Mass Terminations and Severance Pay

It is always shocking when an Employer terminates a considerable number of employees in one fell swoop, and even more unsettling when you find yourself subject to a mass termination. In Ontario the Employment Standards Act, 2000 (“ESA”) gives additional notice obligations for employees who find themselves apart of a mass termination. This means that a non-union employee’s minimum severance entitlements under the ESA are higher compared to the statutory entitlements under a regular dismissal. Being aware of your legal rights will help ensure that you are receiving the compensation you are entitled to. This blog is intended to provide general information only and does not constitute legal advice.

What is the definition of a Mass Layoff?

Generally, a mass layoff is a situation where an employer terminates many employees at the same time. How do you know if your layoff qualifies as a mass layoff? A mass layoff requires: 

• The employment of 50 or more employees to be terminated;
• The terminations occur within a four (4) week period; and
• The terminations occur at the employer’s establishment.

Proposed amendments to the ESA from Bill 79 would expand the definition of “employer’s establishment.” Employees who perform work in a private residence and do not perform work at any other location where the employer carries on business would be considered a part of the employer’s establishment.  The result of this change would mean that fully remote workers could be subject to a mass termination, whereas currently they cannot. 

The notice obligations for mass terminations will not apply if the layoffs do not represent more than ten (10) percent of the employees who have been employed for at least three months, and the employee terminations are not caused by permanent discontinuance of business. 

You are a part of a mass termination. How much notice are you entitled to?

The minimum notice of termination for Ontario employees depends on the amount of time you worked for your employer. In the context of an individual dismissal, and not in the context of a mass layoff, the ESA requires notice as follows:

• If you worked, less than one year = one (1) week of pay
• If you worked, 1 year but less than 3 years = two (2) weeks of pay
• If you worked, 3 years but less than 4 years = three (3) weeks of pay
• If you worked, 4 years but less than 5 years = four (4) weeks of pay
• If you worked, 5 years but less than 6 years = five (5) weeks of pay
• If you worked, 6 years but less than 7 years = six (6) weeks of pay
• If you worked, 7 years but less than 8 years = seven (7) weeks of pay
• If you worked, 8 years or more = eight (8) weeks of pay

Please note that calculating notice, and corresponding severance pay, for individual Ontario employees can be calculated by other methods, such as common law. The ESA notice requirements outlined above are the minimum an individual can receive. An individual subject to a mass layoff will be able to receive a far greater minimum notice. 

The minimum length of your notice period in the event of a mass termination is determined by the number of employees who have been laid off:

• If 50 – 199 employees were terminated = eight (8) weeks
  
• If 200- 499 employees were terminated = twelve (12) weeks
  
• If 500 + employees were terminated = sixteen (16) weeks

How much severance is owed by employers in a mass layoff?

In addition to receiving notice of termination, an employee may also be entitled to statutory severance pay. As per the ESA, an employee qualifies for statutory severance pay if they meet the following criteria: 

• Worked for the employer for 5 years or longer;
• 50 or more employees who have been terminated within a 6-month timeframe; and 
• Employer has a payroll of $2.5 million or more. 

The employee can receive an extra week of pay per year of service under the statutory severance pay scheme, with a maximum limit of 26 weeks of regular wages.

Takeaway

Mass layoffs can be a stressful event, it is important to remember that your employer cannot force you to accept a severance offer. Instead, they should give you time to consider the offer. If you would like to discuss a severance offer or have any related questions, please contact Toronto employment lawyers, Sultan Lawyers, for a free call back or flat-rate consultation. As employment lawyers, we can help determine if a severance package is fair and if there is potential to negotiate. Please contact us by telephone at 416-214-5111 or here.