Employee Rights When a Company Closes Down in Ontario

When a business shuts its doors, employees are often left wondering what happens to their jobs, pay, and benefits. In Ontario, non-unionized workers have strong rights when a company closes down — including notice, termination pay, and in many cases severance pay far beyond the minimums in law.

This guide explains employee rights when a company closes down in Ontario, and answers common questions about pay, notice, and what happens if a business goes bankrupt or closes without warning.

What Are Employee Rights When a Company Closes Down?

If your employer shuts down operations, your rights depend on the situation:

• Full business closure – You are owed outstanding wages, vacation pay, termination pay, and severance pay.
• Bankruptcy or receivership – You may qualify for the federal Wage Earner Protection Program (WEPP).
• Sale of the business – If the business is sold but continues to operate, your job may continue with the new owner, and your service time usually carries over. Learn more about your rights when an employer sells the business in Ontario.

Termination Pay and Notice Requirements

Ontario’s Employment Standards Act (ESA) sets the minimum rules for notice and termination pay:

• Employees with 1–8 years of service are owed 1 week of notice per completed year, up to a maximum of 8 weeks.
• Employees with less than a year of service still get at least 1 week’s notice.
• If notice isn’t given, the employer must pay termination pay instead.
• Employers can use a mix of working notice and pay, but the total must meet ESA requirements.

👉 Example: If you worked for 6 years, your employer must give 6 weeks’ notice or pay you 6 weeks’ wages.

But remember: these ESA rules are minimums only. In reality, most employees are entitled to much more under common law.

Severance Pay in Ontario When a Business Closes

Under the ESA, you may be entitled to statutory severance pay if:

• You’ve worked 5+ years, and
• The company has a payroll of $2.5 million+, or
• 50+ employees are terminated within a 6-month period because of the closure.

ESA severance is capped at 26 weeks.

Severance pay in Ontario depends on factors like:

• Age
• Position and seniority
• Length of service
• Difficulty finding similar work

This is why many severance offers after a company shuts down are tens of thousands of dollars lower than what employees are truly owed. Employers who only rely on ESA minimums may be exposing themselves to a wrongful dismissal claim.

What If the Company Closes Without Notice?

If your employer closes suddenly without warning, you are still owed:

• Outstanding wages and vacation pay
• Termination pay (instead of notice)
• Severance pay

Failing to provide notice does not cancel your rights — employees can pursue full compensation.

What Happens If a Company Goes Bankrupt?

If a business shuts down due to bankruptcy or receivership:

• Employees can apply to the Wage Earner Protection Program (WEPP) for unpaid wages, vacation pay, termination pay, and severance earned in the last 6 months.
• Directors of the company may also be personally liable for some unpaid wages.

What If a Small Business Is Closing?

Even small businesses must follow Ontario’s rules. Employee rights include:

• Minimum notice or termination pay (1–8 weeks)
• Vacation pay and unpaid wages
• Severance pay

A business’ size does not erase employee rights.

Do Employers Have to Pay Staff if They Close Their Business?

Yes. Employers must pay employees for:

• All hours worked
• Accrued vacation pay
• Termination pay if notice isn’t given
• Severance pay

Can I Get Employment Insurance If the Company Closes?

Yes. If your job ends because the business shuts down, you can apply for Employment Insurance (EI) benefits. You must meet the minimum hours worked in the qualifying period to be eligible.

You can also read our resource on EI and severance pay in Ontario to understand how severance impacts benefits.

FAQ on Company Closures in Ontario

Why Legal Advice Matters

The ESA provides only minimum standards. Under common law, employees are often owed much more severance — up to 24 months’ pay.

If your employer offers you a severance package after shutting down, don’t assume its fair. Employers often rely on ESA minimums, which are only a fraction of true entitlements. Some employers may also suggest that they are not required to pay severance, which is often far from the case.

Speak to an Employment Lawyer

If your employer is shutting down and tells you that you aren’t owed severance — or only offers the minimum — that may be a violation of your rights. You could be entitled to much more compensation, often up to 24 months’ pay.

At Samfiru Tumarkin LLP, our team has helped 50,000+ employees across Ontario secure the full severance they deserve when businesses close. Contact us today before signing anything.

At our firm, we have:

• ⚖️ Settled over 99% of cases quickly through negotiation or mediation
• 💰 Secured millions in compensation
• 📱 Free Termination Consultations — in many, but not all, cases
• ⭐ Earned 2,310 5-star Google reviews (4.8 average)
• 🏆 Recognized as one of Canada’s Best Law Firms (Globe and Mail)

Call us at 1-855-821-5900 or request a consultation online.