Is Your Severance Package Enough? What Ontario Employees Are Actually Entitled To
Losing your job is stressful enough. The last thing you need is to sign away your legal rights without knowing what you were actually entitled to. Yet it happens constantly — employees receive a termination letter and a severance offer, feel the pressure of the moment, and sign the release before speaking to a lawyer.
Here is what you need to know before you sign anything.
There Are Two Levels of Entitlement
In Ontario, when you are terminated without cause, your entitlement to notice or pay in lieu comes from two sources: the Employment Standards Act, 2000 (ESA) and the common law. Most employers offer the ESA minimum and hope you do not know the difference.
The ESA sets floors, the absolute minimum your employer must pay you regardless of what your employment contract says. Common law notice, determined by the courts, is almost always higher, sometimes significantly so.
ESA Minimums: What the Law Guarantees
Under the ESA, you are entitled to notice of termination or pay in lieu based on your length of service. The scale runs from one week for employees with less than one year of service to a maximum of eight weeks for employees with eight or more years.
If you have five or more years of service and your employer has a payroll of $2.5 million or more, you are also entitled to ESA severance pay, separate from termination pay, calculated at one week per year of service, up to a maximum of 26 weeks.
These are minimums. Your employer cannot pay you less than this regardless of what your employment contract says, and regardless of what they tell you.
Common Law Notice: What You May Actually Be Owed
If your employment contract does not contain a valid and enforceable clause limiting your notice entitlement to the ESA minimum, and many do not, for reasons discussed below, you are entitled to common law reasonable notice.
Courts determine reasonable notice based on your age, length of service, the nature of your position, and how easy it will be to find comparable employment. There is no precise formula, but as a rough guide, courts have awarded between one and two months per year of service for mid-to-senior level employees, with significant variation depending on circumstances.
For a 45-year-old marketing director with 10 years of service, reasonable notice could be 12 to 18 months. If your employer offered you 10 weeks, the ESA minimum, you would be leaving a significant amount of money on the table.
Why Your Termination Clause May Not Be Enforceable
Many employment contracts contain a termination clause designed to limit your notice entitlement to the ESA minimum. Whether that clause actually does what your employer thinks it does is a different question entirely.
Ontario courts have become increasingly strict about how termination clauses are drafted. Following the 2020 Court of Appeal decision in Waksdale v. Swegon North America, courts now read all termination provisions in an employment agreement together. If any part of the termination section, including the for-cause provisions, violates the ESA, the entire termination section may be void, entitling you to common law notice instead.
More recently, in Dufault v. The Corporation of the Township of Ignace (2024), the court found that language giving the employer the right to terminate “at its sole discretion” and “at any time” was itself enough to void a termination clause, because it could theoretically permit termination in ESA-prohibited circumstances.
The practical result is that a significant number of termination clauses in use across Ontario today are unenforceable under current case law. Whether yours is one of them requires a review by an employment lawyer, but the point is that you should not assume the clause is valid just because it is in your contract.
The Release: What You Are Being Asked to Sign Away
Almost every severance package comes with a separation agreement that includes a release of all claims. Once you sign a valid release, you generally cannot come back and claim more, even if you later discover you were owed significantly more than you received.
This is why the moment between receiving a severance offer and signing the release is the most important legal moment of your employment relationship. It is the moment where legal advice has the highest return on investment.
You Do Not Have to Sign Immediately
Employers will often create a sense of urgency around signing, deadlines are set, sometimes with the suggestion that the offer will be reduced or withdrawn if not accepted quickly. In most cases, this pressure is not legally justified.
You are entitled to take reasonable time to review a separation agreement and seek independent legal advice. Most employment lawyers will tell you that a request for a two-to-four week extension to review a severance package is entirely reasonable and that employers who refuse such requests in bad faith expose themselves to additional risk.
Ask for the extension. Use it to speak to a lawyer. The cost of a consultation is a fraction of what you may be leaving on the table.
What to Do If You Have Already Signed
In some circumstances, a signed release can be challenged, for example, if it was signed under duress, without adequate time for review, without independent legal advice, or in exchange for only what you were already owed by law. These cases are fact-specific and the window to act may be limited. If you signed recently and have concerns, speak to an employment lawyer as soon as possible.
The Bottom Line
Most severance offers in Ontario are lower than what employees are actually entitled to. Most employees do not know this. Most sign without getting advice. Most of those who do get advice recover more than the initial offer.
Before you sign anything, speak to an employment lawyer. The consultation is usually free or low-cost, and what you learn could be worth significantly more.
This article is for informational purposes only and does not constitute legal advice. Contact Yombo Grossman Law for a consultation before signing any severance agreement.
