Termination Pay in Ontario (2026): ESA Notice Periods, Exemptions and Worked Examples

When an Ontario employer ends someone's job without cause, the Employment Standards Act sets the floor: written notice, termination pay in place of notice, or a mix of the two. The amounts are modest — at most eight weeks for an individual — but the rules around them are where employers trip up: who is exempt, how to handle variable hours, what a temporary layoff turns into, and what happens when 50 or more people go at once. This guide is for Ontario employers, HR and payroll staff, and employees checking what they're owed in 2026. It covers the notice scale, the calculation with worked examples in Canadian dollars, the exemptions, layoffs, mass terminations, the 2025 changes, and where common-law notice and severance pay come in.

Quick answer

Ontario employees with 3 months or more of service must get written notice, termination pay, or both when let go without cause: 1 week under a year, 2 weeks from 1 to 3 years, then 1 week per year up to 8 weeks. Termination pay is regular wages for the notice period plus vacation pay, with benefits continued, paid by the later of 7 days or the next pay day.

• Mass terminations (50 or more employees in 4 weeks) need 8 weeks–16 weeks of notice and Form 1

• Severance pay is a separate, extra entitlement for 5+ years' service at larger employers

• Wilful misconduct, construction work and refusing reasonable alternative work are the main exemptions

• From 27 November 2025: extended temporary layoffs by agreement and 3 days' job-search leave in mass terminations

• A flawed contract clause can open the door to common-law notice of up to about two years

The ESA notice scale

Notice is based on the employee's period of employment — the time they have worked for the employer — on the date notice is given.

Notice must be in writing. The employer can give working notice (the employee keeps working until the termination date), pay termination pay instead, or combine them — for example, three weeks of working notice and two weeks of pay for a five-week entitlement.

During any statutory notice period the employer can't cut the employee's wage rate or change other terms of employment, must keep making contributions to benefit plans, and must pay at least regular wages for a regular work week. It also can't schedule the employee's vacation in the notice period unless the employee agrees after receiving written notice. Notice that's undermined — hours slashed, benefits cancelled — doesn't count as proper notice.

Termination pay vs severance pay

The two are often confused. Termination pay replaces the notice the employer didn't give, and nearly every employee with three months' service is entitled to it. Severance pay is a separate payment for long-service employees — at least 5 years of employment — at employers with a global payroll of C$2.5 million or more, or when 50 or more employees are let go in six months because all or part of the business permanently closes. It's 1 week per year of service, up to 26 weeks. An eligible employee gets both. Our guide to severance pay in Ontario covers it in detail.

How to calculate termination pay

Termination pay is a lump sum equal to the regular wages the employee would have earned in the notice period, plus vacation pay on that amount. The employer must also keep up benefit plan contributions — health, dental, life insurance and pension — for the whole statutory notice period, even though the employee isn't working.

Calculating Ontario termination pay

1. 1

   Work out the notice entitlement

   Use the employee's total period of employment on the date notice is given and read off the scale: 1 to 8 weeks.

2. 2

   Find a regular week's wages

   Fixed hours: hourly rate × regular weekly hours, or weekly salary. Variable hours: average the employee's regular wages over the 12 weeks before termination, leaving out weeks they didn't work.

3. 3

   Multiply by the weeks owed

   Subtract any weeks of proper working notice already given.

4. 4

   Add vacation pay

   Add 4% (under 5 years) or 6% (5 years or more) on the termination pay, or a higher contractual rate.

5. 5

   Continue benefits and pay on time

   Keep benefit contributions going to the end of the notice period and pay the lump sum by the later of 7 days after termination or the next pay day.

Worked examples

Fixed hours (Ontario's example). Sarah earns C$20 an hour for a 40-hour week and has worked for three and a half years, so she is owed three weeks. Her regular week is C$800; three weeks is C$2,400; 4% vacation pay adds C$96. Her termination pay is C$2,496.

Variable hours (Ontario's example). Gerry earns C$25 an hour on irregular hours, has four years' service, gets 6% vacation pay under his contract, and was off sick for two of the last 12 weeks. He earned C$1,800 in the 10 weeks he worked, so his regular week is C$180. Four weeks is C$720, plus 6% vacation pay of C$43.20: C$763.20.

Long service, salaried. Priya, an office manager in Mississauga, earns C$62,400 a year (C$1,200 a week) and has 11 years' service. She's owed the 8-week maximum: 8 × C$1,200 = C$9,600, plus 6% vacation pay of C$576, for C$10,176 — and her dental and health coverage must continue for those eight weeks. Because she has more than five years' service, if her employer's global payroll is at least C$2.5 million, she's also owed severance of 11 weeks' pay on top.

Partial working notice. A retail supervisor with 6 years' service is owed 6 weeks. The employer gives 4 weeks' written working notice and then decides to end the job early. It owes 2 weeks' termination pay for the shortfall, plus vacation pay on it.

Who isn't entitled to notice or termination pay

The ESA and its regulations carve out a list of situations. An employee isn't entitled to notice or termination pay if they:

• have been employed for less than three months
• were guilty of wilful misconduct, disobedience or wilful neglect of duty that isn't trivial and hasn't been condoned by the employer
• were hired for a specific term or task and the job ends on schedule — unless it ends early, the task isn't completed more than 12 months after it started, or the employment continues three months or more past the end date
• work in construction (including some off-site staff) or building, altering or repairing certain ships
• reach retirement age under an established practice of the employer, provided that doesn't breach the Human Rights Code
• refuse reasonable alternative employment with the employer, or a position available through a seniority system
• are on a temporary layoff, or don't return within a reasonable time after being recalled
• are terminated during or because of a strike or lockout
• have a contract that became impossible to perform or frustrated by an unforeseeable event such as a fire or flood

The misconduct test is stricter than the common-law idea of "just cause". It requires conduct that is wilful — deliberate, not just careless — and not trivial. Ontario's guide gives the example that poor performance, even if it hurts the business, usually doesn't meet it unless it's intentional. Employers who dismiss for performance problems and pay nothing are a common source of successful claims.

Frustration has its own limits. Bankruptcy or insolvency doesn't count, and neither does frustration caused by the employee's own illness or injury — so an employee on long-term disability whose job ends is still generally owed termination pay.

Constructive dismissal

An employer doesn't have to say "you're fired" for the termination rules to apply. If it makes a significant change to a fundamental term without the employee's agreement — a large pay cut, a major change in location, hours, authority or role — or allows harassment, or gives a "quit or be fired" ultimatum, the employee can treat it as a dismissal. They must resign within a reasonable time. They're then owed notice or termination pay as if they'd been let go. This area is complex; Ontario's Employment Standards Information Centre is at 1-800-531-5551.

Temporary layoffs: when they turn into a termination

Ontario layoff limits at a glance

13 weeks in any 20 consecutive weeks

Always a temporary layoff

35 weeks in any 52 consecutive weeks

Temporary only with conditions

e.g. continued benefits or approved recall

Under 52 in 78 weeks

Extended layoff by written agreement

Director approval, from 27 Nov 2025

A temporary layoff isn't a termination, so no termination pay is owed at the start. But it becomes one if it runs too long. A "week of layoff" is a week in which the employee earns less than half their usual weekly earnings, and the limits are:

• up to 13 weeks in any 20 consecutive weeks — always temporary
• more than 13 weeks but less than 35 weeks in any 52 consecutive weeks — temporary only if, for example, the employer continues substantial pay or benefits, the employee gets supplementary unemployment benefits, or the employer recalls them within a timeframe approved by the Director or agreed in writing
• 35 weeks or more in 52 — temporary only for unionized employees recalled within the period in their collective agreement, or under the new extended layoff rules

Once a layoff goes past these limits, the law treats the employment as terminated on the first day of the layoff, and termination pay — and possibly severance — becomes payable. The ESA doesn't require written notice of a temporary layoff, though a contract may, and an employer laying someone off without a contractual right to do so may face a constructive dismissal claim.

The extended temporary layoff (from 27 November 2025)

Since 27 November 2025, non-union employees can be on a layoff of 35 weeks or more in a 52-week period — but under 52 weeks in any 78 consecutive weeks — if three conditions are met. The employer and employee must agree in writing, after the employee is told the latest recall date and that the agreement can't be withdrawn. The employer must apply to the Director of Employment Standards for approval at least 30 days before it's needed. And the approval ends on the earlier of the latest recall date or the day the layoff reaches 52 weeks in a 78-week window. Laying off beyond the approved end date triggers termination and severance pay.

Mass terminations

When an employer terminates 50 or more employees at one establishment in any four-week period, the mass termination rules replace the individual scale. Notice depends on the number of employees affected, not their service:

Ontario mass termination notice

Employees terminated in 4 weeks	Minimum notice to each employee
50 to 199	8 weeks
200 to 499	12 weeks
500 or more	16 weeks

50 to 199

Minimum notice to each employee

8 weeks

200 to 499

Minimum notice to each employee

12 weeks

500 or more

Minimum notice to each employee

16 weeks

The employer must file Form 1, Notice of termination of employment, with the Director of Employment Standards, and the notice to employees isn't effective until the Director receives it. On the first day of the notice period it must post Form 1 in the workplace, give each affected employee a copy, and — since 1 July 2025 — give them the Employment Ontario Career Supports information sheet.

Other points that catch employers out:

• The 10% exception. The mass rules don't apply if the terminations affect no more than 10% of employees with at least three months' service at the establishment, and none of them is caused by permanently discontinuing all or part of the business.
• Home workers. Since 26 October 2023, an employee's home counts as an establishment only if they work exclusively from home — which matters when a remote-first employer counts heads.
• Job-search leave. Since 27 November 2025, employees receiving mass termination notice can take up to 3 unpaid days of job-protected leave during the notice period to look for work.
• Employees resigning during notice. They must give one week's written notice if employed under two years, or two weeks if longer — unless they were constructively dismissed or the employer breached the contract.

Federally regulated employers follow the Canada Labour Code instead: at least two weeks' notice for an individual, rising to one week per completed year after three years up to 8 weeks, and 16 weeks' notice to the federal Labour Program for a group termination of 50 or more.

ESA minimums vs common-law notice

The ESA is a floor. A non-unionized employee in Ontario is also entitled to reasonable notice at common law unless their written employment contract validly limits them to the ESA minimum. Courts set reasonable notice case by case using what are known as the Bardal factors: the character of the job, length of service, the employee's age, and the availability of similar work, along with their experience and qualifications. Long-serving or senior employees can be awarded close to two years — many times the ESA's eight weeks.

That's why termination clauses matter. In Waksdale v. Swegon North America (2020), the Ontario Court of Appeal held that if any part of a contract's termination provisions breaches the ESA — even a "for cause" clause the employer never relied on — all of them are unenforceable, and the employee gets common-law notice. Later cases, including Rahman (2022), followed it.

In Dufault v. Ignace (Township), the trial judge found a termination clause unenforceable partly because it let the employer dismiss "at any time" in its "sole discretion", wording the court said ignored protected periods under the ESA. The Court of Appeal upheld the result in December 2024 on the narrower ground that the for-cause provision breached the ESA, without deciding the "at any time" point. The Supreme Court of Canada refused leave to appeal on 5 June 2025, so the Court of Appeal's decision stands. For employers, the practical lesson is to have termination clauses reviewed against the current ESA.

An employee can't take both routes for the same termination. Filing an ESA claim for termination or severance pay and suing for wrongful dismissal are alternatives — the employee must choose one, and a lawsuit can recover far more but costs more and takes longer.

Tax, the ROE and paperwork

Termination pay in lieu of notice is employment income, not a retiring allowance, according to the Canada Revenue Agency. Deduct CPP, EI and income tax, adding it to any regular pay in the period — our payroll deductions guide has the 2026 rates. ESA severance pay and damages for wrongful dismissal are generally treated differently, as a retiring allowance with no CPP or EI withheld.

When the job ends, issue a Record of Employment within the deadline and show termination pay correctly on it, because it affects when EI benefits start. Our Record of Employment guide explains the timing. Pay any outstanding wages, overtime, accrued vacation pay and holiday pay along with the termination pay.

Ending employment in Ontario — employer checklist

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• Confirm the employee's total period of employment and any exemption that genuinely applies
• Check the contract's termination clause against the current ESA
• Give written notice, termination pay or a mix — never less than the ESA scale
• Keep wages, terms and benefit contributions unchanged through the notice period
• Add vacation pay to termination pay
• Check severance eligibility (5 years' service and C$2.5M global payroll)
• Pay by the later of 7 days or the next pay day
• Issue the Record of Employment
• For 50+ terminations in 4 weeks, file Form 1 before notice takes effect

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Common mistakes

Paying termination pay but cancelling benefits. Benefit contributions must continue for the statutory notice period. Check with your benefits provider before giving notice that coverage can be extended for terminated staff.

Using a flat week for variable-hours staff. The 12-week average applies, ignoring weeks not worked.

Calling it "cause" when it's performance. The ESA's wilful misconduct test is narrow. Without deliberate wrongdoing, notice is owed.

Letting a layoff drift. Count layoff weeks from day one; at 13 weeks in 20, either recall, document one of the conditions that extends the limit, or prepare for termination and severance costs.

Forgetting severance. Long-service employees at larger employers are owed severance as well as termination pay.

Official links

• Ontario — termination of employment (ESA guide)Notice scale, layoffs, mass terminations
• Ontario — severance pay (ESA guide)The separate long-service payment
• Federal — termination of employmentCanada Labour Code employers
• CRA — retiring allowancesTax treatment of termination payments

What to do next

Before you give notice, confirm the employee's start date and pay history, check your contract wording, and work out both termination pay and any severance pay so the full cost is clear. Then read our guide to severance pay in Ontario, prepare the Record of Employment, and use our salary slip generator to show termination pay, vacation pay and final wages as separate lines on the last pay stub.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

How much termination pay is required in Ontario?

Under the Employment Standards Act, an employee with at least 3 months of service is owed written notice, termination pay or a mix. It's 1 week for under 1 year, 2 weeks for 1 to under 3 years, then 1 week per year of service up to 8 weeks at 8 years. Termination pay is regular wages for that period, plus vacation pay and continued benefits.

When must termination pay be paid in Ontario?

Termination pay is due as a lump sum on the later of seven days after the employment ends or the employee's next regular pay day. During the notice period itself, the employer must keep paying regular wages and benefit contributions and cannot cut wages or change other terms of employment.

What is the difference between termination pay and severance pay in Ontario?

Termination pay replaces the notice an employer didn't give, and almost every employee with 3 months' service gets it. Severance pay compensates long-service employees for losing their job: it needs 5 years of service and an employer with a payroll of C$2.5 million or more, and it's 1 week per year up to 26 weeks. An employee can be owed both.

Who isn't entitled to termination pay in Ontario?

Exceptions include employees with under 3 months' service, those guilty of wilful misconduct, disobedience or wilful neglect of duty that isn't trivial and wasn't condoned, most construction employees, employees who refuse reasonable alternative work, employees on temporary layoff, fixed-term employees whose term simply ends, and contracts frustrated by an unforeseeable event such as a fire.

What is a mass termination in Ontario?

It's the termination of 50 or more employees at one establishment within four weeks. Notice depends on the number of employees, not service: 8 weeks for 50 to 199, 12 weeks for 200 to 499 and 16 weeks for 500 or more. The employer must file Form 1 with the Director of Employment Standards, post it, and give employees a copy.

Is the ESA minimum all an Ontario employee is owed?

Not always. Unless a valid written termination clause limits them to the ESA minimum, non-unionized employees are entitled to common-law reasonable notice, which courts set using age, service, position and the availability of similar work and which can approach two years. Ontario courts strike down clauses that breach the ESA in any respect.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 12 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Your guide to the Employment Standards Act: Termination of employment — Government of Ontario · accessed 12 October 2026
2. 2.Your guide to the Employment Standards Act: Severance pay — Government of Ontario · accessed 12 October 2026
3. 3.Termination of employment (federally regulated employers) — Employment and Social Development Canada · accessed 12 October 2026
4. 4.Retiring allowances — Canada Revenue Agency · accessed 12 October 2026
5. 5.Dufault v. Corporation of the Township of Ignace — SCC case 41680 — Supreme Court of Canada · accessed 12 October 2026
6. 6.Recent decisions on termination clauses: Dufault v. Ignace (2024 ONSC 1029; 2024 ONCA 915) — Mann Lawyers LLP · accessed 12 October 2026
7. 7.Better late than never: employers in Canada should review their termination provisions — Mintz · accessed 12 October 2026