Losing your job due to layoffs, company insolvency or other reasons may create a period of financial instability in your life. You may have the skills, experience and network to land another job fairly quickly, but in these uncertain economic times, there are no guarantees. Fortunately, the government of Ontario requires certain employers to provide severance pay when they terminate employees under particular conditions.
Severance pay can provide you with a cushion to get you to your next job, and it may compensate you for some material losses, such as salary, seniority and benefits. Qualifying for and receiving severance pay can be complex to understand. There are numerous eligibility requirements and exceptions, but if you are in a situation where a severance pay is something you need and deserve, you would be wise to learn as much as you can about your rights.
When do I qualify?
While technically “severance” means the “cutting off” of your employment, there is a difference between severance and termination or resignation. You should not expect severance pay if you quit a job or if your employer fires you for cause. Severance that qualifies for compensation occurs under specific circumstances, such as any of the following:
- You have worked for your employer for at least five years.
- Your employer pays at least $2.5 million in payroll in Ontario or is severing at least 50 employees.
- Your employer lays you off due to the closing of the business or location.
- You resign from the job due to constructive dismissal, which is when an employer changes the terms of your employment or creates an environment that forces you to quit.
- Your employer lays you off for at least 35 weeks for motives unrelated to discipline, strike or other specific reasons.
- Your employer lays you off because the company is struggling financially or going through a bankruptcy.
Other laws or the terms of your contract may have other requirements, and some of those listed above may have caveats or exceptions. For example, you may give two weeks’ notice to quit your job without losing eligibility for compensation if your employer has already given you notice of termination, but you would be wise to obtain legal counsel to ensure that your circumstances meet the requirements.
Additionally, a lawyer can assist you in determining whether your employer is offering a fair severance based on your employment history. In fact, it is smart to discuss your options with a legal professional before accepting a package from your employer or if your employer refuses to provide a severance to which you are entitled.