If your employer gives you working notice of termination, you may wonder whether that replaces any severance pay you would otherwise receive.
For employees who qualify for statutory severance pay under Ontario’s Employment Standards Act, 2000 (ESA), working notice does not eliminate the employer’s separate obligation to pay statutory severance.
Working notice and statutory severance pay are different entitlements. An employee may work through a termination notice period and still be entitled to statutory severance pay when their employment is severed.
What is working notice in Ontario?
Working notice means that an employer tells an employee in advance that their employment will end on a future date and the employee continues working during that notice period.
Instead of immediately ending the employment relationship and providing termination pay in lieu of notice, the employer allows the employee to continue working until the termination date.
Ontario’s guide to termination of employment explains the minimum notice requirements under the ESA.
For more information, read Monkhouse Law’s guide to working notice in Ontario.
Does working notice replace statutory severance pay?
No, not if the employee qualifies for statutory severance pay.
Under section 65(7) of Ontario’s Employment Standards Act, 2000, statutory severance pay is generally payable in addition to other amounts to which the employee is entitled under the ESA or their employment contract.
This means an employer cannot generally treat working notice as a substitute for statutory severance pay.
An employee who works through their required termination notice period may therefore still be entitled to statutory severance pay when the employment relationship ends.
Who qualifies for statutory severance pay?
Statutory severance pay is not owed to every employee whose employment ends.
An employee generally must have at least five years of employment and meet one of the ESA’s additional requirements relating to the employer’s global payroll or a qualifying permanent closure involving 50 or more employees.
For a full explanation of the eligibility requirements, see Severance Pay in Ontario: How Much Are You Entitled To?
You can also review the Ontario government’s severance pay guide.
Ontario government example: working notice and severance pay
The Ontario government’s severance pay guide provides an example of an employee who receives seven weeks of working notice and continues working throughout that notice period.
At the end of the notice period, the employee’s employment is severed. Because the employee also meets the statutory severance requirements, severance pay is then calculated separately.
The example illustrates an important distinction: working through a termination notice period does not, by itself, eliminate an employee’s entitlement to statutory severance pay.
What did the court decide in M. v. Hathro Management Partnership?
The distinction between working notice and statutory severance pay was also considered in M. v. Hathro Management Partnership.
The employee had approximately 26 years of service and received 54 weeks of working notice before her employment ended. She later claimed statutory severance pay in addition to the working notice she had already received.
The court concluded that the employee was entitled to statutory severance pay in addition to the working notice.
The case reinforces the principle that statutory severance pay is a separate entitlement and is not automatically satisfied merely because an employer has provided working notice.
Can an employer contract out of statutory severance pay?
An employment agreement cannot provide an employee with less than the minimum standards required by Ontario’s ESA.
Section 5 of the ESA generally prevents employers and employees from contracting out of or waiving an employment standard unless the contractual provision provides a greater benefit to the employee.
This means an employment contract cannot simply eliminate statutory severance pay where the employee qualifies for it under the ESA.
Does income earned during the notice period reduce statutory severance pay?
Statutory severance pay is different from common-law wrongful dismissal damages.
The ESA limits the amounts that may be deducted or set off when calculating statutory severance pay. An employee’s entitlement is therefore not generally reduced simply because they continued working during a working notice period.
The specific calculation rules are set out in section 65 of the ESA.
Can statutory severance pay be paid in instalments?
Yes, in some circumstances.
Ontario’s ESA generally requires severance pay to be paid in a lump sum. However, an employee may agree in writing to receive severance pay in instalments.
Where instalments are permitted, the payment period cannot exceed three years.
If the employer misses an instalment payment, the unpaid balance generally becomes due immediately.
For the current payment rules, see the Ontario government’s severance pay guide.
How much statutory severance pay can an employee receive?
For an employee who qualifies, statutory severance pay is calculated based on the employee’s regular wages for a regular work week and their completed years and months of employment.
The maximum statutory severance entitlement under the ESA is 26 weeks.
For a broader explanation of statutory severance calculations and other potential termination entitlements, read Severance Pay in Ontario: How Much Are You Entitled To?
What if you received working notice but no severance pay?
If you worked through a notice period and your employer did not provide statutory severance pay, the first question is whether you meet the ESA eligibility requirements.
Your length of employment, the employer’s global payroll and the circumstances in which your employment ended may all be relevant.
It is also important to distinguish statutory severance pay from common-law reasonable notice and other potential contractual entitlements.
If you are unsure whether your employer has provided everything you may be entitled to receive, Monkhouse Law’s employment lawyers can review your employment agreement, termination documents and the circumstances of your termination.
Contact Monkhouse Law Employment Lawyers for a free 30-minute phone consultation.