Redundancy in Employment Law: What Is It?

What is Redundancy in Employment Law?

Redundancy happens when a job or role is no longer needed within a company. This could result from restructuring, adopting new technology, merging with another business, or cutting costs due to economic pressures. It’s not about an employee’s performance—it’s about the position itself being eliminated.

In Canada, the term “redundancy” isn’t officially recognized in employment law like it is in other countries. Instead, concepts like “termination due to lack of work” or “layoff” are used to describe the same situation. Regardless of the terminology, the legal principles remain similar: employers must meet their obligations to provide fair notice or severance pay when a role is no longer required.

For employees, it’s important to know that redundancy doesn’t reflect your abilities. For employers, it’s a reminder to navigate these decisions carefully, as mishandling a redundancy can lead to significant legal consequences.

What is employee redundancy in Ontario?

In Ontario, “employee redundancy” refers to situations where a role is eliminated because it’s no longer necessary—not due to the employee’s performance or misconduct. This often happens because of restructuring, new technology, company mergers, or financial cutbacks. While the term “redundancy” is widely used in other jurisdictions, in Ontario, it’s typically referred to as a termination without cause or a layoff due to lack of work under employment law.

Understanding employee redundancy in Ontario

Although the term “redundancy” isn’t officially defined in Canadian employment law, the Employment Standards Act (ESA) and common law (court) principles govern how job eliminations are handled. Here’s what you need to know:

• It’s Not About Performance: Redundancy strictly pertains to the role being eliminated for business reasons. It’s not a reflection of the employee’s capabilities or conduct.
• ESA Guidelines Apply: Under the ESA, redundancy is treated as a termination without cause. This means employees are entitled to:
  • Notice of termination or pay in lieu of notice.
  • Severance pay, if they qualify under the ESA (e.g., five years of service and the employer meets certain payroll criteria).
• Common Law Entitlements: In addition to ESA entitlements, employees often have greater rights under common law, such as significantly longer notice periods or additional compensation. Many employment contracts in Ontario fail to limit these common law rights, meaning that severance packages of up to 24 months’ pay are possible.

Employer obligations during redundancy

When a position becomes redundant, employers in Ontario must fulfill specific legal obligations:

• Notice Period or Pay in Lieu: Employers must provide notice of termination or compensation for the notice period, depending on the employee’s tenure.
• Severance Pay: For eligible employees, severance pay is required in addition to Ontario termination pay. Severance acknowledges the employee’s service and can be up to 24 months’ pay.
• Continuation of Benefits: Employers must maintain health, dental, and other benefits or provide compensation equal to their value.
• Transparency: Employers should clearly communicate the reasons for redundancy, ensuring the process is fair and transparent.

Employee rights in a redundancy situation

If you’re an employee facing redundancy, Ontario law provides protections to support you:

• Notice of Termination or Pay in Lieu: Employers must either give you notice of termination or compensate you for the time you would have worked during the notice period.
• Severance Pay: You are owed as much as 24 months’ pay as severance in Ontario. The total amount is based on a number of factors, such as your age, position, tenure, and bonus.
• Challenge Discriminatory Redundancies: If you believe the redundancy is being used to target you unfairly—for example, due to age, gender, or raising workplace concerns—you may have grounds to challenge the termination under Ontario’s Human Rights Code.
• Protection of Benefits: Your employer must continue your benefits during the notice period or provide equivalent compensation if they opt for pay in lieu.

Why legal advice is crucial

Employee redundancy often raises questions about your right to fair compensation. Many employment contracts fail to limit severance pay, leaving employees owed much more than they realize. If your employer doesn’t offer what you’re actually owed, it is a wrongful dismissal.

Speaking to an experienced Ontario employment lawyer can help you:

• Understand your rights and what redundancy means for you.
• Calculate your full severance package and determine what you should receive.
• Challenge the layoff decision if you were wrongfully dismissed or your human rights were violated.

Contact the experienced lawyers at Samfiru Tumarkin LLP. We’ll help you understand and protect your workplace rights.

Our team has successfully represented tens of thousands of non-unionized employees in Ontario, Alberta, and B.C. Book a consult today, and to get the compensation you deserve.