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Ontario Severance Law — Complete Guide for Terminated Employees

Last updated: April 21, 2026  |  Jurisdiction: Ontario, Canada  |  Non-unionized employees only

1. Overview — Two Types of Severance in Ontario

When a non-unionized employee is terminated in Ontario, they may be entitled to two distinct types of severance pay. These are often confused — and employers almost always only offer one.

1a. ESA Minimums (Statutory Entitlement)

The Ontario Employment Standards Act, 2000 (ESA) sets a floor — the minimum an employer must pay regardless of what any employment contract says. ESA entitlements include:

• Termination pay: 1 week per year of service, up to 8 weeks (for employees with 3+ months of service)
• Severance pay (ESA): An additional 1 week per year of service, up to 26 weeks — but only applies to employees with 5+ years of service if the employer has a payroll of $2.5 million+ or is closing a facility that eliminates 50+ jobs

ESA entitlements cannot be waived or contracted away. They are the absolute minimum.

1b. Common Law Reasonable Notice

Common law reasonable notice is a separate, typically much larger entitlement that exists independent of the ESA. It is what a court would award if the case went to litigation. Common law notice is based on the Bardal factors (see Section 2) and can range from a few months to 24+ months of pay.

2. The Bardal Factors — How Common Law Notice Is Calculated

The Bardal factors were established in Bardal v. Globe & Mail Ltd. (1960) and have been applied by Ontario courts ever since. There is no fixed formula — courts weigh all factors together to arrive at a reasonable notice period.

The Four Core Bardal Factors

• Age: Older employees generally receive longer notice. A 55-year-old faces a harder job search than a 30-year-old, and courts recognize this.
• Length of service (tenure): More years of service typically means more notice. Long-service employees have often forgone other opportunities and have deeper integration with the employer.
• Character of employment: More senior roles — managers, professionals, executives — receive longer notice than entry-level positions.
• Availability of similar employment: Employees in specialized roles or niche industries where comparable jobs are scarce may receive more notice.

Practical Examples

• 55-year-old regional manager, 20 years of service → may be entitled to 18–24 months
• 45-year-old mid-level professional, 7 years of service → may be entitled to 8–12 months
• 35-year-old specialist, 4 years of service → may be entitled to 4–6 months
• 28-year-old junior employee, 2 years of service → may be entitled to 2–4 months

These are illustrative only. The actual entitlement depends on the full Bardal analysis and applicable case law.

3. The Waksdale Rule — When Termination Clauses Are Void

Waksdale v. Swegon North America Inc., 2020 ONCA 391 is the most significant Ontario employment law case in recent history for terminated employees.

What It Established

The Ontario Court of Appeal held that if any part of an employment contract's termination clause is unenforceable — even a clause the employer never actually relied on — the entire termination provision is void. This includes any clause that purports to limit severance to the ESA minimum.

Why This Matters Practically

Many Ontario employment contracts contain a "just cause" termination clause that defines misconduct more broadly than the ESA's "wilful misconduct" standard. Even if the employee was not fired for cause, the existence of this defective clause invalidates the entire termination section. The employee is then entitled to common law reasonable notice — not just the ESA minimum the employer offered.

4. Constructive Dismissal — Being "Fired" Without a Termination Notice

Constructive dismissal occurs when an employer makes a fundamental, unilateral change to the terms of employment without the employee's consent. Common examples:

• Significant pay cut (typically 10%+ is considered fundamental)
• Forced demotion or substantial reduction in responsibilities
• Material change in job duties without consent
• Forced relocation to a different city
• Creation of a hostile work environment that makes continued employment intolerable

How to Respond to a Constructive Dismissal

An employee facing constructive dismissal generally has two options:

1. Reject the change and claim termination: The employee notifies the employer they do not accept the change and treats themselves as dismissed, then pursues full severance.
2. Accept under protest: The employee continues working but formally objects in writing, preserving their rights while seeking legal advice.

5. Termination "With Cause" — What It Actually Means

Ontario courts have described proving "just cause" as the "capital punishment of employment law" — it is the most serious sanction an employer can impose, and the bar is extremely high.

What Constitutes Just Cause

• Theft or fraud from the employer
• Serious, documented, and repeated insubordination
• Sexual harassment or other serious workplace misconduct
• Willful neglect of duty (not mere poor performance)

What Does NOT Constitute Just Cause

• Poor performance (absent a proper performance management process)
• Attitude or personality conflicts
• Business restructuring or cost-cutting
• A single isolated incident of misconduct (in most cases)
• Minor policy violations

6. What "Severance" Actually Covers

Many employees assume severance is only base salary continuation. Ontario common law entitlements are broader:

• Base salary: Full salary continuation during the notice period
• Bonus: Bonuses that would have been earned during the notice period are generally included (Paquette v. TeraGo Networks Inc.)
• Commissions: Commission income that would have been earned during the notice period
• Benefits: Continued benefits (health, dental, life insurance) during the notice period — or their cash equivalent
• Equity / stock options: Options or RSUs that would have vested during the notice period may be included (Matthews v. Ocean Nutrition Canada Ltd.)
• Pension contributions: Employer contributions that would have continued

7. Signing a Severance Release — What You Need to Know

Employers typically ask employees to sign a full and final release in exchange for the severance payment. This is a binding legal document that permanently waives your right to pursue any additional claims.

Key Points

• You are not legally required to sign immediately. Despite any deadline your employer provides, you have the right to seek legal advice first.
• Once signed, the release is binding — you generally cannot reopen the matter even if you later discover you were entitled to significantly more.
• The limitation period in Ontario is generally two years — your legal rights to pursue a claim do not expire in 3 or 5 days, as employers sometimes suggest.
• "Exploding offers" (deadlines of 3–7 days) are a pressure tactic. Courts and legal professionals recognize them as such.

8. Demand Letters — Negotiating After a Low Offer

A demand letter is a formal legal letter sent by a lawyer to the former employer, asserting the employee's legal entitlements and requesting a revised severance offer. It is not a lawsuit — it is a pre-litigation negotiation tool.

Effectiveness

After a lawyer's demand letter, the majority of Ontario employers improve their severance offer without proceeding to litigation. Common outcomes:

• 60–75% of employers improve their offer after receiving a demand letter
• 20–30% engage in counteroffers and negotiation
• 5–15% adopt a litigation posture — more common with mid-sized employers and those with strong legal teams

What Drives Settlement

• The strength of the employee's Bardal entitlement
• Whether the termination clause is Waksdale-vulnerable
• The employer's reputational sensitivity
• The cost of litigation vs. the cost of settling

9. Frequently Asked Questions

Q: My employer said the offer is "standard." Should I believe them?

A: No. "Standard" typically means the ESA minimum, which is the legal floor, not the full entitlement. Whether the offer is adequate depends on your Bardal factors — something only a lawyer can properly assess.

Q: I have a signed employment contract. Does that cap my severance?

A: Not necessarily. After Waksdale, many Ontario termination clauses are unenforceable. A lawyer must review the specific contract language to determine whether the cap is valid.

Q: How long do I have to challenge my severance offer?

A: The general limitation period for civil claims in Ontario is two years from the date you knew or ought to have known about the claim. ESA complaints must typically be filed within two years of the alleged violation.

Q: What if I already signed the release?

A: In most cases, a signed release is binding. There are narrow exceptions (duress, misrepresentation, failure of consideration), but these are difficult to establish. This is why getting advice before signing is so important.

Q: I was let go "without cause." Am I entitled to more than ESA?

A: Likely yes, unless your employment contract contains a valid and enforceable clause limiting you to the ESA minimum. Given Waksdale, many such clauses are now void. A legal review will determine your actual entitlement.