In general, when an employee quits their job they are not entitled to termination or severance pay. But, what happens if an employee resigns after receiving notice of their termination? Are they still entitled to anything?
In most cases, when an employer terminated an employee it chooses to provide termination pay in lieu of notice of termination for several business reasons. However, the employer does have the option to provide an employee with working notice of their termination, meaning the employee is required to continue working for the notice period unless they decide to resign at some point.
An employee who has been given written notice of termination can resign and continue to keep their right to severance pay. In order to do so, the employee must:
1. give the employer two weeks’ written notice of their resignation; and
2. the resignation must also take effect during the statutory notice period.
Catherine has worked for 8 years and is entitled to 8 weeks’ notice of termination under the Employment Standards Act, 2000 (“ESA”). Catherine’s employer gives her 10 weeks’ notice. Catherine must give at least two weeks’ written notice of her resignation. She must also ensure that the resignation takes place during the statutory notice period, in this case, the last 8 weeks of the 10-week notice period. If the following is done, she would continue to be entitled to severance pay.
Note: If an employer provides the employee with more notice than what is required by the ESA the statutory notice period is the last part of the notice period ending on the date of termination.
Now, severance pay does not mean a ‘severance package’ which is often used interchangeably with ‘termination pay.’ Under the ESA, severance pay is compensation that is paid to a qualified employee who has their employment “severed.” It compensates an employee for losses (such as loss of seniority) that occur when a long-term employee loses their job.
It is important to note that severance pay does not apply to all employees. In order to qualify for severance pay, an employee needs to have worked for the employer for 5 or more years and the employer has a payroll in Ontario of at least $2.5 million or severed the employment of 50 or more employees in a six-month period because all or part of the business permanently closed.
To calculate the amount of severance pay an employee is entitled to receive, multiply the employee’s regular wages for a regular workweek by the sum of the number of completed years of employment and the number of completed months of employment divided by 12 (for a year that is not completed). The maximum amount of severance pay required to be paid is 26 weeks.
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