Written by: Sezar Bune, J.D. | Toronto Employment Lawyer
Jurisdiction: Ontario, Canada
Date Published: April 18, 2026
Quick Answer
When your employment ends in Ontario, you are usually entitled to at least minimum protections under the Employment Standards Act, 2000 (“ESA“), and in many cases more under common law.
The ESA sets the legal floor, not the ceiling. Most employers know exactly where that floor is and will rarely offer more unless the law requires it or the employee understands their rights and pushes back.
In many cases, the impact of a new employment contract on severance pay is significant, as it may limit an employee’s entitlement to common law reasonable notice and restrict termination pay to ESA minimums.
The biggest mistake employees make is treating a severance offer as final before it has been reviewed. Once you sign a release, your ability to claim anything more is usually gone.
The Reality Most People Miss When a Job Ends
Every employment relationship ends. That part is predictable. What is not predictable (for most employees) is the gap between what they expect and what the law actually requires.
People assume severance is based on loyalty, fairness, or years of service. In reality, Ontario employment law doesn’t work that way.
There are only two legal layers that matter:
- The ESA – the statutory minimum entitlements to notice of termination (or termination pay), benefits continuation and severance pay (if applicable)
- Common law — reasonable notice (unless it has been legally limited by an employment contract)
Many other things that employers advise employees or refer to at the time of termination, such as internal policy, “standard packages,” HR guidelines, is secondary to those two sources.
And that is where most misunderstandings and employment disputes begin.
The ESA Sets the Floor, Not the Outcome
The ESA is often misunderstood as a “fairness standard.” It is not.
It is a minimum compliance regime. Think of it less like compensation law and more like a baseline obligation employers cannot go under.
In practice, that means:
- Minimum notice or termination pay must be provided
- Severance pay may apply in larger or longer-service cases
- Certain exceptions reduce or eliminate obligations
But here is the key point most employees never hear clearly enough:
The ESA is not necessarily intended to establish an employee’s termination entitlements in a holistic way. Rather, it sets baseline minimums that apply regardless of whether the result feels fair in the circumstances.
That is why many severance packages that feel low are still technically legal under the ESA.
Where Common Law Changes Everything
Common law is where most real value in termination cases exists.
It applies when there is no enforceable termination clause in an employment contract that limits an employee’s entitlements.
Under common law, employees are entitled to “reasonable notice,” which is not fixed. The courts in Ontario assess it based on practical realities (commonly referred to as the Bardal factors), such as:
- Age
- Length of service
- Position and seniority
- Compensation structure
- Job market conditions
This is why two people with the same job title can receive very different severance outcomes.
But the critical point is that common law is not automatic. In other words, if the employer and employee both agree, it can be limited or eliminated entirely through properly drafted employment contracts that restrict termination entitlements to ESA minimums.
When that happens, the analysis changes completely.
A Pattern We Regularly See in Practice
I often represent employees who are asked to sign updated employment contracts during their employment.
Sometimes it is framed as a promotion. Sometimes as an HR update. Sometimes as a condition of continuing employment during restructuring.
On paper, the changes rarely look dramatic.
But buried inside those agreements is often a clause that quietly removes access to common law reasonable notice and limits termination entitlements to ESA minimums.
Many employees do not focus closely on termination clauses at the time of signing a new employment contract, often because the practical importance of those terms only becomes clear later. That is usually where issues arise.
Why? Because the problem is that Ontario employment law does not evaluate these contracts based on what someone noticed or intended. It looks at what was signed. After oftentimes, we find that the impact of a new employment contract on an employee’s severance pay is significant.
So when termination happens a few years or even months later, the employer relies on that termination clause – and the employee is often surprised by the employer’s actions (and how much severance pay they gave up by signing the employment contract).
Not because anything “new” happened, but because the legal outcome was set earlier.
In one recent example, one of my clients was already working with his company in a senior manager role for about 4 years when his employer asked him to sign a new employment contract. One section (the termination clause) would have reduced his severance pay to the ESA minimums. A few months later, he was terminated “without cause.”
Fortunately, we were able to negotiate a stronger termination clause before he ultimately signed the updated employment contract, which significantly improved his position when he was provided with a severance package.
Why This Often Becomes a Problem at Termination
At the end of employment, expectations and legal reality often diverge.
Employees tend to assume a severance package they receive reflects loyalty or years of service. Employers, on the other hand, rely on what the employment contract allows them to do – not what feels fair in hindsight.
That is where tension usually appears.
And once termination happens, the leverage shifts quickly. The employment relationship is already over. The legal discussion is no longer about negotiation in the abstract. Instead, it becomes simply enforcing or challenging a written employment contract.
At that point, what matters is not what was assumed, but what was signed.
Frequently Asked Questions
Does my employer have to pay me severance pay when I am fired?
Yes, at minimum under the ESA. You may also be entitled to more under common law unless your employment contract limits it.
What is the difference between ESA severance and common law severance?
The ESA provides minimum statutory entitlements (the “bare minimums”). Common law may provide significantly more based on your circumstances unless restricted by contract.
Can my employer limit my severance in my employment contract?
Yes. If the contract is properly drafted and enforceable, it can limit termination entitlements to ESA minimums, but nothing less.
Should I sign a severance offer right away?
No. Once you sign a release, you are usually giving up your right to claim anything more.
Final Though
Most employment disputes are rarely determined at termination. Their resolution actually originates much earlier — at the moment someone signs a employment contract without realizing it defines not just how they are hired, but how they are exited.
That is usually the part people only understand once it is too late to change it.