When a company closes down in Ontario, employees are owed outstanding wages, vacation pay, notice or termination pay, and severance. Closing the business does not automatically cancel those rights.
For non-unionized employees, the full severance package can be worth significantly more than Ontario’s employment standards minimums — as much as 24 months’ pay. What you are owed depends on your employment history, contract and circumstances. If the employer is bankrupt or can’t pay, recovering that money requires a separate assessment.
Before accepting a closure-related severance offer, signing a release or resigning, speak with the Ontario employment lawyers at Samfiru Tumarkin LLP.
“We’re shutting down” does not automatically mean “we owe you nothing.” Have your full package reviewed before accepting your employer’s calculation.
This guide focuses on non-unionized employees covered by Ontario’s Employment Standards Act. Different rules apply to federally regulated workplaces, such as banks and airlines, and unionized employment.
On This Page:
- 1. Severance When a Company Closes
- 2. Notice & Mass Terminations
- 3. Final Pay & Benefits
- 4. Bankruptcy & Unpaid Severance
- 5. Employment Insurance
- 6. Business Sales & Location Closures
- 7. What You Should Do
- 8. Frequently Asked Questions
Do You Get Severance Pay if a Company Closes in Ontario?
Many employees do. A permanent shutdown that ends your employment can trigger termination and severance obligations. However, not every employee qualifies for every payment, and the word “severance” is often used to describe different things.
Your package should be assessed under Ontario’s minimum employment standards and any greater rights available under your employment contract or common law.
Notice or termination pay
Most employees who have been continuously employed for at least three months are entitled to written notice of termination, termination pay instead of notice, or a combination of both.
Ordinary individual notice under Ontario’s Employment Standards Act (ESA) ranges from one to eight weeks, depending on service. Different notice periods can apply when a closure qualifies as a mass termination.
Statutory severance pay
ESA severance pay is a separate payment for eligible employees. Generally, you must have at least five years of employment with the employer, and one of these conditions must apply:
- Your employer has a global payroll of at least $2.5 million; or
- Your employment is severed because all or part of the business permanently closes at an establishment, and you are one of 50 or more employees whose employment is severed within six months because of that closure.
The five-year requirement applies under either route. Qualifying employees generally receive one week’s regular pay for each completed year of service, plus a proportionate amount for completed months in a partial year, to a maximum of 26 weeks. Exemptions can apply.
See our explanation of termination pay versus severance pay in Ontario.
Your full severance package can be larger
The ESA minimums are not necessarily your full compensation. Unless an enforceable employment contract limits your rights, you may be owed a longer period of reasonable notice or compensation under common law.
The assessment considers factors such as your age, years of service, position and the availability of similar employment. Depending on your circumstances, the amount can represent months of compensation, rather than just a few weeks. In fact, you could be owed upwards of 24 months’ pay.
Bonuses, commissions, benefits and other compensation may also need to be considered. ESA termination and severance payments are generally credited toward overlapping common-law compensation, not simply added on twice.
Learn more about severance pay in Ontario.
You may still be owed termination pay and common-law compensation. The five-year threshold relates to ESA severance pay—not every form of compensation after losing your job.
How Much Notice Must an Employer Give Before Closing?
The important question is how much notice or compensation you must receive before your employment ends. An announcement that the business might close is not necessarily valid notice of your termination.
Ask for written confirmation of your last day, whether you are expected to continue working, and what notice, pay and benefits the employer will provide.
What if you are asked to work until the closure date?
Your employer may give you working notice, meaning you continue working after being told that your employment will end on a specified date.
Valid working notice can satisfy part or all of the required notice period. It does not replace a separate ESA severance payment where you qualify for one.
Have any retention bonus or “stay until closing” agreement reviewed before signing. Check whether the promised payment is additional compensation, whether it includes a release, and what happens if the employer closes earlier than expected.
What if the closure affects 50 or more employees?
Special mass termination rules in Ontario generally apply when an employer terminates 50 or more employees at its establishment within four weeks.
Where these rules apply, minimum notice is based on the number of affected employees:
- 50 to 199 employees: 8 weeks.
- 200 to 499 employees: 12 weeks.
- 500 or more employees: 16 weeks.
These periods replace the ordinary individual ESA notice periods; they are not added to them. Additional statutory severance or greater common-law rights still apply, meaning you could be owed up to 24 months’ pay.
Eligible employees receiving working notice of a mass termination can also qualify for up to three unpaid days of job-seeking leave. Eligibility depends partly on how much working notice is provided.
What if the company closes without notice?
A sudden shutdown does not automatically remove your right to compensation. Your employer may owe termination pay for missing notice, statutory severance if you qualify, and any additional compensation required by your contract or common law.
If the employer does not provide what you are owed, you may have a wrongful dismissal claim. If the employer is insolvent, different recovery procedures may apply.
What Happens to Your Final Pay, Vacation Pay and Benefits?
A closure does not turn money you have already earned into an optional payment. Check your final statement for unpaid wages, overtime where applicable, earned commissions and outstanding vacation pay.
Under Ontario’s ESA, outstanding wages are generally due by the later of seven days after employment ends or your next regular payday. Special rules can affect particular payments, including permitted statutory severance instalments.
Our final pay in Ontario guide explains the deadlines and what to check.
Can your benefits stop on the closure date?
Do not assume your last day at work is automatically the correct end date for your benefits. Where ESA termination notice or pay is owed, the employer must make the contributions required to maintain your benefits through the statutory notice period.
Your broader compensation claim may also need to account for benefits. Ask for written confirmation of coverage end dates and contact the insurer or plan administrator promptly if coverage is interrupted.
What if the Company Goes Bankrupt or Says It Can’t Pay?
A business closure and a bankruptcy are not the same thing. An owner can decide to close a business without entering a formal insolvency process.
If your employer says there is no money for wages or severance, get advice promptly. The amount you are legally owed and the amount you can recover are separate questions.
Bankruptcy, receivership or another insolvency proceeding can change how you must pursue payment and may restrict ordinary legal proceedings. Ask for the name and contact details of the trustee, receiver or other person administering the process.
Can the Wage Earner Protection Program help?
The federal Wage Earner Protection Program (WEPP) may cover eligible unpaid wages, vacation pay, termination pay and severance pay when your employment has ended and your employer is bankrupt, in receivership or involved in another qualifying insolvency proceeding.
A company simply closing or refusing to pay is not enough to qualify. The program has eligibility requirements and a maximum payment, so it may not cover everything you are owed.
You will generally need to submit a proof of claim to the trustee or receiver and apply to Service Canada. A 56-day application period normally applies, calculated from the latest applicable event specified by the program—not necessarily the day the closure was announced.
Check the WEPP application requirements promptly. Our bankruptcy guide for employees in Canada provides a broader overview of your options.
If paycheques stop, your employer misses a promised payment or an insolvency notice arrives, get advice about your claim and the applicable deadlines.
Can You Apply for EI When Your Company Closes?
Yes, you can apply for Employment Insurance after losing your job because of a closure. Eligibility depends on factors including your insurable employment, hours worked, availability for work and efforts to find another job.
Apply as soon as you stop working. Do not wait for your Record of Employment or for a severance dispute to be resolved. Delaying an application for more than four weeks after your last day of work can result in lost benefits.
Report severance, vacation pay and any WEPP payment to Service Canada, which will determine how the rules applying to your claim affect your benefits.
See Service Canada’s EI regular benefits information.
What if the Business Is Being Sold or Only Your Location Is Closing?
The business is being sold
A sale does not necessarily end your employment. You might continue working for the same company or receive an offer from a purchaser, with important questions about your previous service and new employment terms.
Do not resign, reject an offer or sign a new contract before understanding the consequences. Read our guide to employee rights when a business is sold in Ontario.
Your store, office or department is closing
The entire company does not have to shut down for termination or severance rights to arise. If your employment ends because one location or part of the business closes, your employer must address the compensation legally owed to you.
If you are offered a transfer, compare the location, commute, pay, hours and duties before deciding. Refusing reasonable alternative employment can affect your rights, while a major imposed change may raise a constructive dismissal issue.
What Should You Do When Your Employer Announces a Closure?
Get the details in writing and protect your records before workplace systems become unavailable.
- Confirm what is happening. Ask whether the business is closing permanently, being sold, temporarily shutting down or entering insolvency proceedings.
- Get your employment end date and package. Request a written breakdown of notice, termination pay, severance, vacation pay, benefits and any retention bonus.
- Keep your employment documents. Save your contract, amendments, pay statements, bonus plans, benefit information and closure notices that you are lawfully entitled to retain.
- Avoid rushed decisions. Have releases, resignation requests, transfer offers and “stay until closing” agreements reviewed before accepting or rejecting them.
- Address income support and insolvency deadlines. Apply for EI promptly after you stop working and contact the trustee or receiver where an insolvency process is underway.
- Have your full compensation assessed. Get legal advice before accepting an offer or choosing how to pursue unpaid termination and severance amounts.
You can use our Severance Pay Calculator for a general estimate. It does not determine whether an insolvent employer has the funds to pay your claim.
A short deadline on an employer’s offer is not the same as a legal deadline for pursuing compensation. Get advice promptly rather than assuming you must accept the package immediately.
Company Closures in Ontario: Frequently Asked Questions
Do small businesses have to pay severance when they close?
Small-business employees can still have termination and common-law compensation rights. An employer that does not meet the ESA statutory severance requirements may still owe other compensation. Do not assume that a small staff or payroll means you receive nothing.
What if the owner is retiring?
An owner’s decision to retire does not automatically cancel employee termination rights. The outcome depends on whether your employment ends, the business is sold or your job continues under another arrangement.
Do you have to sign a release to receive your minimum payments?
Your employer cannot make payment of ESA minimum amounts legally owed to you conditional on giving up those statutory rights. However, an offer of additional compensation may require a release. Have it reviewed to understand what claims you would be giving up.
Can the owner or directors be personally responsible for unpaid amounts?
Potentially, depending on the business structure and the legal basis for the claim. Ontario’s ESA can make corporate directors liable for certain unpaid wages and vacation pay, subject to conditions and limits. Those director-liability provisions do not cover termination pay or severance pay.
What if the company says the closure is temporary?
A temporary shutdown is different from a permanent termination, but the employer’s label does not settle your rights. Your contract, the length of the layoff and the circumstances matter. Review our guide to temporary layoffs in Ontario before agreeing to an unpaid absence or an extension.
Get Advice Before Accepting a Closure-Related Severance Package
Losing your job because a business closes can leave you with immediate questions about your income and future. You do not have to rely only on the employer’s explanation of what you are owed.
Samfiru Tumarkin LLP helps non-unionized employees across Ontario review severance offers, understand their options and pursue unpaid compensation. We can assess your contract, employment history and closure documents, including whether insolvency affects how to advance your claim.
Before signing a release, accepting a reduced payment or resigning ahead of the closure, contact our Ontario employment law team.
Contact your union representative about closure-related notice, severance, benefits and grievance deadlines. Our employment law team does not assist with unionized workplace disputes.