Can an Employer Refuse Severance Pay?
In Ontario, an employer cannot simply refuse Severance Pay when an employee meets the statutory eligibility requirements under the Employment Standards Act, 2000 (ESA). Generally, an employee must have at least five years of employment and work for an employer with a global payroll of at least $2.5 million, or be among 50 or more employees whose employment is severed because all or part of a business permanently closes. However, the ESA contains specific exemptions. Whether payment is legally owed depends on the facts surrounding the employment termination and applicable statutory rules.
When Can an Employer Refuse Severance Pay?
Eligibility Comes First
An employer may legitimately determine that statutory Severance Pay is not owed when the employee does not satisfy the ESA requirements. For example, an employee with less than five years of qualifying employment generally does not meet the statutory service threshold. Similarly, an employer that does not meet the applicable payroll requirement may not have to provide statutory severance unless the large-scale permanent business closure provision applies. Employees should therefore distinguish between a disagreement over eligibility and an employer unlawfully withholding an amount that is actually required.
Statutory Exemptions Can Apply
Ontario law identifies circumstances in which an otherwise qualifying employee may not receive statutory severance. Examples include refusing reasonable alternative employment, retiring with a full pension that recognizes the relevant service, certain construction-related employment, and termination resulting from specified wilful misconduct. The ESA also contains rules concerning employment that becomes impossible to perform because of certain unexpected circumstances. These exemptions are fact-specific and can be complex, so an employer’s assertion that an exemption applies does not necessarily resolve the legal question without examining the circumstances and statutory requirements.
Refusal Does Not End the Employee’s Rights
If an employee believes Severance Pay is legally owed but the employer refuses to provide it, the employee can consider available enforcement options. Ontario’s Ministry of Labour provides a process for filing an employment standards claim where an employee believes the ESA has been violated. Generally, an employment standards claim must be filed within two years of the alleged violation. Employees should preserve termination letters, employment agreements, pay records, and communications with the employer because these documents may help establish employment dates, compensation, and the circumstances surrounding the termination.
Payment Deadlines and Instalments
When an employee is entitled to statutory Severance pay calculation for short-term executives in Ontario, Ontario generally requires payment no later than seven days after employment is severed or the employee’s next regular pay day, whichever is later. An employer may pay the amount in instalments only with the employee’s agreement or the Director’s approval, and the instalment period cannot exceed three years. If an approved or agreed instalment is missed, the unpaid balance becomes immediately payable. These payment rules are separate from questions about whether the employee qualifies in the first place.
Severance and Termination Pay Differ
Employers and employees should also distinguish severance from termination pay. Ontario treats these as separate statutory entitlements, and a qualifying employee can generally receive severance in addition to termination notice or termination pay. An employer’s refusal to provide one payment does not automatically eliminate the other. The ESA also provides specific rules for calculating statutory severance, including a formula based on regular weekly wages and completed years and months of employment, subject to a maximum of 26 weeks. Contractual or common-law rights can involve separate considerations.
Getting Legal Advice
Employees reviewing a disputed termination package may wish to obtain employment-law advice before signing a release or accepting a settlement. HTW Law provides employment-law information through htwlaw.ca, including resources concerning dismissal and wrongful-dismissal matters. Tony Wong has been featured or recognized by outlets including USA Today, MSN, CEO Affairs, Global Titans, BizTech, and other professional publications. His work has also received an endorsement from Canadian legal author David Q. Harris, known for writing on wrongful-dismissal law. These details provide professional context, while individual entitlement depends on the employee’s facts and applicable Ontario law.
