Special Rules for Mass Terminations

Note:  The following blog post describes the law for a situation where the employer intends to permanently downsize. For information about temporary layoffs from the closure of retail establishments due to the COVID-19 pandemic, please go to Temporary Layoffs in Ontario Due to Coronavirus and Employee Rights.

News of multinational retailers closing establishments across Canada have made headlines in recent years.  Indeed, it is sometimes necessary for organizations to restructure their operations to remain competitive, which can often result in many employees within a company being terminated in the same period of time.  In cases of mass terminations like these, the Ontario Employment Standards Act, 2000 (“ESA”) provides enhanced entitlements for terminated employees.

Under the ESA, a “mass termination” happens when an employer terminates 50 or more employees at the employer’s establishment within the same four-week period.  “Establishment” includes multiple locations in the same municipality where the employer carries on a business and not just one location.  The four-week period is a “rolling window”, with a mass termination occurring on the first occasion of 50 or more employees being terminated within the same four-week period.  The mass termination provisions do not apply when the number of terminated employees is 10 percent or less of the employees who have been employed for at least 3 months and if the terminations were not caused by the permanent discontinuance of the employer’s business at the establishment.

The following rules apply to Ontario employers in a mass termination scenario:

Notice to Director of Employment Standards

An employer must provide the Director of Employment Standards with a Form 1 Notice of Termination of Employment (Form 1), which means that notice of termination will not be effective until the Director of Employment Standards receives the employer’s Form 1.  The Form 1 must include relevant information regarding the mass termination, including the location(s) affected by the termination, the number of employees to be terminated, the dates upon which the terminations will become effective, the economic circumstances surrounding the termination, and the contact information for an employer representative.  The Form 1 must also be posted in the workplace.

Notice of Termination or Pay in Lieu of Notice

Employers must also provide individual notices of termination in addition to providing and posting the Form 1.  The length of individual working notice of termination, or pay in lieu of notice of termination, is determined by the number of employees who are terminated, provided as follows:

•If 50 to 199 employees are terminated, then the employer must provide eight (8) weeks’ notice of termination for each employee;

•If 200 to 499 employees are terminated, then the employer must provide twelve (12) weeks’ notice of termination; and

•If the number of employees terminated is 500 or more, then the employer must provide sixteen (16) weeks’ notice of termination.

Employers have the option of requiring employees to work during the notice period (working notice) or, alternatively, pay the termination pay in lieu of notice.

The rules regarding the timing of the delivery of the Form 1 notice can be complicated, and the matter was recently the subject of a class action lawsuit in Ontario.  The lower court judge found that the employer had failed to meet its obligations.  On an appeal, the Court of Appeal took a more lenient position, in Wood v. CTS of Canada Co.  The rules remain complicated, and in other situations employers may be caught unaware.

Employers should seek expert legal advice to ensure that they meet their obligations.  They may not receive credit for the notice that they gave if the notice requirements have not been adhered to correctly.

Severance Pay

Employees may also be eligible for severance pay in addition to the notice of termination (or alternatively, termination pay). Severance pay is something that employees are entitled to even if they have been given the notice as required above.

Severance pay is ordinarily only required to be paid by employers with more than $2.5 million of payroll.  However, employees with five or more years of service who are dismissed because of a “permanent discontinuance” which results in a mass termination are entitled to severance pay even if the employer does not have a payroll of $2.5 million or more.

Severance pay, when there is an entitlement to it, is two weeks’ pay for each year that has been worked for that employer, up to a maximum of 26 weeks of pay.

Notice Period Requirements

Employers are also required to abide by the ESA’s general requirements during the notice period in addition to the special rules that apply in mass termination scenarios.  This means, for example, that the employer cannot change any term or condition of employment or reduce wage rates, and they must continue its benefits plan contributions, if any, in order to maintain the employees’ benefits during the notice period.

The foregoing statutory entitlements are supplemented by the common law, or the body of similar case law decided by the courts.  Together, their purpose is to provide employees with reasonable notice of the termination of their employment, so that they can begin to search for alternate employment before experiencing a wage loss.  The termination provisions of the employment contract, if any, will determine whether the terminated employee will receive statutory or common law entitlements.

If you think you may fall under the ambit of a mass termination, it is best to seek the advice of an employment lawyer to help you navigate the law and your entitlements.  Contact Monkhouse Law today for a free consultation!

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About the Author: Miguel Mangalindan is a senior lawyer at Monkhouse Law where he practices Employment, Human Rights and Disability Insurance Law. Learn more about our team or contact us for a free 30 minute phone consultation.

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