Severance pay obligations in Ontario expanded for employers with global payroll above $2.5 Million

Under the previous Employment Standards Act (ESA) rules, severance pay was an entitlement for severed employees who had been employed with the same employer for five or more years, and where the employer had an Ontario payroll of at least $2.5 million per year. As the result of a court decision on June 15, 2021, this obligation now extends to employers with global payroll of at least $2.5 million.

Severance pay is prescribed by Ontario’s Employment Standards Act and is distinct from termination pay for which all employers are obligated. Severance pay is based on the employee’s years of service, calculated at one week per year of service, up to a maximum of 26 weeks.