employee death severance package Ontario employment law

Dealing with employment issues after the passing of an employee can be challenging and emotionally difficult for most employers. However, it is important to understand what an employer’s obligations under Ontario employment law to an employee’s estate upon termination of employment. This article briefly explores the eligibility criteria and exceptions that may exist in some cases.

The goal is to provide some general educational information on the complexities of deceased employees and their entitlement to severance packages for wrongful dismissal in Ontario.

What Is a Severance Package?

If an employee is terminated from their employment without cause (meaning without legal justification, such as wilful misconduct), the employer is generally required to provide them with financial compensation. As a result, most employers will offer employees a “severance package” consisting of:

a termination letter (notifying the employee it has officially ended their employment on a specific day, and the circumstances surrounding the termination, including any specific reasons for the termination, such as downsizing or business restructuring
an offer of financial compensation (such as a specific amount of “notice of termination” where the employee works until a future last day of employee while earning their full income, or a lump sum payment of termination pay and severance pay)
a full and final legal release (asking the employee to forfeit their legal rights to sue the employer for any work-related issues, such as wrongful dismissal claim, constructive dismissal claim, discrimination, and so on).

How Much is My Severance Package Worth?

When it comes to determining how substantial an employee’s severance package is worth upon termination of employment without cause, the key question is: has the employee agreed to a valid termination clause in an employment contract limiting their severance package entitlement? If the answer is “yes,” then the employee is limited to that specific severance package outlined in the employment contract – as long as it provides at least (or more than) the statutory minimum entitlements under the Ontario Employment Standards Act, 2000. If the answer is “no,” then the employee is entitled to their full (maximum) severance package under common law, which is usually determined by assessing the employee’s age, years of service working for the employer, type of job and compensation, and ability to find a similar job considering the employee’s skillset and educational qualifications.

Minimum Termination Pay and Statutory Severance Pay in Ontario

Under the Ontario Employment Standards Act, 2000, most employees who are wrongfully dismissed are entitled to statutory minimum amounts when it comes to notice of termination (or termination pay), continuation of benefits (including health benefits and pension plan), and statutory severance pay. The amount depends on the employee’s length of service and consists of:

one week of notice of termination (or termination pay) for each year of service (capped at a maximum of 8 weeks)
one week of continuation of benefits plans for each year of service (capped at a maximum of 8 weeks)
one week of statutory severance pay for each year of service (capped at a maximum of 26 weeks), which is intended to compensate the employee for their intangible losses, including loss of seniority once their job is “severed” (terminated)

Specifically, the requirement for statutory severance pay is owed to employees their employer:

dismisses the employee or otherwise refuses or is unable to continue employing the employee
constructively dismisses the employee, and the employee resigns within a reasonable period
lays off the employee for 35 weeks or more within 52 consecutive weeks
permanently discontinues all business operations at an establishment
gives notice of termination, and the employee resigns with written notice at least 2 weeks before the end of the statutory notice period

However, statutory severance pay is only owed to employees in certain circumstances:

The employment relationship is severed by the employer
The employee has been employed for 5 years or more
The employer has a payroll of $2.5 million or more
Employees with less than 5 years of service are entitled to severance pay only if the severance results from the permanent discontinuance of all or part of the employer’s business, affecting a group of 50 or more employees within 6 months.

When Is a Deceased Employee Entitled To Severance Pay?

Under common law, the general rule is that an employee’s death frustrates the employment contract and discharges the employment contract. However, under Ontario employment legislation (section 9 of O. Reg. 288/01: Termination and Severance of Employment), a deceased employee’s estate is entitled to receive severance pay from an employer following a termination of employment in the following cases:

the employee’s employment contract has become impossible to perform frustration of employment) due to an employee’s death
the employer’s death
if the deceased employee received a notice of termination before their death and qualified for severance pay

Book a Consultation with an Employment Lawyer in Toronto

At Bune Law, we understand and are familiar the complexities of workplace law and are committed to helping both employers and employees navigate these challenges. Whether you are an employer or employee dealing with employment contracts, workplace disputes like a wrongful dismissal or constructive dismissal, or simply need guidance on your rights and obligations for a severance package review and negotiation, our experienced employment lawyer is here to assist you.

Book a confidential consultation with our Toronto employment law firm to protect your legal rights to understand your options and protect your rights. Why Choose Bune Law When You Need an Ontario Employment Lawyer?

Experience in all areas of workplace law, including wrongful dismissal claims, constructive dismissal claims, severance package reviews, severance package negotiations, discrimination and human rights disputes, and employment contract reviews.
Proven track record of successfully resolving workplace disputes through negotiation, mediation, and employment litigation.
Compassionate and personalized approach to each case, ensuring tailored solutions that meet your specific needs.

If you need a Toronto employment lawyer who is committed to delivering strong results and proactive solutions, please contact Bune Law online or by phone today at 647-822-5492.