ARTICLE
16 March 2012

Not Everyone is Entitled to Severance: Know Your Rights and Obligations

LL
Lerners LLP

Contributor

Lerners LLP is one of Southwestern Ontario’s largest law firms with offices in London, Toronto, Waterloo Region, and Strathroy. Ours is a history of over 90 years of successful client service and representation. Today we are more than 140 exceptionally skilled lawyers with abundant experience in litigation and dispute resolution(including class actions, appeals, and arbitration/mediation,) corporate/commercial law, health law, insurance law, real estate, employment law, personal injury and family law.
Pursuant to the Employment Standards Act, employers are required to provide severance pay, which is compensation to a qualified employee who has his or her employment "severed".
Canada Employment and HR

Pursuant to the Employment Standards Act, employers are required to provide severance pay, which is compensation to a qualified employee who has his or her employment "severed". The purpose of severance pay is to compensate an employee for loss of seniority and job-related benefits.

In order to qualify for severance pay, an employee must be employed by the employer for five years or more. Additionally, the employer must have severed the employment of 50 or more employees in a sixmonth period because all or part of the business closed OR the employer must have a payroll in Ontario of $2.5 million or more. Severance pay is in addition to any other amount to which an employee is entitled under the Employment Standards Act or his or her own employment contract.

To determine the amount of severance pay an employee is entitled to receive, multiply the employee's regular wages for a regular work week by the sum of the number of years of employment the employee has completed AND the number of completed months of employment divided by 12 for a year that is not completed.

It is important to note that only the following set-offs and deductions may be made in calculating severance pay:

  1. Additional unemployment benefits the employee collects after his or her employment is severed and before the severance pay becomes payable to the employee.
  2. An amount paid to an employee for loss of employment under a provision of the employment contact if it is based upon length of employment, length of service or seniority.
  3. Severance pay that was previously paid to the employee under the Employment Standards Act.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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