News of large multinational retailers closing establishments across Canada has dominated the headlines of late. There has been a spotlight on the impact of such closures on the tens of thousands of Canadians who will very soon be without employment. In cases of mass terminations like these, the Ontario Employment Standards Act, 2000 (“ESA”) (like its counterpart in some other jurisdictions) provides enhanced arrangements for employees who find themselves let go and suddenly in an over-saturated labour market.
For purposes of the ESA, a “mass termination” occurs when an employer terminates 50 or more employees at the employer’s establishment in a four-week period. “Establishment” includes multiple locations in the same municipality where the employer carries on business and not just one location. The four-week period is a “rolling window”, with a mass termination occurring at the first occasion of 50 or more employees being terminated (i.e., walking out the door) within the same four-week period. The mass termination provisions do not apply when the number of terminated employees is 10 per cent or less of the employees who have been employed for at least 3 months and if the terminations were not caused by the permanent discontinuance of the employer’s business at the establishment.
In the event of a “mass termination” the following rules will apply to Ontario employers:
Individual Notice of Termination
In the event of a mass termination, the length of individual working notice of termination, or pay in lieu of notice of termination, is determined by the number of employees who are terminated and not the individual’s length of service. Notice is provided as follows:
- If 50 to 199 employees are terminated, then the employer must provide eight (8) weeks notice of termination for each employee.
- If 200 to 499 employees are terminated, then the employer must provide twelve (12) weeks notice of termination.
- If the number of employees terminated is 500 or more, then the employer must provide sixteen (16) weeks notice of termination.
Employers continue to have the option to require employees to work during the notice period (for example, during a period of staggered closure or for any other reason) or, alternatively, pay them termination pay in lieu of notice. Subject to any contractual restrictions or other collectively bargained rights, it is permissible for an employer to require some employees to work the duration of the notice period while providing others with pay in lieu.
Requirements during Notice Period
In addition to the special rules that apply in cases of mass termination, the employer is also required to abide by the ESA’s general requirements during the notice period. For example, the employer cannot change any term or condition of employment or reduce wage rates. The employer must continue its benefits plan contributions, if any, in order to maintain the employees’ benefits for the duration of the notice period.
In addition to notice of termination, employees may also be eligible for severance pay. Eligible employees who have been employed by the employer for five or more years who are dismissed because of a “permanent discontinuance” which results in a mass termination are entitled to severance pay even if the employer does not have a payroll of $2.5M or more.
Notice to the Ministry
In the event of a mass termination, an employer must provide the Director of Employment Standards with a Form 1 Notice of Termination of Employment (“Form 1”). Importantly, notice of termination will not be effective until the Director of Employment Standards receives the employer’s Form 1. The employer is required to advise the Director on the Form 1 of the location(s) where terminated employees work and the number of employees being dismissed amongst other information. The Form 1 must also be posted in the workplace.
When a mass termination takes place on a national scale, employers must ensure that they are complying with the requirements of the applicable employment standards legislation in the relevant provinces. Employers must also consider individual contracts of employment and any obligation set out in a collective agreement. Special considerations may arise in a unionized workplace, such as recall rights and elections relating to severance pay.