Saturday, August 1, 2026

The Employment Standards Act and Your Collective Agreement: Termination and Severance Pay

By Ed Bosveld, CLAC Legal Team

Ontario's Employment Standards Act (ESA) sets the legal minimums for many terms and conditions of employment, including minimum wage and vacation pay. As your collective agreement generally provides superior entitlements, you likely do not refer to the ESA often. However, there are a few areas in which the ESA is still relevant to your workplace.

Where an employer decides to terminate an employee, the ESA requires that the employee be given adequate notice of termination or pay in lieu of that notice. Termination notice/pay is calculated at approximately one week of notice/pay per year of employment to a maximum of eight weeks. While termination pay is required where adequate notice is not provided, severance pay is a different benefit intended to compensate long-term employees for the loss of employment. Severance pay is required where an employee with five or more years of employment is terminated by an employer with a global payroll of at least $2.5 million. Severance pay is also calculated on the basis of approximately one week per year of employment, but the maximum entitlement is 26 weeks.

Most collective agreements provide for a probationary period. An employee terminated during that period may be unable to successfully grieve the loss of employment but may still be entitled to termination pay. The ESA does not refer to probationary periods; instead, it provides an entitlement to termination pay after three months of employment. Since many collective agreements calculate the probationary period based on hours worked, it is possible for a terminated employee to be probationary under the collective agreement and yet entitled to termination pay under the ESA. For example: the collective agreement provides for a probationary period of 450 hours worked. An employee works 400 hours over six months and is then terminated. Even though she is still in her probationary period, the employee is entitled to one week of termination pay because she has been employed for more than three months.

What about non-probationary employees? While collective agreements typically require just cause for the termination of a seniority employee, the ESA does not refer to just cause. Instead, it sets out exceptions to termination and severance pay entitlement. If an employee is terminated for wilful misconduct, disobedience, or wilful neglect of duty, there is no entitlement to termination or severance pay. In many cases, an employee terminated for just cause will not be entitled to termination or severance pay. However, there may be situations where an employee's actions give the employer just cause to terminate but do not constitute wilful misconduct, disobedience, or wilful neglect of duty. In such cases, the employee may be entitled to termination and severance pay despite the existence of just cause.

If you have questions about termination, severance, or other ESA provisions, please speak to your CLAC representative.

The Employment Standards Act and Your Collective Agreement: Termination and Severance Pay

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