As the economic situation continues to evolve, companies are making rapid changes to their workforce. Unfortunately, these changes can result in mass layoffs, which can be difficult for both employees and employers. Earlier this month, Nordstrom announced it was shutting down all its Canadian stores, cutting 2,500 jobs. In Ontario, when companies make mass layoffs, there are certain considerations employers must keep in mind, which are applicable when terminating employees without cause such as notice of termination and severance pay.
Severance pay is compensation provided by an employer to an employee who has been terminated without cause. In Ontario, the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”) sets out the minimum requirements for severance pay. However, only some employees are entitled to severance pay. Specifically, employees who have been employed for five or more years and who are terminated because of a permanent discontinuance of all or part of an employer’s business or because of a layoff of 50 or more employees within a six-month period are entitled to severance pay.
Employees are entitled to severance if they have been employed for five or more years with the employer (whether continuous or not, active or not). The amount of severance pay that an employee is entitled to depends on, among other things, their length of service with the employer starting at one week of wages per year of employment, up to a maximum entitlement of 26 weeks.
It is important to note that these are the minimum requirements for severance pay under the ESA. Through effective counsel, employers may provide more generous severance packages to employees, particularly in cases of mass layoffs. This can include additional severance pay, extended benefits and outplacement services to help employees find new employment.
Employers should also be aware that there are additional requirements under the ESA when it comes to mass layoffs. Specifically, employers must provide notice of the layoff to affected employees and to the Ministry of Labour, Training and Skills Development. The notice period depends on the number of employees being laid off. For example, if you, as an employer, are laying off between 50 and 199 employees, you must provide at least eight weeks’ notice. If you are laying off 200 or more employees, you must provide at least 16 weeks’ notice. Labour Minister Monte McNaughton announced on March 13, 2023, that the government is introducing amendments to the ESA that would make “…employees who work solely from home eligible for the same enhanced notice as “in-office” and other employees in mass termination situations.”
In addition to the requirements under the ESA, employers should also be aware of their obligations under any employment contracts, collective agreements, or other agreements with employees. These agreements may contain additional requirements when it comes to severance pay and notice of termination.
When companies like Nordstrom, Bed Bath & Beyond, Google, Spotify, Meta and Apple make mass layoffs in Ontario, they must fulfill obligations under the ESA and any other agreements with employees. While the minimum requirements for severance pay are set out in the ESA, more generous packages for employees can be negotiated depending on your particular circumstances. Conversely, employers should also be aware of their obligations when it comes to notice of termination, and should ensure that they comply with all applicable requirements.
If you have any questions or concerns about severance pay or mass layoffs in Ontario, both as an employer or an employee, you can reach out to our office for a consultation to discuss your specific situation.