Employee Rights When a Company Closes Down in Ontario

When a business shuts its doors, employees are often left wondering what happens to their job, pay, and benefits. In Ontario, non-unionized workers have strong rights when a company closes down — including notice, termination pay, and severance pay that can amount to months of compensation.

This guide explains your employee rights when a company closes down in Ontario and what steps to take if your employer shuts its doors unexpectedly.

Quick Summary

If your company closes in Ontario, you’re still entitled to:

• Outstanding wagesand vacation pay
• Termination pay Ontario
• Severance pay Ontario
• Potential federal Wage Earner Protection Program (WEPP) benefits if the company is bankrupt

Even if your employer claims they can’t pay, you may still be owed up to 24 months’ pay under common law.

What Are My Rights if My Employer Shuts Down in Ontario?

When a business closes, Ontario’s Employment Standards Act (ESA) protects employees. What you’re owed depends on how the closure happens:

• Full business closure: You must receive all unpaid wages, vacation pay, termination pay, and severance pay.
• Bankruptcy or receivership: You can apply for the Wage Earner Protection Program (WEPP) for unpaid amounts.
• Sale of business: If operations continue, your job may transfer to the new owner and your service typically carries over.

Even if a company closes suddenly, the employer’s obligations don’t disappear — your rights remain the same.

Do I Get Severance Pay if the Company Closes?

Yes. Many employees are entitled to both termination pay and severance pay.

Under the ESA

You qualify for statutory severance pay if:

• You’ve worked five or more years, and
• Your employer has a payroll of $2.5 million+, or
• At least 50 employees are terminated within a six-month period due to the closure.

Severance under the ESA is one week per year of service, up to 26 weeks.

Under Common Law

Most employees are owed far more than ESA minimums — often up to 24 months’ pay.

The law considers your:

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

👉 Learn more: Difference Between Termination Pay and Severance Pay in Ontario

What If My Company Closes Without Notice?

If your employer shuts down without warning, you’re still owed:

• Unpaid wages and vacation pay
• Termination pay in place of notice
• Severance pay

Failing to provide advance notice does not cancel your rights. You can pursue compensation for the full value of what’s owed — and potentially file a wrongful dismissal claim.

What Happens if a Company Goes Bankrupt?

If your employer closes due to bankruptcy or receivership, you can apply for federal help through the WEPP.

This covers:

• Unpaid wages
• Vacation pay
• Termination and severance pay

In some cases, company directors can also be personally liable for unpaid wages.
Learn more

What If a Small Business Is Closing in Ontario?

Even small employers must follow Ontario’s employment laws.

Employees are entitled to:

• 1–8 weeks of notice or termination pay
• Unpaid wages and vacation pay
• Severance pay (up to 24 months’ pay)

A company’s size or financial struggles don’t erase its legal obligations to staff.

Can I Apply for EI if the Company Shuts Down?

Yes. When your job ends because your employer closes, you can apply for Employment Insurance (EI) benefits through Service Canada.

You’ll need:

• A Record of Employment (ROE)
• Enough insurable hours worked in the past 52 weeks

EI provides temporary income support while you search for new work.

Why Legal Advice Matters

Employers sometimes claim they don’t owe severance when a company shuts down — but that’s often not true.

Many employees in Ontario are entitled to significantly more than what’s offered.

A legal consultation can:

• Confirm your true severance entitlements
• Identify whether the employer’s offer meets common law standards
• Prevent you from signing away valuable rights

Speak to an Employment Lawyer

If your company is closing and you’re unsure what you’re owed, talk to the team that’s helped over 50,000 Ontarians get fair compensation.

At Samfiru Tumarkin LLP, the employment lawyers in Toronto, representing clients across Ontario, have recovered millions in severance pay.

📞 Call us at 1-855-821-5900 or request a consultation online. Many cases qualify for our no-win, no-fee policy.