must do when employment ends: give notice or pay in lieu, and — in some cases — statutory severance pay on top. This page explains those rules in plain language and links each one to the official source.

One idea governs everything below. The ESA sets a floor, not a ceiling. An employee dismissed without cause can be owed far more under the common law of “reasonable notice” — often many months — unless a valid, enforceable contract clause limits them to the statutory minimum. Meeting the ESA minimums is the start of the analysis, not the end of it.

How much termination notice or pay does the ESA require?

Once an employee has worked continuously for three months or more, an Ontario employer must give written notice of termination, pay in lieu of notice, or a combination of the two — scaled by length of service to a maximum of eight weeks.

The minimum notice is tied to how long the person has been employed, capped at eight weeks:

• under one year: one week
• one to under three years: two weeks
• three to under four years: three weeks
• and so on, adding a week for each additional year, up to eight weeks at eight years or more.

Pay instead of notice. An employer can end employment without working notice by paying a lump sum equal to what the employee would have earned over the notice period, and by keeping benefit-plan contributions going for that period. During any working notice, the employer cannot cut the employee’s pay, change the job, or drop their benefits.

Two situations quietly turn into terminations: a long layoff can become a termination, and a constructive dismissal counts as one as well. Some prescribed categories of employee are not entitled to notice or pay at all (see the exemptions below).

Source: Employment Standards Act, 2000, ss. 53.2–67.

The statute is the floor, not the ceiling. The ESA sets only a floor: written notice or pay in lieu of up to eight weeks, based on length of service. At common law, an employee dismissed without cause can be owed far longer “reasonable notice” — often many months — unless a valid, enforceable contract clause limits them to the statutory minimum.

Who is owed ESA severance pay, and how is it calculated?

Severance pay is a separate ESA entitlement from termination pay. An employee qualifies only with five or more years of service and one of two things being true: the employer has an annual payroll of $2.5 million or more, or the severance is part of a permanent shutdown that puts 50 or more people out of work within six months.

(The $2.5 million payroll figure is set in the Act; confirm the current threshold at the official source before relying on it.)

“Severing” employment is defined broadly. It covers an outright dismissal, a constructive dismissal the employee resigns over within a reasonable time, certain long layoffs (35 weeks or more in a 52-week period), and a permanent business closure.

How it is calculated. Multiply the employee’s regular weekly wages by their years of service, adding any extra completed months divided by 12. All time on the payroll counts — continuous or not, active or not. The total is capped at 26 weeks’ wages.

Severance pay is owed on top of other ESA entitlements and any contractual amounts; only a few set-offs are allowed, such as severance already paid for the same period of service. An employer may spread severance over up to three years, but only with the employee’s agreement or the Director’s approval — and if a payment is missed, the entire balance becomes due at once.

A common error is assuming termination pay and severance pay are the same thing, or forgetting that the five-year clock includes broken and inactive service.

Source: Employment Standards Act, 2000, ss. 63–66.

The statute is the floor, not the ceiling. ESA severance pay is a distinct statutory entitlement with no common-law twin. It does not reduce — and is not part of — an employee’s common-law claim for reasonable notice, so a court can award reasonable-notice damages on top of the statutory severance the employer already owes.

How is an employee's period of employment counted?

An employee’s period of employment runs from their most recent start date to the day proper written notice is given — or, if no proper notice is given, to the day employment actually terminates.

That ending day matters, because it fixes the length of service that drives the notice or pay-in-lieu entitlement. If the employer gives proper written notice, the period ends on the day notice is given; without proper notice, it ends on the actual termination date.

The trap is the phrase “most recently.” If an employee left and came back, the count does not automatically restart: two runs of employment with a gap of 13 weeks or less between them are added together and treated as a single, unbroken period. A worker who left for a couple of months and returned keeps the earlier service in the termination math.

A common error is treating a rehire as a brand-new employee and shortchanging the notice — or forgetting that giving notice freezes the count on the notice date rather than the last day worked. The safe practice is to pull the full employment history, including any earlier stint that ended within that 13-week window, before calculating anything.

Source: Termination and Severance of Employment (O. Reg. 288/01), s. 8.

The statute is the floor, not the ceiling. This regulation sets out the ESA’s method for counting service — a floor calculation only. At common law, reasonable notice is assessed separately and almost always produces a longer entitlement, and the common law has its own approach to how re-employment gaps affect continuity, which can differ from the regulation’s 13-week bright-line rule.

How does the notice period run: seniority bumping, temporary work, and vacation?

Three mechanics in O. Reg. 288/01 govern how a notice period actually runs: a posted notice can serve as notice to a “bumped” employee, up to 13 weeks of temporary work may follow the notice date without restarting the clock, and vacation time counts as notice only if the employee agrees to it after receiving the notice.

Seniority bumping. Some contracts (often unionized) let a senior employee being laid off or terminated displace a more junior one. Where that applies, posting a notice in a visible place in the workplace — naming the employee, their seniority, job classification, and the proposed layoff or termination date — counts as notice of termination to whoever is bumped, starting the day it is posted. In that situation, the statutory requirement to maintain the employee’s wage rate and terms of employment throughout the notice period does not apply to the displaced employee, because they are moving into a different role with potentially different conditions.

Temporary work after notice. Once proper notice has been given, the employer can keep the employee on with temporary work past the notice date without restarting the clock — as long as the final end date falls within 13 weeks of the original termination date. That extra work does not change the termination date and does not add to length of service.

Vacation does not double as notice. Running an employee’s vacation time through the notice period to shorten it only counts if the employee agrees to it after receiving the notice — not before, and not by assumption. Without that after-the-fact agreement, the notice period has not run.

Source: Termination and Severance of Employment (O. Reg. 288/01), ss. 5–7.

The statute is the floor, not the ceiling. These rules govern only the minimum statutory notice under the ESA. A dismissed employee may still be owed considerably more under common-law reasonable notice, so meeting these mechanics is not the end of the analysis.

What are the rules when 50 or more employees are terminated at once?

When 50 or more employees at one establishment are terminated within the same four-week period, longer group-notice periods apply — and those notices are legally void until the Director of Employment Standards actually receives the prescribed filing.

How long the notice runs depends on the headcount being cut:

• 50 to 199 employees — at least 8 weeks’ notice
• 200 to 499 employees — at least 12 weeks’ notice
• 500 or more employees — at least 16 weeks’ notice

The filing requirement is what catches employers off guard. A prescribed form must be delivered to the Director of Employment Standards, and until the Director actually receives it, any notice already given to employees is deemed not to have been given at all. The form covers the employer’s name and mailing address, the affected work locations, headcounts broken down by how people are paid (hourly, salaried, or otherwise), the union locals representing affected workers, the economic background to the cuts, anticipated termination dates, and the provincial employment services available to those affected. Employees must also receive their own written notice, served in accordance with the Act.

There is a narrow carve-out: the mass-termination rules do not apply when both conditions are satisfied — the eliminated jobs represent 10 per cent or less of the employees who have worked at that location for at least three months, and the cuts did not result from a permanent shutdown of part of the employer’s operations there.

A common and costly error is handing out notices, assuming the clock is running, and only later discovering it was not — because the Director had not yet received the form. Every day of that gap adds to how long the employer remains on the hook.

Source: Termination and Severance of Employment (O. Reg. 288/01), ss. 3–4.

The statute is the floor, not the ceiling. These are minimum ESA standards. An employee’s common-law reasonable-notice entitlement is usually longer and is determined separately from these statutory floors.

Which employees get no ESA termination notice or pay?

A defined list of employees are entitled to neither notice nor termination pay under the ESA — including people hired for a fixed term or a specific task, employees on temporary layoff, and anyone dismissed for serious wilful misconduct that the employer has not condoned.

The main exclusions are:

• People hired for a definite term or a specific task — the contract ends when the term runs out or the job is done.
• Anyone on a temporary layoff (and someone who, once recalled, does not return within a reasonable time).
• An employee dismissed for wilful misconduct, disobedience, or wilful neglect of duty that is serious — not trivial — and that the employer has not tolerated.
• A job that has become impossible to perform or frustrated by an unforeseen event.
• Someone who turns down a reasonable alternative job with the employer, or alternative work offered through a seniority system.
• Employees let go during or because of a strike or lock-out, construction employees, and certain shipbuilding workers under a supplementary unemployment benefit plan.
• Retirement at the employer’s established retirement age — but only if that does not breach the Human Rights Code.

Watch the fixed-term trap: the exemption fails if the employer ends the contract early, sets a term longer than 12 months, or lets the person keep working three months or more past the end date — at which point the full notice rules snap back. And frustration will not cover an employer where the real cause is the employee’s own illness or injury.

Source: Termination and Severance of Employment (O. Reg. 288/01), s. 2.

The statute is the floor, not the ceiling. These exclusions only switch off the ESA’s statutory minimums. Common-law reasonable notice still applies to nearly every employee, so labelling someone “exempt” under the regulation does not shield an employer from a wrongful-dismissal claim for far larger amounts.

Which employees are left out of ESA severance pay?

Even an employee who would otherwise qualify can be shut out of ESA severance pay — most commonly for serious wilful misconduct, for refusing reasonable alternative work, or on retirement with a full unreduced pension.

The main exclusions are:

• Wilful misconduct — an employee guilty of serious wilful misconduct, disobedience, or wilful neglect of duty, as long as it is not trivial and the employer has not already let it slide.
• Refusing reasonable alternative work — turning down a reasonable alternative job with the employer, or one offered through a seniority (bumping) system.
• Retirement on a full pension — an employee who retires and receives an actuarially unreduced pension that credits the service they would have earned had they stayed.
• Frustrated contracts — where the employment contract becomes impossible to perform or is frustrated. This carve-out does not apply where the impossibility stems from the employee’s illness or injury; the employer’s death; the employee’s own death where a termination notice had already been given before they died; or a permanent shutdown caused by a fortuitous or unforeseen event — in any of those cases severance can still be owed.
• Strike-driven shutdowns — a permanent closure the employer can show was caused by the economic effects of a strike.
• Construction and on-site maintenance employees, who are excluded outright.

“Wilful misconduct” is a high bar: ordinary poor performance or a one-off mistake will not clear it, and conduct the employer has condoned cannot be revived later. Pulling a worker’s severance on a thin misconduct theory is a common, costly error.

Source: Termination and Severance of Employment (O. Reg. 288/01), ss. 9–11.

What does "construction employee" mean under O. Reg. 288/01?

O. Reg. 288/01 does not define “construction employee” itself — it adopts the definition from O. Reg. 285/01, so the term means the same thing in both regulations.

This matters because the construction industry is treated differently for some termination and severance entitlements, so whether a worker is a “construction employee” can change the answer. Because the meaning lives in O. Reg. 285/01, the classification cannot be settled by reading O. Reg. 288/01 alone — the cross-reference has to be followed. The common error is deciding whether a worker is “in construction” on instinct rather than checking the definition the regulation actually points to.

Source: Termination and Severance of Employment (O. Reg. 288/01), s. 1 (adopting the definition in O. Reg. 285/01).

What happens to an employee's length of service when a business is sold?

When a business changes hands and the buyer keeps an employee, the ESA treats that person’s employment as never having ended — their service with the previous owner counts as service with the new owner for notice, severance, and vacation — unless the gap before the rehire is more than 13 weeks.

The clock does not reset just because the name on the cheque changed. “Sells” is broad here: it covers leases, transfers, and other ways of handing over a business. The same rule applies to building services: if a building swaps one services provider for another — the Act covers food, security, and cleaning services, plus any prescribed categories — and the incoming provider takes on the outgoing provider’s staff, those employees carry their service across to the new provider.

The 13-week catch. Continuity does not apply if the new employer hires the person more than 13 weeks after the earlier of two dates: their last day with the old employer, or the day of the sale (for a business) or the day the new provider started servicing the building. Hire within that window and service carries; let the gap run longer and the slate is wiped.

A common error is assuming a fresh purchase or a new contract means a fresh start on service. It usually does not — keep the people and you generally inherit their accrued entitlements, so the cost belongs in the deal, not after closing.

Source: Employment Standards Act, 2000, ss. 9–10.

The statute is the floor, not the ceiling. At common law, a sale of business is treated as a termination of the contract followed by a new hire — accrued service does not automatically carry over unless the employee consents and the new employer expressly agrees to assume it. The ESA’s deemed continuity is the opposite default: the carry is automatic when the gap is 13 weeks or less, so ESA notice and severance are calculated on the combined service even if the contract or deal documents say nothing about it.

Which workers must an incoming building-services provider carry over?

When a building replaces one services provider with another — cleaning, security, food services, parking, concessions, or property management — the incoming provider’s default under the ESA is to step into the outgoing provider’s shoes: the workers carry over, and their length of service follows them. O. Reg. 287/01 sets out the narrow categories the new provider does not have to carry.

The new provider does not owe termination or severance under Part XV of the ESA to a worker who meets any of these conditions:

• The employee did not perform their duties primarily at that site during the 13 weeks before the changeover date.
• The employee was not actively at work immediately before the changeover and did not perform their duties primarily at the site during their most recent 13 weeks of active employment.
• The employee worked at the site for fewer than 13 weeks out of the 26-week window before the changeover date. (In counting that window, periods when building services were temporarily stopped, or when the worker was on a Part XIV job-protected leave, are excluded.)
• The employee turned down a reasonable job offer from the new provider. Whether an offer is reasonable takes into account the terms the employee had with the outgoing provider when the request for staff information was made.

On the information side, the building’s owner or manager must give the incoming provider details on each affected employee: job classification or description, the actual wage rate paid, a full benefits breakdown with costs, regular daily and weekly hours (or the actual hours for each of the last 13 weeks where hours vary), the hire date, any attributed employment period under s. 10 of the ESA, the number of weeks the employee worked at the site in the 26 weeks before the request, and a flag for whether the employee falls into one of the primarily-elsewhere categories. That 26-week count, too, excludes temporary service stoppages and job-protected leaves.

Source: Building Services Providers (O. Reg. 287/01), ss. 2–3.

The statute is the floor, not the ceiling. This regulation addresses which workers an incoming provider must treat as continuous employees for ESA purposes. It does not limit any common-law reasonable-notice rights those workers may have against the outgoing — or, depending on the circumstances, the incoming — provider, so meeting these ESA exceptions does not close off all exposure.

Are non-compete clauses enforceable in Ontario?

No. The ESA bars an employer from entering into a non-compete agreement with an employee or an applicant, and any such clause is void — subject to two narrow exceptions: the sale of a business, and certain senior executives.

A “non-compete agreement” means a clause that stops a former employee from working, running a business, or otherwise competing with the employer once the working relationship ends. The ban applies to applicants too, so a non-compete cannot simply be slipped into an offer letter.

The two real exceptions are:

• Sale of a business. Where a buyer acquires a business (or part of one) and, as part of the deal, the seller agrees not to compete and then becomes the buyer’s employee immediately after the sale, that agreement still stands. A lease counts as a sale here.
• Executives. The ban does not cover senior leaders such as a CEO, president, CFO, CIO, chief legal or HR officer, COO, chief administrative or corporate development officer, or anyone holding another chief executive position.

The common trap is assuming a manager or a salesperson is an “executive.” The title alone does not qualify them — the role has to be one of those top chief positions. A void non-compete is struck from the agreement; whether the rest of the contract stands is a separate question.

Source: Employment Standards Act, 2000, ss. 67.1–67.2.

The statute is the floor, not the ceiling. This is a clear break from the old common-law approach, under which a reasonable, narrowly drawn non-compete could be enforceable if it protected a genuine business interest. The ESA now generally prohibits non-competes outright, so a clause that might once have held up can simply be void.

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This page is general information about Ontario employment law, not legal advice. Termination is the area where the gap between the statutory minimum and what a court may order is widest, so obtain advice before acting on any of the above.