Termination and Severance Pay Requirements Under the ESA

Termination and Severance Pay Requirements Under the ESA Content: 1. Understand the purpose of statutory notice of termination or pay in lieu requirements. 2. Explain the relationship between statutory and common law notice of termination requirements. 3. Define ‘temporary layoff’ under the ESA, 2000. 4. Understand the statutory requirements for giving individual and mass notice of termination or pay in lieu of such notice. A. Individual termination requirements: ● Individual notice or pay in lieu entitlements ● Communicating termination notice: must be in writing indicating the date it becomes effective, must be clearly communicated to the employee. An exception for this is if an employee has bumping rights in their contract meaning a laid-off seniority employee has the right to bump / displace other junior employees. ● Working notice ● Working after the termination date B. Mass termination requirements: ● Mass notice or pay in lieu ● Notice to director of employment standards ● Employee’s advance notice of resignation 5. Exceptions to statutory individual or mass notice of termination requirements: ● Term or task employee ● Temporary layoffs ● Willful misconduct, disobedience, or wilful neglect of duty. ● Refuse alternative employment ● Return after recall - if employee does not return to work after being recalled from a temporary layoff, is not entitled ● Strikes / lockout ● Construction / shipbuilding employees - not entitled ● Frustration of contract 6. Identify statutory severance pay requirements and exceptions. - Employee guilty of wilful misconduct, disobedience, or wilful neglect of duty. - Refuse alternative employment - Strikes / lockout - Construction / shipbuilding employees - not entitled - Frustration of contract 7. Understand the ‘continuity of service’ provisions that apply where there is a changes of ownership of the employer organization. Introduction: - The ESA sets out minimum entitlements on termination including the right to receive notice of termination or pay in lieu of notice, unless there is a limited statutory exceptions i.e. wilful misconduct. - In Ontario, an employee’s termination or separation package can be made up of many different types of payments, including: 1. Statutory notice or Termination pay. - The ESA requires that employees who have been employed for at least three months be provided with written notice or pay in lieu of notice. The amount of notice depends solely upon their length of service i.e. employed for 3 months to a year = one week notice, employed for 8 years or more = eight weeks notice. - The purpose of termination notice is to provide an employee with time, while still being paid, to look for another job. 2. Severance pay. - Compensation paid to an employee in situation - For example, an employee with 6.5 years would be entitled to receive 6 weeks of statutory notice / termination pay, and 6.5 weeks of severance pay. 3. Common law reasonable notice or pay in lieu of notice. - An employee’s entitlement to notice will be quite a bit more than their minimum entitlements ser out under the ESA. - For example, a manager with 20 years of service is entitled to 8 weeks notice and severance pay of 20 weeks. However, this is far less than the 12 to 18 months’ notice that the common law would consider reasonable. So he would sue for wrongful dismissal rather than file a claim under the ESA because he felt that the employer had failed to offer an acceptable separation package. - On the other hand, an entry-level with 2 years of service is entitled to two weeks of notice or pay in lieu under the ESA. if the employer failed to give notice of pay in lieu notice, the employee can file for a claim with the Ministry of Labour. They would not sue because it is too costly and time-consuming to hope for a few more weeks pay in lieu notice under the common law. - So it it mostly senior employees or those with many years of service would choose to go to court to assert their rights to reasonable notice under the common law. Define ‘temporary layoff’ under the ESA, 2000. 1. Under the ESA, employees who are temporarily laid off are not entitled to termination requirements i.e. notice, pay in lieu of notice, or severance pay. 2. However, if the employees are laid off longer than the time limits, they are protected by the termination requirements. 3. Lasts no more than 13 weeks of 20 consecutive weeks - For example, laid off for 4 weeks, then return for 2 weeks, then laid off again for 8 weeks, so total of 12 weeks - not entitled to termination notice or pay in lieu because laid off totalled only 12 weeks within 20 weeks. Explain the relationship between statutory and common law notice of termination requirements. There are 3 main statutory requirements that relate to termination: 1. Individual notice of termination - Basic requirement that requires employers to provide 1 to 8 weeks notice, - Exceptions include: wilful misconduct dismissal or pay in lieu, depending on the length. 2. Mass notice of termination - The mass notice provisions in the ESA replace the individual notice requirements. - As with the common law notice, an employer has a choice under the ESA of providing an employee with notice and letting them work throughout the notice period or give them pay in lieu of notice. - Employers usually give working notice when they dismiss many - However, when dismissing employees individually, they usually give pay in employees at the same time for economic reasons. lieu because they don’t want the employee to work through the notice period. 3. Statutory severance pay - Under the ESA, the statutory requirement includes severance pay. - This is a compensation entitlement in addition to termination notice or pay - Severance pay intends to compensate longer-term employees for their - To qualify for severance pay: in lieu. loyalty, loss of seniority, and loss of job benefits. 1. The employee must serve for 5 or more years. 2. The employer must have an Ontario payroll of at least $2.5 million or, 3. must have dismissed 50 or more employees in a 6-month period. - By limiting severance pay obligations to employers with minimum payrolls of $2.5 million, the statutory provisions do not directly affect small businesses because of the business closure. - Under the ESA, employers must pay dismissed employees no later than 7 days after employment ends or employee’s next payday. 1. Outstanding wages 2. Vacation pay 3. Termination and severance pay - Employers must review relevant parts of the ESA when terminations are being considered: a. For example, under the termination provisions, in the week of layoff, the employee receives less than ½ of his regular earnings. b. However, under the severance pay provisions, in the week of layoff, the employee receives less than ¼ of his regular earnings. When is an employee ‘terminated’? - termination occurs when an employer: 1. Dismisses or stops employing (including as a result of bankruptcy or insolvency). 2. Lays the employee off longer than the time limit for a temporary layoff. 3. Constructively dismisses the employee, in this case the employee is entitled to resign and claim for damages. Constructive dismissal also occurs if an employer’s conduct is abusive and unpleasant that forces an employee to resign, then he / she also is entitled to claim for damages. Understand the ‘continuity of service’ provisions that apply where there is a change of ownership of the employer organization. - For example, an employee who worked for Seller Company for five years and continued working for Buyer Company for another four years is entitled to termination notice or pay in lieu and severance pay under the ESA on the basis of 9 years service. - Because the employment continues under the Buyer Company, Seller Company has no statutory obligation under the ESA to provide termination or severance at the time of change business ownership.