Severance For People Aged 50+ Ontario

How much severance pay is reasonable for someone age around 50 years? Find out by reading this article below. You will learn:

  • generally about the common law right to reasonable notice; and
  • specifically what the common law right to reasonable notice is for someone about age 50.

Termination rights (age 50+)

If an employer terminates an employee on a without cause basis, the employee is entitled to reasonable notice in advance of their termination or pay in lieu thereof (i.e. “severance”). The amount of reasonable notice or pay in lieu thereof depends on whether there is an enforceable termination clause in the employment contract between the employer and employee.

If an employer and an employee have entered into a valid termination clause in their contract, then the employee’s employer’s obligations vis-a-vis severance are governed by the terms of that termination clause. However, if there is no enforceable termination clause, then the employee’s employer’s obligations vis-a-vis severance are governed by minimum standards and the common law.

What are the minimum standards?

At the very least, an employer in Ontario must provide a without-cause dismissed employee who has worked at least three months this amount of minimum notice (or pay instead of notice) as per the Employment Standards Act: one week of notice for every year of completed service up to a maximum of 8 weeks.

Also, some employees are entitled to Employment Standards Act severance on top of Employment Standards Act notice. An employee qualifies for Employment Standards Act severance pay if they:

  • have worked for their employer for five or more years, and
  • their employer:
    • has a payroll in Ontario of at least $2.5 million; or
    • terminated the employment of 50 or more employees in six months because all or part of their business permanently closed.

Employees get one week of Employment Standards Act severance pay for every year of completed service up to a maximum of 26 weeks.

What is common law (age 50+)?

The above-noted Employment Standards Act formulas to provide notice and severance are minimum requirements only. Most employees, provided there is no valid termination clause in their contract, are entitled to common law reasonable notice of termination, which is usually worth much more than their Employment Standards Act entitlements.

The common-law rule is this: an employee who is dismissed without reasonable advance notice of termination is entitled to damages for breach of contract based on the employment income the employee would have earned during the reasonable notice period, less any amounts received in mitigation of the loss

In Bardal v. Globe & Mail Ltd., [1960] O.J. No. 149 (H.C.J.), the court set out the standard factors relevant to the calculation of common law reasonable notice:

  1.  the character of employment;
  2.  the length of service;
  3. the age of the employee; and
  4.  the availability of similar employment having regard to the experience, training, and qualifications of the employee.

Accordingly, one of the factors for determining reasonable notice under the common law is older age, meaning that a 50-year-old would be entitled to different reasonable notice than, for example, a 25-year-old.

Generally speaking, a more extended notice period will be justified for older employees because they may be at a competitive disadvantage in securing new employment because of their age. In McKinney v. University of Guelph, the Supreme Court of Canada stated in paragraph 92:

Barring specific skills, it is generally known that persons over 45 have more difficulty finding work than others. They do not have the flexibility of the young, a disadvantage often accentuated by the fact that the latter are frequently more recently trained in the more modern skills. Their difficulty is also influenced by the fact that many in that age range are paid more and will generally serve a shorter period of employment than the young, a factor that is affected not only by the desire of many older people to retire but by retirement policies both in the private and public sectors.

http://canlii.ca/t/1fsqk

The rule that older employees get more reasonable notice than younger employees has been reinforced by the Supreme of Canada on other occasions. For example, in Law v. Canada (Minister of Employment and Immigration),  the Supreme Court of Canada said at paragraph 101:

It seems to me that the increasing difficulty with which one can find and maintain employment as one grows older is a matter of which a court may appropriately take judicial notice. Indeed, this Court has often recognized age as a factor in the context of labour force attachment and detachment.”

http://canlii.ca/t/1fqh9

Now that we know that older employees get more reasonable notice than younger employees, what about reasonable notice/severance for 50 years old?

Severance for people age 50 and up

The courts in Canada have determined that around 50 is ‘old age’ when it comes to calculating reasonable notice. For instance, in confirming a reasonable notice “bump” for someone age 52 who worked 2.5 years, an Ontario court said this:

I conclude that the appropriate notice period in this case is seven months. I do so recognizing that it is toward the upper end of the range but do so because the age of the Plaintiff in an employment area that tends to favour younger people is a factor to be given weight.

Teitelbaum v. Global Travel Computer Holdings Ltd., [1999] O.J. No. 546

We also know that on many other occasions people around age 50 were awarded large notice periods as per the common law. See for example:


 Case Name
  Employee’s Position   Tenure (Years)   Salary     Age Notice Awarded (Months)
George v. Imagineering Ltd., 2002 CanLII 9995 President 23 $177,500 54 30
Baranowski v. Binks Manufacturing Co., 2000 CanLII 22614 President 29 54 30

Moreover, we know that people around age 50 were awarded relatively large notice periods under the common law even when they had short service:


 Case Name
  Employee’s Position   Tenure   Salary     Age Notice Awarded (Months)
Saliken v Alpine Aerotech Limited Partnership, [2016] BCJ No 963 Helicopter mechanic 15 months  $68,000 54 6
Hennessy v Excell Railing Systems Ltd, [2005] BCJ No 1116 Computer scientist 18 months $75,000 53 5

See how this chart compares to the average severance in Ontario.

Severance Pay Calculator

In order to assess an employee’s severance entitlements (i.e. continuation of the employee’s remuneration) in a “without cause” dismissal (i.e., when dismissed without having committed any misconduct or wrongdoing), there are a number of factors to bear in mind for Ontario workers. First, the Employment Standards Act, 2000 (“ESA”) stipulates that after three (3) months of service, a recently terminated employee is entitled to one (1) week of notice of dismissal or termination pay per year of completed service, to a maximum of eight (8) weeks. Second, if the employer has a payroll of at least $2.5 million (typically seen when 50+ workers are employed) and the employee has completed at least five (5) years of service, they are entitled to an additional one (1) week of statutory severance pay per year of completed service, to a maximum of twenty-six (26) weeks. 

Further, through our precedent based common law legal system, judges have routinely ruled that an employee’s minimum entitlements set out under the ESA is insufficient income protection to keep the employee “whole” while they are seeking new employment. Accordingly, barring a restrictive employment contract which stipulates otherwise, judges have the discretion to enhance an employee’s severance above their minimum statutory entitlements under the ESA, based upon factors such as (but not limited to) an employee’s age, length of service, and type of position. Depending upon these factors, in some cases employees may be entitled to several months of additional severance, to upwards of twenty-four (24) months of severance (inclusive of their minimum entitlements set out under the ESA). This enhanced severance package is also known as common law reasonable notice of dismissal.

Summary: Reasonable Notice and age 50+

In summary, individuals age around 50 years old are awarded more notice than younger people even if they worked for just a short time. Generally, short-term employees age 50 should receive about six months’ reasonable notice and long-term employees age 50 can be awarded as much as 30 months’ reasonable notice.

About the Author: Jeff Dutton is an Employment Lawyer at Monkhouse Law. He represents both individual employees and management in all matters. He has experience advising on employment standards, employment contracts, occupational health and safety, wrongful dismissals, workplace investigations and human rights.

If you are about 50 years old, call Monkhouse Law for a free consultation on your entitlement to reasonable notice/severance. We will calculate your rights.

Call us for a FREE 30 minute phone consultation at 416-907-9249 or submit a callback request

    Free Consultation

    Call us for a free 30 minute phone consultation at 416-907-9249 or submit a callback request. We endeavor to phone you back once we have reviewed the information, calls will be Monday to Friday between 9:00 AM and 5:00 PM:


    YesNo

    Monkhouse Law