Common Law vs. ESA: Why Your Ontario Severance Package Is Likely Too Low
The day you are let go from your job is often one of the most stressful days of your professional life. Whether it’s a “restructuring,” a “downsizing,” or a sudden “termination without cause,” the immediate concern is almost always financial: How long will this severance package last?
Most employees in the Greater Toronto Area (GTA) and across Ontario receive a termination letter accompanied by a release form. Usually, there is a deadline—often just a few days away—and a “take it or leave it” tone.
The biggest mistake you can make is assuming that the offer on the table is the maximum amount the law requires. In reality, most initial offers only cover the bare legal minimums required by the Employment Standards Act (ESA). However, most employees are actually entitled to significantly more under Common Law.
Understanding the “Floor”: The Employment Standards Act (ESA)
In Ontario, the Employment Standards Act (ESA) sets out the absolute minimum requirements an employer must meet when terminating an employee without cause.
Under the ESA, notice of termination is generally calculated as one week of pay per year of service, capped at a maximum of eight weeks. If the company has a global payroll of over $2.5 million and the employee has been there for five years or more, they may also be entitled to “severance pay,” which is another week per year of service, capped at 26 weeks.
To many employees, receiving eight or twelve weeks of pay sounds like a reasonable “standard.” Employers often present these numbers as if they are the final word on the matter. But the ESA is not the “standard”—it is the legal floor. It is the absolute smallest amount an employer can pay you without breaking the law.
The “Ceiling”: What is Ontario Common Law?
While the ESA is written by the government, Common Law is a body of law established through decades of court decisions. Unless you have signed an employment contract with a very specific (and legally enforceable) termination clause that limits you to the ESA minimums, you are likely entitled to “Common Law Reasonable Notice.”
Common Law is much more generous than the ESA. While the ESA might give a 15-year employee 15 weeks of pay, Common Law could entitle that same employee to 15 months of pay.
The Bardal Factors: How Common Law is Calculated
Unlike the ESA, there is no simple “one week per year” formula for Common Law. Instead, Ontario courts look at the specific circumstances of your employment, commonly known as the Bardal Factors (named after a landmark 1960 case, Bardal v. Globe & Mail Ltd.).
When determining your true severance entitlement, a Toronto employment lawyer will evaluate:
- Character of Employment: Were you a senior executive, a specialized technician, or an entry-level clerk? Generally, the more senior or specialized the role, the longer the notice period.
- Length of Service: Longer tenure usually results in a higher notice period, but even short-term employees can be entitled to significant Common Law damages.
- Age of the Employee: Courts recognize that older employees (typically 50+) may face more difficulty finding comparable employment in a competitive market like the GTA.
- Availability of Similar Employment: If you work in a niche industry where jobs are scarce, your severance entitlement may increase because it will take you longer to find a “comparable” role.
The “Gap”: Why Your Offer is Likely Inadequate
When you compare the ESA “floor” to the Common Law “reasonable notice,” a massive gap emerges. For many employees in Mississauga, Brampton, or Toronto, this gap represents tens of thousands—sometimes hundreds of thousands—of dollars.
Employers often rely on the fact that most employees don’t know the difference. They hope you will sign the release quickly to get your “two weeks per year” offer, which saves the company money while leaving you undercompensated during your job search.
The Myth of the “Exploding Offer”
One of the most common tactics used by HR departments is the “exploding offer.” You might be told, “This offer is only valid until Friday at 5:00 PM. If you don’t sign, we will revert to the ESA minimums.”
This is designed to create a sense of panic. Legally, however, your right to seek Common Law damages does not expire in three days. In fact, most Ontario courts look unfavourably on employers who pressure employees into signing releases without giving them adequate time to seek legal advice.
At Randy Ai Law Office, we routinely help clients extend these deadlines or ignore them entirely while we negotiate a settlement that reflects their true value.
Why a Termination Clause Might Not Block You
You might be thinking, “But I signed a contract that says I only get the ESA minimums.”
This is where expert legal review becomes critical. In recent years, Ontario courts (most notably in the Waksdale v. Swegon North America Inc. decision) have struck down thousands of termination clauses because they were worded incorrectly. If a single sentence in your termination clause violates the ESA—even a part that doesn’t apply to you—the entire clause may be void.
If your termination clause is void, you “fall back” into Common Law entitlements, even if you signed a contract saying otherwise.
How the Severance Improvement Program™ Helps
Navigating the transition from an ESA-based offer to a Common Law settlement requires strategy. The Severance Improvement Program™ at Randy Ai Law Office was designed to bridge this gap.
We don’t just ask for more money; we build a legal case based on the Bardal factors, recent case law, and the specifics of your industry. Our goal is to resolve these disputes privately and efficiently. Most of our clients in the Greater Toronto Area see their severance packages improved without ever having to step foot in a courtroom.
Conclusion: Don’t Leave Money on the Table
If you have been terminated, the most important thing you can do is stay calm and get an expert opinion. Accepting an offer based solely on the Employment Standards Act is essentially giving your employer a “discount” on your termination.
You have worked hard for your years of service. Your severance package should reflect that dedication and provide the financial bridge you need to find your next opportunity.
