In Ontario, your legal right to severance pay depends on the true nature of your working relationship — not the label your employer chose to put on it.
Part-time workers are covered by the Employment Standards Act, 2000 (ESA) on equal footing with full-time employees; part-time status alone does not disqualify anyone from severance pay.
Workers labelled “independent contractors” may still be entitled to severance if a court or tribunal determines they were actually employees or dependent contractors — a recognised third category under Ontario law for workers economically reliant on a single client.
Under the ESA, severance pay may be owed when an employee has at least five years of service and the employer has a global payroll of $2.5 million or more. Under common law, entitlement can be broader and the amounts significantly higher — sometimes reaching 24 months of pay — regardless of ESA eligibility thresholds.
Before signing any severance offer or release, consult an Ontario employment lawyer. Accepting prematurely may extinguish rights that are worth considerably more than the initial offer.
Why Your Job Title May Not Determine Your Rights
You just received a termination letter. Or perhaps your employer sat you down and said that because you were part-time — or because you worked under a contractor agreement — you are not entitled to any severance pay.
If that sounds familiar, here is something important to understand before you sign anything: in Ontario, what matters is not the label on your contract. It is your actual working relationship that determines your legal rights. The courts and the law both look at how you truly worked — not what your employer chose to call the arrangement.
This article explains the severance pay rules for three types of Ontario workers: employees (full-time and part-time), workers labelled independent contractors, and a lesser-known category called dependent contractors. Understanding which group you fall into is the first step toward knowing what you may actually be owed.
If you have questions about your situation right now, an Ontario employment lawyer can help you assess your rights before you make any decisions.
First: Identify Which Type of Worker You Are
Full-Time or Part-Time Employee
Your employer controls your schedule and directs how and when you do your work. You receive a T4 slip at tax time. If this describes you, you are likely covered by the Employment Standards Act, 2000 and may be entitled to both ESA and common law severance pay.
Worker Labelled an Independent Contractor
You signed a contractor or service agreement and reported income on a T4A. However, if your working situation closely resembled an employment relationship — consistent hours, employer-directed work, exclusive service — your legal status may not be what the contract says.
Dependent Contractor
You worked primarily or exclusively for one company on a contractor basis, relying on them for most of your income. This may make you a dependent contractor — a recognised third category under Ontario law. Even without full ESA coverage, you may still be entitled to common law severance. A labour lawyer in Ontario can help you understand where you stand.
How Ontario Law Actually Classifies Workers
The leading case is 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. [2001] 2 SCR 983, in which the Supreme Court of Canada confirmed that the central question is whether the worker is truly operating an independent business — or whether, in substance, they are working as an employee. Courts consider four key factors:
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1
ControlDid your employer direct how, when, and where you performed your work? Workers who received day-to-day instructions and followed set schedules are more likely to be classified as employees.
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2
Tools and EquipmentDid you supply your own resources, or did the hirer provide what you needed to work? Using employer-owned tools and systems is a factor pointing toward employment.
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3
Chance of Profit or Risk of LossDid you bear any financial risk in the work, or did you simply receive payment for tasks completed? True contractors can profit or lose on a contract. Employees generally cannot.
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4
IntegrationWas your work integral to the hirer’s core business — not a peripheral service? Workers whose work was woven into the business’s daily operations are more likely to be treated as employees.
No single factor is decisive. Courts weigh all four together. Ontario’s Employment Standards Act, 2000, S.O. 2000, c. 41 (ESA) goes further: employers are expressly prohibited from misclassifying employees as contractors, interns, or volunteers. The Ministry of Labour, Immigration, Training and Skills Development has authority to investigate and enforce compliance.
If your employer controlled your hours, directed your work, and you worked exclusively for them, Ontario courts may recognise you as an employee — regardless of what any contract says. Before accepting an offer that assumes contractor status, have your situation reviewed by an employment lawyer.
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Ontario Worker Classification: What Each Category Means for Severance Rights
Your worker category is determined by the substance of your working relationship — not the label on your contract.
| Dimension | Employee | Dependent Contractor | Independent Contractor |
|---|---|---|---|
| Covered by ESA? | ✓ Yes | ✗ Generally No | ✗ No |
| ESA Severance Eligible? | ✓ Yes* *5+ yrs & $2.5M+ payroll | ✗ No | ✗ No |
| Common Law Severance? | ✓ Yes Reasonable notice | ✓ Yes Reasonable notice | ⚠ Generally No |
| Who Determines Status? | Courts / Ministry of Labour | Courts | Courts |
| Can Employer Misclassify? | ESA expressly prohibits | Yes — common | N/A |
| Typical Contract | Employment Agreement | Contractor / Service Agreement | Service Agreement |
For informational purposes only. Worker classification is determined by courts based on the full circumstances of each relationship. · Sources: Employment Standards Act, 2000; 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. [2001] 2 SCR 983 · Nihang Law Professional Corporation · Law Society of Ontario
Part-Time Workers and Severance Pay: What the Law Says
To be eligible for ESA severance pay specifically, two conditions must both be met: you must have at least five years of service with your employer, and your employer must have a global payroll of $2.5 million or more — or must have terminated 50 or more employees in a six-month period due to a permanent business closure. These thresholds apply equally regardless of whether you worked full-time or part-time hours.
For part-time workers, “regular wages for a regular work week” — the figure used to calculate severance — is determined by multiplying your average weekly hours by your hourly wage. If your hours fluctuated, your employer must calculate an average over a representative period.
Even if the ESA thresholds are not met, common law reasonable notice — which means compensation determined by courts rather than a statutory formula — may still apply. The ESA minimum is a floor, not a ceiling.
Employers who tell part-time workers they are entitled to nothing are often incorrect. If you have received this message, speak with an employment lawyer before accepting any offer or signing anything.
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ESA Minimum Severance Weeks by Years of Service — Ontario 2026
Applies equally to full-time and part-time employees. Dashed line marks the 26-week statutory maximum.
Source: Government of Ontario, Employment Standards Act, 2000 — ontario.ca/document/your-guide-employment-standards-act-0/severance-pay · Nihang Law Professional Corporation · Law Society of Ontario
ESA Severance vs. Common Law Severance: The Gap That Costs Workers Thousands
The first level is the Employment Standards Act, 2000: a statutory formula providing one week of severance pay per completed year of service, up to a maximum of 26 weeks, subject to the eligibility thresholds described above. This is the floor that all qualifying employers must provide.
The second level is common law — a body of judge-made law that exists independently of the ESA. Under common law, courts assess the appropriate length of reasonable notice using what are known as the Bardal factors, from the 1960 Ontario case Bardal v. Globe and Mail Ltd. Those four factors are:
- 1Age: Older workers typically face longer job searches, which courts recognise by awarding longer notice periods.
- 2Character of employment: Senior, specialised, or managerial roles generally command longer notice.
- 3Length of service: The longer the tenure with a single employer, the greater the common law entitlement.
- 4Availability of similar work: If comparable roles are scarce in your field or region, courts may award a longer notice period.
Under common law, entitlement may reach up to 24 months of pay — far exceeding the ESA formula. Most non-unionised employees are entitled to more than the ESA minimum.
| Dimension | ESA Severance | Common Law Severance |
|---|---|---|
| Eligibility Requirements | 5+ years of service AND employer payroll of $2.5M+, or 50+ employees terminated in a permanent closure | Generally available to all non-unionised employees and dependent contractors, regardless of years of service |
| Calculation Method | 1 week per completed year of service (statutory formula) | Based on Bardal factors: age, position, tenure, availability of similar work |
| Maximum Entitlement | 26 weeks | Up to 24 months |
| Who Decides | Statutory formula; Ministry of Labour can enforce | Courts, based on individual circumstances |
| Can It Be Limited by Contract? | No — ESA minimum cannot be reduced by agreement | Yes, if the termination clause is valid and compliant with the ESA |
| If You Sign a Release | ESA statutory entitlements cannot be waived below minimum | Common law claims are permanently extinguished |
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ESA Severance vs. Common Law Severance — Estimated Months of Pay by Worker Profile
The gap between ESA minimums and common law entitlement can mean the difference between weeks and months of pay.
Chart values are illustrative estimates for educational purposes only. Sources: Bardal v. Globe and Mail Ltd. (1960) 24 DLR (2d) 140; Employment Standards Act, 2000 · Nihang Law Professional Corporation · Law Society of Ontario
When a Temporary Layoff Becomes a Termination in Ontario
Under the ESA, a temporary layoff is generally permitted for up to 13 weeks in any 20-week period. If the layoff extends past this point without a recall, the employer is typically considered to have terminated the employee’s employment. At that point, termination pay becomes owing, and if the five-year / $2.5M ESA eligibility thresholds are also met, severance pay may be owing as well.
The ESA was amended on November 27, 2025 to permit extended layoffs under additional circumstances. A layoff may continue beyond 13 weeks — up to 35 weeks — if the employer continues to provide substantial benefits during the layoff period. It may also be extended beyond 35 weeks by a written agreement between the employer and employee, but only if two conditions are both met: the employer must provide the employee with a specific written recall date before the agreement is signed, and required disclosures must be made at that time.
There is also a separate concept worth knowing: constructive dismissal, which is when an employer makes a fundamental, unilateral change to the terms of your employment without your consent. For part-time workers, a dramatic and involuntary cut to scheduled hours — without agreement — may constitute constructive dismissal, entitling the worker to claim severance as though a termination had occurred.
If you are currently on a layoff with no confirmed return date, do not wait to seek advice. Speak with an employment lawyer promptly — time can be a factor in these situations.
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When Does a Temporary Layoff Become a Termination in Ontario?
Under the Employment Standards Act, 2000, defined time thresholds determine when a layoff is deemed a termination — triggering termination pay and, if eligible, severance pay.
Source: Employment Standards Act, 2000, S.O. 2000, c. 41, s. 56 · ontario.ca (updated November 27, 2025) · Nihang Law Professional Corporation · Law Society of Ontario
Your Step-by-Step Severance Roadmap for Ontario Workers
If you have just been laid off, terminated, or presented with a severance offer, here is a practical six-step process to protect your rights.
- 1Do not sign anything yet.No matter what deadline your employer has communicated, do not sign a release, settlement, or severance agreement until you fully understand what you are agreeing to and what rights you may be waiving.
- 2Gather your documents.Collect your employment contract or contractor agreement, offer letter, termination letter, any recent pay stubs, benefit statements, and records of your actual working arrangement — especially if you were classified as a contractor.
- 3Identify your worker category.Use the three-path framework above. Are you an employee (Path A), a worker labelled a contractor who may have employment rights (Path B), or a dependent contractor who worked primarily for one company (Path C)? Your category shapes your entitlement.
- 4Assess which severance tier applies.Review whether your employer’s offer reflects only the ESA minimum or whether common law entitlement could be significantly higher based on your age, role, tenure, and the job market in your field.
- 5Check your termination clause.If your contract contains a clause limiting severance to ESA minimums, do not assume it is valid. Ontario courts routinely strike down termination clauses that are ambiguous, fail to comply with the ESA, or were not supported by proper consideration when signed.
- 6Consult an employment lawyer before your employer’s deadline.Employers often set tight timelines, but you are generally entitled to a reasonable opportunity to seek independent legal advice. Book a consultation before agreeing to or signing anything.
Qasim Ali, Principal Lawyer at Nihang Law, and the Nihang Law employment team have helped workers across Toronto, Scarborough, and the broader GTA navigate severance offers, contractor misclassification claims, and wrongful dismissal disputes.
Common Mistakes Ontario Workers Make After a Layoff or Termination
Consulting an employment lawyer before taking any action is the single most important step you can take after receiving a termination. In the meantime, here are seven costly mistakes to avoid.
- ✕Signing a release on the same day as terminationEmployers sometimes pressure employees to sign immediately by citing a tight deadline. Signing permanently forfeits all future claims — including potentially significant common law entitlement. Workers are generally entitled to a reasonable time to seek independent legal advice before signing.
- ✕Assuming a “contractor” label means zero severance rightsMany workers accept being told “you were a contractor — you’re owed nothing.” Ontario courts regularly reject this position if the working relationship was effectively that of an employee or dependent contractor.
- ✕Confusing ESA minimums for full legal entitlementThe ESA sets the floor, not the ceiling. Most non-unionised employees have access to common law severance that is significantly higher than the statutory formula. Workers who accept ESA-only offers often leave thousands of dollars unclaimed.
- ✕Not challenging an unenforceable termination clauseEmployment contracts frequently contain clauses designed to cap severance at ESA minimums — but Ontario courts routinely invalidate these if they are ambiguous, fail to meet ESA compliance standards, or were not supported by adequate consideration.
- ✕Waiting too long to seek advice about a “temporary” layoffOnce a temporary layoff exceeds the ESA’s permitted thresholds, it may be deemed a termination — and delay can complicate the claim. Seek legal advice as soon as a layoff notice is issued.
- ✕Ignoring a dramatic cut in part-time hours as a legally significant eventA severe, unilateral reduction in hours without your consent may constitute constructive dismissal — entitling you to claim severance even without a formal termination notice.
- ✕Filing an ESA complaint before understanding the strategic trade-offUnder section 97 of the Employment Standards Act, 2000, filing a Ministry complaint for termination or severance pay may bar you from separately pursuing common law damages for the same termination. This is a consequential strategic choice that should be made with legal guidance.
Frequently Asked Questions About Severance Pay in Ontario
Do part-time workers get severance pay in Ontario?
Part-time workers in Ontario may be entitled to severance pay under the same conditions as full-time employees. The Employment Standards Act, 2000 does not distinguish between workers based on hours worked per week. To qualify for ESA severance specifically, you must have at least five years of service and your employer must have a payroll of $2.5 million or more. Even if these thresholds are not met, common law reasonable notice may still apply to part-time workers in many circumstances.
My employer called me a contractor — am I still entitled to severance in Ontario?
Possibly yes. The label on your contract does not determine your legal status — courts look at the actual working relationship using the Sagaz factors. If you were treated like an employee or were a dependent contractor economically reliant on one company, you may have common law severance rights regardless of what your contract says. Before accepting any offer that assumes you were a contractor with no entitlements, have your situation reviewed by an employment lawyer.
What is the difference between ESA severance pay and common law severance in Ontario?
ESA severance pay is a statutory minimum: one week per completed year of service, up to a maximum of 26 weeks, available only to employees who meet the five-year and $2.5M payroll thresholds. Common law severance is assessed by courts using the Bardal factors: age, character of employment, length of service, and availability of similar work. Common law entitlement can reach up to 24 months and is not subject to the same eligibility conditions as the ESA. Most non-unionised employees in Ontario are entitled to more than the ESA minimum.
What is a dependent contractor, and do they get severance when fired?
A dependent contractor is a worker who is not technically an employee but is economically reliant on one company for most or all of their income — a common situation in the gig economy and among long-term freelancers. Ontario courts recognise that dependent contractors may be entitled to common law reasonable notice of termination, similar to employees, even though ESA protections generally do not apply to them. Many dependent contractors are wrongly told they are owed nothing when the relationship ends — this is often incorrect, and the position should not be accepted without legal advice.
Can my employer lay me off without pay in Ontario?
A temporary layoff is permitted under the Employment Standards Act, 2000 within defined time limits — generally up to 13 weeks in a 20-week period. During this window, no pay is required unless your employment contract says otherwise. However, a layoff that exceeds the ESA’s permitted duration triggers termination pay obligations, and severance pay may follow if the eligibility thresholds are met. Workers may also be able to challenge an indefinite or unwanted layoff as constructive dismissal under common law, which could entitle them to severance from the outset.
How much severance pay am I owed in Ontario?
Under the ESA, severance pay is calculated at one week per completed year of service, up to a maximum of 26 weeks — but only if the five-year and $2.5M payroll thresholds are both met. Under common law, your entitlement depends on your age, the nature of your position, how long you worked for the employer, and how readily you can find similar work — potentially ranging from a few months to 24 months of pay. No formula is definitive, and individual circumstances vary significantly. An employment lawyer can provide an accurate assessment based on the specifics of your situation.
Should I sign my severance offer right away?
No — signing a release permanently forfeits all future legal claims, including any common law entitlement that may exceed what was offered. Employers often set tight deadlines, but workers are generally entitled to a reasonable opportunity to seek independent legal advice before signing. An employment lawyer can review the offer against both your ESA and common law rights and advise whether it reflects fair and full compensation before any deadline passes.
What happens if my employment contract limits my severance — can I challenge it?
Possibly yes. Ontario courts have frequently struck down termination clauses that are ambiguous, fail to comply with the Employment Standards Act, 2000 on their face, or were not supported by proper consideration when the contract was signed. If a termination clause is found to be invalid, you may be entitled to full common law reasonable notice instead of the contractually limited amount. Legal review of your employment contract is strongly recommended before accepting any severance package. To explore your options, contact Nihang Law for a consultation.
You May Be Owed More Than You Think — Speak With an Ontario Employment Lawyer
Ontario law looks at the real working relationship — not just the label your employer put on it. Whether you worked part-time, under a contractor agreement, or in a situation that has changed significantly over time, your legal rights may be more substantial than you have been told. Many workers across the GTA accept less than they are owed simply because they did not know to ask.
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About the author
Qasim Ali
Principal Lawyer · Nihang Law Professional Corporation · Toronto & Scarborough, Ontario · Law Society of Ontario
Qasim Ali is the Principal Lawyer at Nihang Law Professional Corporation, serving clients across Toronto, Scarborough, and the broader Greater Toronto Area. He provides full-service legal representation across immigration, real estate, family law, criminal law, civil litigation, employment law, wills and estates, and business law.
Nihang Law is particularly recognized for its depth in immigration and real estate law — a combination that serves newcomers and growing families navigating both legal systems simultaneously.
Learn more about Qasim Ali →Sources & References
- Government of Ontario — Employment Standards Act, 2000 — Severance Pay. ontario.ca/document/your-guide-employment-standards-act-0/severance-pay
- Government of Ontario — Employment Standards Act, 2000 — Termination of Employment. ontario.ca/document/your-guide-employment-standards-act-0/termination-employment
- Government of Ontario — Your Guide to the Employment Standards Act, 2000 (updated to reflect November 27, 2025 amendments). ontario.ca/document/your-guide-employment-standards-act-0
- Supreme Court of Canada — 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. [2001] 2 SCR 983. scc-csc.lexum.com
- Ontario High Court of Justice — Bardal v. Globe and Mail Ltd. (1960) 24 DLR (2d) 140. canlii.org — Bardal v. Globe and Mail
- Law Society of Ontario — Finding Legal Help. lso.ca/public-resources/finding-a-lawyer-or-paralegal
- Ontario Ministry of Labour, Immigration, Training and Skills Development — Employee Misclassification. ontario.ca/document/your-guide-employment-standards-act-0/employee-misclassification
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