From time to time, we meet with employees who have been given notice of termination and want to know what happens to their severance pay if they decide to resign during the working notice period. Are they still entitled to it? Must they work the entire notice period or risk losing their severance pay? In Ontario, the Employment Standards Act, 2000 (“ESA“) provides the answers.

Notice of Termination and Severance Pay under the ESA

Under the ESA, an employee is entitled to notice of termination or termination pay in lieu of notice. Section 57 of the ESA sets out the minimum notice period, generally one week per year of service, up to a maximum of eight weeks. An employer may choose to provide notice, pay in lieu of notice, or a combination of both.

Employers may also provide more notice than the ESA minimum, and employees may be entitled to additional notice under their employment contract or common law. Employees should consult an employment lawyer to clarify their specific entitlements.

In some circumstances, an employee may also be entitled to severance pay if they have worked at least five years for the employer and either:

  1. The employer permanently discontinues all or part of its business and terminates 50 or more employees within six months; or
  2. The employer has a payroll of $2.5 million or more.

Where these conditions are met, the employee is entitled to one week of pay per year of service, up to a maximum of 26 weeks. Unlike termination pay, severance pay compensates the employee for the loss of employment.

Resignation During the Working Notice Period

Often, employers opt to provide termination pay in lieu of notice for business reasons. In other cases, employers provide working notice, requiring the employee to continue working during the notice period. Employees may choose to resign during this period.

Sometimes, employers provide more notice than the ESA minimum. In such cases, the statutory notice period prescribed by the ESA applies to the last part of the notice period. For example, if an employer is required to provide four weeks of statutory notice but opts to provide six weeks, the last four weeks of the working notice period constitute the statutory part.

Employees often ask whether they retain their severance pay if they resign during the notice period. The answer is yes, provided the following conditions are met:

  1. The employee gives two weeks’ notice of resignation; and
  2. The resignation occurs during the statutory part of the notice period.

In short, employees who resign during working notice do not automatically lose severance pay, as long as these requirements are satisfied.