Most employers in Ontario are aware of the notice requirements under Ontario’s Employment Standards Act (the “ESA”) in the event of a termination. However, not all employers are aware that these entitlements can increase drastically if the number of employees terminated triggers a mass termination under the ESA.
What is a mass termination?
A mass termination occurs if at least 50 employees are terminated at the same “establishment” within a four-week period. This will trigger increased termination entitlements compared to a regular termination under the ESA. The current definition of “establishment” under the ESA is a location where the employer carries on business. Separate locations are also considered one establishment if they are located in the same municipality.
Termination entitlements in a mass termination scenario
In a mass termination scenario, employees could be entitled to eight, 12 or 16 weeks’ notice, depending on the number of employees terminated. Specifically, at least eight weeks’ notice or pay in lieu of notice is required if the number of employees terminated is between 50-199, at least 12 weeks’ notice or pay in lieu of notice is required if the number of employees terminated is between 200 to 499, and at least 16 weeks’ notice or pay in lieu of notice is required if the number of terminated employees exceeds 500.
These entitlements are considerably higher when compared to a regular termination. For instance, an employee who worked for more than three months but less than one year would typically only be entitled to one week of termination pay in a regular dismissal scenario; however, that same employee could be entitled to up to 16 weeks’ termination pay if the employee were part of a mass termination.
The exception
Mass termination rules are not automatically applied as there is an exception to the rules. Mass terminations requirements will not apply to an employer if the number of employees terminated is not more than 10% of the number of employees who have been employed for at least three months and where the terminations are not the result of a permanent discontinuance of part of the employer’s business at the establishment. Both criteria must be met in order for this exception to apply. This is good news for larger employers since sizable terminations can still take place without triggering increased notice entitlements as long as the above requirements are met.
Obligation to notify the Director of Employment Standards
In addition to increased termination entitlements, mass terminations also impose further obligations on employers. In particular, employers must inform the Director of Employment Standards using a Form 1 which provides information on, among other things, the number of employees being terminated, the economic circumstances surrounding the termination, and whether any alternatives to termination were implemented or considered. Employers must post this form in their establishment in an area that is likely to come to the attention of impacted employees.
It is important to remember that notice will not be effective until the Form 1 has been properly filed with the Director of Employment Standards. This has also been confirmed by the Court of Appeal for Ontario in 2018 ONCA 758.
Upcoming changes
Currently, the definition of “establishment” does not include remote employees. Accordingly, employers are not required to account for remote employees when calculating whether a mass termination has occurred nor are these remote employees entitled to the increased termination entitlements that would result from such a termination. However, this definition may soon be expanded.
On March 13, 2023, the Ontario government announced Bill 79, Working for Workers Act, 2023 which included potential changes to the ESA that would allow remote employees to be entitled to the same notice entitlements as non-remote employees in the case of a mass termination. In particular, the definition of establishment would be expanded to include the private residence of an employee if the employee is a remote worker.
As of May 8, 2023, the proposed changes are currently at the Second Reading stage of a bill and have not yet become the law. Given the numerous changes that have arisen in the workplace as a result of the Covid-19 pandemic, we expect that this expanded definition will become law eventually. We will continue to provide updates as they become available.
