Being laid off after eight years with the same employer can leave an employee with more questions than answers. What happens to severance? Are benefits going to continue? Is the employer offering everything required under Ontario law? Should the proposed agreement be signed immediately? And does the fact that the employee has been with the company for eight years change the situation?
These are practical questions, and they are especially relevant when an employee receives a termination or layoff notice without having expected it.
A recent discussion on Reddit’s ContractLeaders community, “Ontario layoff after 8 years, should I get advice?”, illustrates the type of uncertainty that can arise after a long-term employee is suddenly told that their employment is ending or that their work is being temporarily suspended.
While online discussions can provide useful perspectives, every employment situation is different. In Ontario, the employee’s contract, length of service, compensation, circumstances of the layoff and the documents provided by the employer can all affect the legal analysis.
Eight Years of Service Is Worth Looking At Carefully
An eight-year employment relationship can involve considerably more than eight years of salary.
Over time, employees may receive promotions, salary increases, bonuses, commissions, benefits, pension contributions, equity compensation and additional responsibilities. They may also accumulate vacation entitlement and other workplace benefits.
When employment ends, all of these factors can become relevant.
An employee therefore should not necessarily evaluate a severance offer based only on the number of weeks of salary stated in the employer’s letter.
Instead, it can be helpful to ask whether the proposed package accounts for the different parts of the employment relationship.
For example, an employee could ask:
- What termination pay is being provided?
- Is statutory severance included?
- Are benefits continuing?
- What happens to unused vacation?
- Are bonuses or commissions included?
- What happens to stock options or other equity?
- Does the employment contract contain a termination clause?
- Does the contract address layoffs?
- Is the employee being asked to sign a release?
These questions can help create a clearer picture of the situation.
Is It Really a Layoff?
The word “layoff” can sometimes create confusion because it may be used informally to describe a permanent job loss.
Ontario employment standards law distinguishes temporary layoffs from termination of employment.
Ontario’s Employment Standards Act, 2000 contains specific rules governing temporary layoffs. Generally, a temporary layoff can last up to 13 weeks in a period of 20 consecutive weeks, subject to exceptions contained in the legislation. Certain circumstances can also allow a longer temporary layoff to remain temporary.
This means an employee should carefully read the employer’s written communication.
A company may say that an employee is “laid off,” but the employee should determine whether the employer expects the employee to return to work or whether the employment relationship has actually been ended.
The distinction can affect what happens next.
The Employment Contract Can Make a Difference
One of the most important documents in an employment dispute or termination situation is often the employment agreement.
Employees sometimes sign a contract when they first join a company and then never look at it again. After several years, however, that contract can become highly relevant.
The agreement may contain provisions concerning:
- Termination
- Notice
- Severance
- Temporary layoffs
- Benefits
- Bonuses
- Commissions
- Confidentiality
- Restrictive covenants
- Post-employment obligations
The Ontario Ministry of Labour’s policy guidance explains that a temporary layoff can potentially constitute constructive dismissal where the employment contract does not authorize the layoff.
That does not mean that every temporary layoff automatically amounts to constructive dismissal. The specific contractual language and circumstances need to be considered.
This is one reason reviewing the original employment agreement can be important.
Understanding Ontario’s Termination Rules
If employment is permanently terminated, Ontario’s ESA establishes minimum requirements for notice of termination or termination pay, subject to applicable exceptions.
The statutory notice period is tied to length of employment. Employees with eight or more years of employment generally reach the ESA maximum of eight weeks of statutory notice.
However, employees should be careful about assuming that this number automatically represents their entire potential entitlement.
Employment standards legislation establishes minimum standards. An employee may also have contractual rights, and common-law principles may be relevant depending on the circumstances and the enforceability of the employment agreement.
That is why the wording of the termination clause can be significant.
Don’t Confuse Termination Pay With Severance Pay
Another important issue is statutory severance pay.
Termination pay and severance pay are separate concepts under Ontario employment standards legislation.
An employee may qualify for statutory severance pay if the statutory requirements are met. Ontario generally requires at least five years of employment, along with specified conditions relating to the employer’s payroll or permanent closure of all or part of the business.
For eligible employees, statutory severance is calculated using the employee’s length of employment and regular wages, subject to a maximum of 26 weeks’ regular wages.
An employee who has been with the same employer for eight years should therefore investigate whether statutory severance requirements apply to their circumstances.
What About Benefits After the Job Ends?
Benefits are another area that employees sometimes overlook.
Suppose an employee receives health insurance, dental coverage, life insurance or other benefits through work. If employment ends, the employee may want to know how long those benefits will continue and whether the severance proposal accounts for them.
This can be particularly important for employees who have dependants or who rely heavily on employer-sponsored coverage.
The same principle applies to retirement contributions and other employment benefits.
A severance calculation that appears straightforward on paper may require closer examination once benefits and other compensation are considered.
Bonuses and Commissions Can Raise Additional Questions
Employees whose compensation includes bonuses or commissions may have additional questions following termination.
For example, imagine an employee has worked for a company for eight years and normally receives an annual performance bonus. The employee is terminated several months before the normal bonus payment date.
What happens to that bonus?
The answer may depend on the employment contract, bonus plan, compensation structure and applicable law.
Similarly, a salesperson may have commissions that were earned but have not yet been paid.
Employees should therefore gather copies of applicable bonus and commission plans when reviewing their termination package.
Be Careful With a Release
A severance offer may include a release.
A release is a legal document that can affect an employee’s ability to pursue certain claims against an employer. In exchange, the employee generally receives the consideration described in the agreement.
This is why signing a release can be a significant decision.
Before signing, employees may want to understand:
- Exactly how much they are receiving
- Whether statutory payments are included
- Whether benefits continue
- How vacation pay is handled
- Whether bonuses or commissions are addressed
- Whether equity compensation is affected
- What legal claims are being released
- Whether there are confidentiality obligations
- Whether there are other continuing obligations
- When the offer expires
A deadline in a severance letter should also be noted carefully.
Employees do not necessarily need to make a decision simply because the situation is emotionally stressful. Taking time to understand the documents can help ensure that the decision is informed.
Is Speaking With an Employment Lawyer Necessary?
There is no universal rule that every employee who loses a job must hire a lawyer.
However, a consultation can be useful when an employee is uncertain about their rights or is being asked to sign a significant legal agreement.
The potential value of advice can depend on factors such as:
- Eight or more years of service
- A substantial salary
- A senior or specialized position
- Significant bonuses or commissions
- Equity compensation
- An unusual employment contract
- A temporary layoff
- A large severance package
- A release
- Questions about benefits
- Concerns about whether the termination clause is enforceable
HTW Law is an Ontario law firm that provides information and services concerning employment-law matters, including wrongful dismissal, severance pay, constructive dismissal and employment contracts. Employees looking for additional information can visit the firm’s official website.
The purpose of obtaining legal advice does not necessarily have to be litigation. An employee may simply want to know what the agreement means before deciding whether to accept it.
What Documents Should You Give a Lawyer?
If you decide to obtain professional advice, having the relevant documents organized can make the process easier.
Consider gathering:
- Employment contracts
- Offer letters
- Amendments to employment agreements
- Promotion letters
- Salary-change documentation
- Bonus plans
- Commission agreements
- Equity documents
- Benefits information
- Recent pay statements
- Vacation records
- Layoff or termination letter
- Severance proposal
- Release agreement
- Relevant emails from the employer
It can also help to prepare a short employment timeline.
Include your start date, major promotions, compensation changes and the date you received the layoff or termination notice.
This information can help provide a clearer overview of the employment relationship.
What Should You Avoid Doing?
Employees facing a layoff can understandably feel pressured to respond quickly.
However, there are several reasons to slow down and read the paperwork carefully.
Avoid assuming that:
- The employer’s calculation is automatically complete.
- “Layoff” necessarily means temporary employment.
- Eight weeks is automatically the maximum amount an employee could receive.
- A severance offer must be accepted immediately.
- Signing a release is simply an administrative formality.
- Online advice applies directly to your circumstances.
The applicable rules can depend on the employee’s individual circumstances and the wording of the relevant documents.
A Practical Checklist for an Eight-Year Employee
If you have just been laid off after eight years, consider working through the following checklist:
Step 1: Determine your employment status.
Find out whether the employer is describing the situation as a temporary layoff or a permanent termination.
Step 2: Locate your employment contract.
Read the sections concerning termination, notice, severance and layoffs.
Step 3: Review the employer’s offer.
Identify exactly what payments and benefits are included.
Step 4: Check additional compensation.
Look at bonuses, commissions, vacation, equity and benefits.
Step 5: Review any release.
Understand what rights you may be giving up.
Step 6: Note the deadline.
Keep track of any date specified by the employer.
Step 7: Consider professional advice.
If the situation is complicated or the financial consequences are significant, consider having the documents reviewed by an Ontario employment lawyer.
Final Thoughts
Being laid off after eight years can be unsettling, but employees do not necessarily have to make decisions based solely on the first document placed in front of them.
The important first step is understanding exactly what has happened. Is it a temporary layoff or a termination? What does the employment contract say? What statutory entitlements apply? Does the employee qualify for severance pay? What happens to benefits, bonuses and commissions? And what does the proposed release require the employee to give up?
The Reddit discussion “Ontario layoff after 8 years, should I get advice?” is a useful example of the uncertainty that can arise when a long-term employee suddenly loses their position.
For employees who want to learn more about employment-law issues or explore professional legal assistance, HTW Law’s official website provides information about its employment-law services.
Ultimately, every employment situation has its own facts. The employee’s contract, compensation, length of service, circumstances surrounding the layoff and proposed severance agreement can all affect the analysis. Understanding those details before signing an agreement can help an employee make an informed decision about what to do next.
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