Common Law Severance in Ontario: How Much Are You Really Owed?

If you were fired or laid off in Ontario, your employer may claim they’ve met their legal obligations by offering only the “minimum” severance required under Ontario law. In many cases, that statement is misleading — and expensive.

Ontario courts entitle most non-unionized employees to common law severance, which is often far greater than the minimum notice or termination pay set out in the Employment Standards Act (ESA).

When you understand how this type of compensation works in Ontario, you put yourself in a position to challenege a low offer — and recover what the law actually requires your employer to pay.

What Is Common Law Severance in Ontario?

Ontario courts determine common law severance to non-unionized employees when an employer terminates them without cause, often far beyond ESA minimums.

Judges — not government formulas under the ESA — decide how much severance an employee is owed.

As a result, common law severance in Ontario is often significantly higher than what employers initially offer.

Common Law Severance vs. ESA Severance in Ontario

This distinction is critical — and frequently misunderstood.

ESA Severance (Minimum Standards)

Ontario’s Employment Standards Act sets out minimum notice or termination pay, largely based on length of service. These are the bare minimums employers must provide.

The Ministry of Labour can only enforce these ESA minimums — not your full legal entitlement.

Common Law Severance (Your Full Legal Entitlement)

Under Ontario common law, severance pay is assessed using a broader and more realistic set of factors, including:

• Age
• Length of service
• Position and level of responsibility
• Availability of comparable employment

Because of these factors, there is no fixed formula. Courts routinely award severance far beyond ESA minimums — sometimes reaching up to 24 months’ pay.

How Courts Calculate Common Law Severance (The Bardal Factors)

Courts in Ontario don’t use a fixed formula to determine common law severance. Instead, judges look at four key considerations — known as the Bardal factors — to decided what a “reasonable notice” period should be:

• Age
• Length of service
• Position or level of responsibility
• Availability of comparably work

These factors work together to determine how long it will realistically take an employee to find new employment — which is why common law severance often far exceeds the minimums set out in the ESA.

What Is a Typical Common Law Severance Package in Ontario?

There is no standard severance package under Ontario common law. However, as a general guideline:

• Short-service employees may still be owed several months of severance
• Long-service employees may be entitled to a year or more of compensation
• Older employees often receive enhanced severance, particularly if their job prospects are limited

Because every case is unique, the only way to know whether your severance offer is fair is to assess all legal factors together.

Why Most Severance Offers in Ontario Are Too Low

Most Ontario employers base severance offers on:

• ESA minimums
• Internal company policies
• Cost-containment goals

They may:

• Say the offer is “standard”
• Impose short deadlines
• Claim the offer is non-negotiable

But none of this overrides your common law rights.

Accepting a severance package without understanding your Ontario common law entitlement often means leaving significant money on the table.

Can an Employment Contract Limit Common Law Severance in Ontario?

Sometimes — but not always.

Many Ontario employment contracts include termination clauses that attempt to limit severance to ESA minimums. However, Ontario courts frequently strike down these clauses if they are:

• Poorly drafted
• Ambiguous
• Non-compliant with the ESA

If a termination clause is unenforceable, the law still entitles you to full common law severance — regardless of what the contract says.

When It Becomes a Wrongful Dismissal Claim in Ontario

In Ontario employment law, wrongful dismissal usually means a failure to provide proper notice or severance — not misconduct by the employer.

When an employer terminates you without cause and underpays your common law severance, the law often treats the termination as wrongful dismissal.

In Ontario, employers resolve most wrongful dismissal claims through negotiations once they understand the financial risk they face.

What Does Common Law Severance in Ontario Include?

Common law severance may include:

• Pay in lieu of notice
• Continued benefits
• Bonuses, commissions, or incentives
• In some cases, compensation for lost pension or stock options

Many Ontario employees are owed far more than they realize.

Common Law Severance Ontario – FAQs

How much common law severance am I entitled to in Ontario?

Most non-unionized employees in Ontario are owed significantly more under common law than under the Employment Standards Act (ESA). Depending on your age, position, length of service, and the availability of comparable work, common law severance can range from a few months’ pay up to 24 months’ pay in some cases.

If your employer gave you a severance package, use our Ontario Severance Pay Calculator to see how much you may really be owed.

What is the formula for common law severance in Ontario?

There is no strict mathematical formula. Courts use the Bardal factors to assess reasonable notice. These four considerations create a range, not a fixed number — which is why employer severance offers are often too low.

How do courts decide common law severance in Ontario?

Ontario courts assess what is “reasonable” for an employee to receive when losing their job. They look at your age, length of service, job position, and how difficult it is to find comparably work — known collectively as the Bardal factors.

These factors help judges determine a fair severance amount, which can be much higher than ESA minimums. For a full breakdown of how each factor works, see our guide: Bardal Factors in Ontario.

Do short-service employees get common law severance in Ontario?

Yes. Even short-service employees often receive months of common law severance. Courts assess the overall employment context — not just length of service — which is why shorter tenure does not always mean low severance.

Is common law severance the same as termination pay?

No. Termination pay is an ESA minimum. Common law severance is what courts award based on your individual circumstances. The ESA guarantees a baseline, but most non-unionized employees are entitled to much higher common law amounts.

For a full comparison of ESA vs. common law, see our main guide: Severance Pay Ontario.

Can employers limit common law severance with a contract?

Sometimes — but only if the contract is legally enforceable. Many termination clauses in Ontario employment contracts are invalid because they violate ESA minimums. If the clause is unenforceable, you default to full common law severance.

If your employer is relying on a contract to pay you less, have it reviewed before you sign anything.

Is common law severance taxable?

Yes. Common law severance is considered employment income and is taxable. However, you can often reduce immediate tax withholding through a direct transfer to an RRSP, depending on your contribution room.

How long does an employer have to pay common law severance?

Payment must be prompt. Employers either provide a lump sum or continue salary and benefits during a severance period. Courts use common law principles to determine how long that period should be.

Can I negotiate common law severance?

Yes — and most employees receive more than their employer initially offers. Severance packages are negotiable, and employers frequently begin with an offer below what the courts would award. You should always get legal advice before accepting a package.

How Our Ontario Severance Lawyers Help

At Samfiru Tumarkin LLP, we’ve helped tens of thousands of Ontario employees challenge low severance offers and secure proper compensation.

Our employment lawyers in Ontario:

• Review your severance offer and employment contract
• Calculate your Ontario common law entitlement
• Negotiate directly with your employer
• Resolve most claims without going to court

Common Law Severance Applies Across Ontario — and Canada

Common law severance applies to non-unionized employees throughout Ontario, but similar principles apply across Canada.

For broader context, see:

• Common Law Severance in Canada
• Severance Pay Ontario
• Severance Pay Canada

Get Legal Advice Before You Accept a Severance Offer

Once you sign a severance agreement, you typically give up your right to pursue full compensation.

Before accepting any offer:

• Understand your Ontario common law severance rights
• Get clear legal advice
• Know what the law owes you