Layoff vs Termination: What Is The Difference?

Employees often search for the difference between layoff vs termination. The terms are sometimes used interchangeably, but legally they mean very different things and can lead to very different rights for employees.

This guide explains the concepts in plain language. Employment laws are different in each Canadian province and territory. Monkhouse Law is based in Ontario and represents non-unionized employees in Ontario, so the detailed legal examples below focus on Ontario law. Employees in other provinces should check their own local rules and government resources.

For federally regulated employees (such as those in banking, telecom, or interprovincial transportation), the federal labour standards on termination, layoff or dismissal apply. A federal overview of labour standards, including links to provincial and territorial standards, is available from the Government of Canada workplace standards page.

Canada-Wide Overview: Layoff vs Termination

Layoff: A temporary pause in work. You stop working and stop being paid, but the employer says the relationship continues and you may be recalled.
Termination: A permanent end to the employment relationship.

Each province has its own employment standards legislation that sets minimum rules about temporary layoffs, termination pay and severance. On top of those minimum standards, employees may also have rights under the common law, which can provide more generous notice or severance than the minimums in the legislation.

If you are outside Ontario, you should check the website for your local ministry of labour or employment standards office to see how temporary layoffs and terminations work in your province. For example, Ontario’s government publishes Your Guide to the Employment Standards Act – Termination of Employment.

What Is a Layoff in Ontario?

In Ontario, a layoff is a temporary suspension of work and pay. You remain an employee on paper, but you are not working and you are not being paid. Some employers continue benefits during a layoff; others do not.

In non-unionized workplaces in Ontario, a layoff is usually only lawful if:

Your employment contract clearly allows temporary layoffs, or
Your industry has a well-established practice of seasonal or cyclical layoffs.

If neither applies, placing you on layoff may legally be considered a constructive dismissal. Monkhouse Law also has a detailed article on temporary layoffs vs constructive dismissal in Ontario.

What Is a Termination?

Termination ends employment permanently. It can be:

Without cause – the most common type, where the employer ends the relationship but must give proper notice or termination pay.
For cause – rare, and reserved for serious misconduct. Many “for cause” terminations are successfully challenged in court.

If proper notice or severance is not provided, that is a wrongful dismissal.

In Ontario, employees dismissed without cause are typically entitled to:

Minimum termination pay or notice under the Employment Standards Act, 2000 (ESA)
ESA severance pay if they and their employer meet the thresholds
Additional common law reasonable notice, which is often higher than ESA minimums

For more detail on the statutory minimums, Ontario’s Ministry of Labour publishes both a guide to termination of employment and an ESA policy and interpretation manual.

Layoff vs Termination: Key Differences (Ontario)

The table below summarises the main layoff vs termination differences for non-unionized employees in Ontario. Employment standards rules, timelines and definitions can be different in other provinces, so employees outside Ontario should confirm the rules with their local employment standards office.

Topic	Layoff (Ontario)	Termination (Ontario)
Employment status	Paused but still employed	Permanently ended
Pay	Wages stop during layoff; EI may be available	Termination pay or notice required, plus possible common law notice
Benefits	May or may not continue during layoff	Often continue during the notice period only
Duration	Time-limited under the ESA; if a temporary layoff exceeds the ESA limits, it is generally treated as a termination.	Effective immediately, though pay and benefits may continue during statutory and common law notice periods.
Contract requirement	Usually requires a layoff clause in the contract or clear industry practice	Employers can terminate without cause if they provide proper notice or pay in lieu
Legal risk	May be a constructive dismissal if not contractually permitted	Risk of wrongful dismissal if notice or severance is inadequate

When a Layoff Becomes a Termination (Ontario)

Under Ontario’s Employment Standards Act, 2000 (ESA), temporary layoffs are allowed but only within strict limits:

Up to 13 weeks in any 20-week period, or
Up to 35 weeks in a 52-week period, if the employer continues substantial benefits (such as health, dental, or pension contributions).

If these limits are exceeded and you are not recalled, the layoff is deemed a termination, which triggers entitlement to termination pay and possibly ESA severance pay.

Even before those limits are reached, a layoff may effectively be a termination if:

Your contract does not allow layoffs
Your employer has no real plan to recall you
Your role has been eliminated or replaced

When a layoff becomes a termination, you may be entitled to:

Termination pay and notice under the ESA
ESA severance pay (for eligible employees)
Common law reasonable notice, which often exceeds ESA minimums

To estimate how much severance you may be owed, you can use our Severance Pay Calculator for Ontario employees.

Layoff and Constructive Dismissal

A layoff without a contractual layoff clause can be a constructive dismissal, meaning the law treats you as terminated even if the employer labels it a temporary layoff. Other changes that can amount to constructive dismissal include:

Large reductions in pay or hours
Significant changes to your duties or position
Demotion or relocation without your agreement

Your Rights After a Layoff or Termination

If you have been laid off or terminated in Ontario, you may have rights to:

Termination pay and notice
ESA severance pay (if thresholds are met)
Common law notice, which can be much higher than ESA minimums
Benefit continuation during the notice period
Bonus, commission and other compensation over the notice period

The first offer from an employer is not always what the law requires. Many employees later find out that they were offered less than they were entitled to. Our
Severance Pay Calculator can provide a helpful starting point.

Common Employee Mistakes

Assuming a layoff is always legal
Signing a release too quickly
Accepting the first severance offer without advice
Thinking a “for cause” termination cannot be challenged
Waiting too long to get legal advice

Frequently Asked Questions

Is a layoff the same as being fired?

No. A layoff is intended to be temporary; a termination is permanent. However, a layoff that is not allowed by your contract or that goes on too long under employment standards legislation may be treated as a termination.

Can I be laid off without a clause in my contract?

In many non-unionized Ontario workplaces, laying off an employee without a layoff clause can be a constructive dismissal. Employees in other provinces should check how their local employment standards and courts treat layoffs.

How long can a layoff last?

The ESA sets specific limits on temporary layoffs in Ontario. If those limits are exceeded and you are not recalled, it is treated as a termination. Other provinces have their own timelines and definitions, so you should check the rules that apply where you work.

What if my employer says it is “for cause”?

Cause is rare and the legal test is strict. Many employees terminated “for cause” still have claims for compensation. You can read more on our wrongful dismissal page.

How much severance could I receive?

It depends on your age, length of service, position and the availability of similar work. Common law notice often exceeds ESA minimums. You can get an initial estimate using our Severance Pay Calculator.

Speak With an Employment Lawyer

If you have been laid off or terminated and are unsure of your rights, you do not have to navigate it alone. Monkhouse Law Employment Lawyers focuses on helping non-unionized employees understand their options and pursue fair compensation.