Dismissal and notice rules in Canada, with severance and the Quebec exceptions

Under the dismissal and notice rules in Canada, an employer meets the statutory minimums of the employee’s province, pays out what is owed, files a Record of Employment, and manages the separate risk of a common-law claim for reasonable notice. There is no at-will employment of the kind US employers are used to; the differences are set out in at-will versus reasonable notice.

The province decides the numbers. Most private employers fall under provincial employment standards, so a developer in Toronto is covered by Ontario’s Employment Standards Act (ESA), while a colleague in Vancouver is covered by British Columbia’s rules. Only federally regulated employers use the Canada Labour Code. This article takes Ontario as the default and adds notes for Quebec, BC, Alberta and the federal sector.

Three layers can apply to one dismissal in Ontario. The ESA sets a floor for written notice or pay in lieu. ESA severance pay may be owed on top of that for longer-serving staff at larger employers. Beyond both sits common-law reasonable notice, which courts assess separately and which can be far higher than the statutory figures unless the contract validly limits it.

Timing also matters for the paperwork. Final pay, outstanding vacation pay and the Record of Employment all follow the last day worked, and the Record of Employment has a short deadline of its own.

The Ontario ESA requires written notice, pay in lieu or a mix of the two, scaled to length of service and capped at 8 weeks. During an employee’s first 3 months, the ESA requires no notice at all. After that, the scale published in the Ontario government’s termination guide runs as follows:

• Less than 1 year of service: 1 week
• 1 year but less than 3 years: 2 weeks
• 3 years or more: 1 week for each completed year, reaching 8 weeks at 8 years

Benefit plans must continue through the statutory notice period, so paying salary in lieu while cutting off health cover on the last day falls short. Mass terminations follow a separate scale: where 50 or more employees are let go within 4 weeks, notice rises to 8, 12 or 16 weeks with the size of the group.

Notice does not have to be paid out as a lump sum. The employee can keep working through the notice period on normal pay and conditions, or the employer can combine some working notice with pay in lieu for the rest. Working notice keeps the payroll cost the same while giving time for a handover, which often suits roles that hold client relationships or system knowledge.

A worked example shows the scale in money. Assumptions: an Ontario employee on CAD 85,000 a year with 4 full years of service, no benefits plan, dismissed without cause and paid in lieu of notice. Weekly pay is CAD 85,000 divided by 52, or CAD 1,634.62, so 4 weeks of ESA pay in lieu comes to CAD 6,538.46. No ESA severance is due at 4 years, because that entitlement starts at 5 years.

ESA severance pay is a separate payment, owed in addition to notice, to employees with 5 or more years of service where the employer meets a size test. Under the province’s severance pay guide, the test is met where the employer’s payroll worldwide reaches CAD 2.5 million, or where 50 or more employees are laid off within a 6-month span as a result of all or part of the business closing permanently.

Each year of service earns 1 week of regular wages, and the total is capped at 26 weeks. Take the same Ontario employee on CAD 85,000, now with 6 full years of service at an employer that meets the CAD 2.5 million payroll test. ESA notice is 6 weeks (CAD 9,807.69) and ESA severance is another 6 weeks (CAD 9,807.69), for a statutory total of CAD 19,615.38 before any common-law claim.

The payroll test looks at the employer. Under an employer of record arrangement the legal employer is the EOR, so ask your provider how its payroll is treated for this test before you budget for a long-serving hire. If you later move staff onto a corporation of your own, run the test again for the new employer.

Common-law reasonable notice is assessed by the courts, separately from the ESA, and it is often far above the statutory minimums. The ESA figures are a floor. A dismissed employee can go to court for the notice a judge considers reasonable, which turns the ESA weeks into a starting point for negotiation.

There is no statutory table for common-law notice. Courts look at the individual circumstances, which is why this article gives no rule of thumb and treats it as a risk to manage. For budgeting, the safer assumption is that an employee without an enforceable termination clause may be entitled to substantially more than the ESA amount.

Employers usually try to manage the risk through the termination clause in the employment contract. Whether a particular clause holds up is a question of current case law, and any wording that could give less than the ESA minimum should be treated as a weak point, so the clause needs review by an Ontario employment lawyer before it is used and at intervals afterwards. The drafting points are covered in employment contract essentials.

The employee also has to pick a forum. An Ontario ESA complaint has a 2-year limit counted from the breach, and filing one shuts the door on a lawsuit over the same issue.

The ESA exception is narrow: the Ontario guide lifts the notice requirement only for wilful misconduct, for disobedience, or for wilful neglect of duty, and in each case the conduct must not be trivial. The key words are wilful and not trivial. A missed target or a slow ramp-up after hiring is hard to describe as wilful, even when it is frustrating.

Common-law just cause is a separate test applied by the courts, and an employer can lose the argument on one even after winning it on the other. Because of that, dismissing for cause without notice should follow a documented process rather than a single incident, with advice taken before the decision.

• Keep dated records of the conduct, the warnings given and the employee’s responses.
• Investigate before deciding, and let the employee answer the allegation.
• Check whether similar conduct by others was tolerated, which weakens a cause argument.
• Where cause is doubtful, compare the cost of paying notice with the cost of defending a claim.

Performance problems usually call for a different route: clear expectations, a written improvement plan with dates, and a dismissal on notice if the plan does not work. That route costs the notice period but avoids staking the whole outcome on a cause finding.

Each jurisdiction has its own notice scale, and Quebec adds a complaint route in which reinstatement is possible. Under Quebec’s labour standards legislation, the notice of termination (préavis de fin d’emploi) published by the CNESST starts at 1 week after 3 months on the job, becomes 2 weeks after 1 year, doubles to 4 weeks after 5 years and reaches 8 weeks after 10 years.

A Quebec employee with 2 years of service who believes a dismissal lacked just and sufficient cause (in French, congédiement sans cause juste et suffisante) can file a complaint. The CNESST must receive it within a 45-day window that opens on the day of dismissal, and reinstatement is one of the possible outcomes. For a foreign employer, that means a Quebec dismissal can be undone, so the reasons and the file behind it matter as much as the notice paid.

In British Columbia, compensation for length of service is nothing up to 3 months, 1 week after 3 months, 2 weeks after 12 months and 3 weeks after 3 years, then 1 extra week per year up to 8 weeks after 8 years. Alberta’s termination pay steps up with service: nothing for 90 days or less, then 1 week until the 2-year mark, 2 weeks from 2 years, 4 weeks from 4 years, 5 weeks from 6 years, 6 weeks from 8 years, and 8 weeks once someone reaches 10 years.

Under the Canada Labour Code, federally regulated employers give at least 2 weeks’ written notice; from 3 years of service the figure becomes 1 week per completed year, capped at 8 weeks. Severance becomes due after 12 months and is worked out as 2 days’ wages per year of service, never less than 5 days’ wages in total. Non-unionised employees with 12 months of service can also complain of unjust dismissal.

The employer pays out final wages and any vacation pay owed, keeps benefits running through the statutory notice period, and issues a Record of Employment (ROE). The CRA employers’ guide sets the usual deadline at 5 calendar days after earnings are interrupted, and the ROE goes in electronically through ROE Web. Service Canada uses it to decide the former employee’s Employment Insurance claim, so late or inaccurate ROEs cause problems for the person you have just let go.

The year’s earnings and deductions also go on the employee’s T4 slip, and the slip has to be filed no later than the last February day following the year it covers. Deductions on a payment in lieu of notice run through the normal payroll process, covered in running payroll for Canadian staff.

With Employer of Record Canada, the decision to end the role stays with you, and we, as legal employer, handle the formal steps. We issue the notice letter under the correct provincial rules, calculate final pay and statutory amounts, run the last payroll and file the ROE. A short conversation before any dismissal lets us check service length, province and contract wording first. The provincial rules we work from are gathered on the employing in Canada overview.