Planning a Workforce Restructuring in Ontario

A responsible restructuring starts with a written business case and settles the legal obligations before anyone is told: which roles change and why, how people are selected, what notice and severance each person is owed under Ontario's Employment Standards Act, 2000 (ESA), whether the mass termination rules apply, and what the collective agreement requires. Federally regulated employers follow the Canada Labour Code instead, and its rules differ.

Start with the business case and the selection criteria

Document the operational reason, target structure and affected positions. Decide about positions before people, then select individuals by objective, written criteria applied consistently, such as skills or, where a collective agreement requires it, seniority.

Test every selection against Ontario's Human Rights Code or, federally, the Canadian Human Rights Act; both bar employment discrimination on grounds including age, sex, family status and disability. The ESA also bars terminating even partly because an employee asked about or exercised an ESA right, such as taking a leave. Consider redeployment: anyone who refuses reasonable alternative employment with the employer gets no ESA notice, termination pay or severance pay.

Notice, termination pay and severance under the ESA

In most cases, an Ontario employee continuously employed for three months is owed written notice, termination pay instead, or a combination. Individual notice rises from one week (under one year) to eight weeks (eight years or more). During it, the employer cannot reduce the wage rate or alter other terms, and must continue benefit plan contributions.

Severance pay is separate: it is owed after five years' employment if the employer meets the Act's payroll test, or the employee is one of 50 or more severed in a six-month period because all or part of the business at an establishment permanently closed. It is a week's regular wages for each completed year, prorated by completed months for a partial year, capped at 26 weeks.

A lay-off longer than an ESA temporary lay-off is a termination. ESA amounts are minimums: some employees have greater common law rights, and contracting out of an employment standard is void.

When the Ontario mass termination rules apply

Special rules apply when an employer terminates 50 or more employees at an establishment in the same four-week period, unless the terminations are not more than 10 per cent of employees employed there for at least three months and none is caused by a permanent discontinuance of all or part of the business there. Notice is 8 weeks for 50 to 199 employees, 12 for 200 to 499, and 16 for 500 or more.

• Deliver Form 1 to the Director of Employment Standards, even when paying instead of notice; notice is not effective until the Director receives it.
• From the first day of notice, keep Form 1 posted; that day, give each affected employee a copy and the Employment Ontario Career Supports information sheet.
• Employees given this notice may take up to three days' unpaid job seeking leave during it, unless given 25 per cent or less of the required notice, with termination pay for the rest.

An establishment can span separate locations in one municipality, and includes the home of an employee who works only from home.

Unionized workplaces: start with the collective agreement

Read the collective agreement first for lay-off, recall, seniority, bumping, union notice and severance terms. The ESA remains the floor, but a greater collective agreement benefit on the same subject applies instead of the standard.

Where seniority rights allow bumping, the employer can post the name, seniority, job classification and proposed termination date of each employee it intends to terminate; this is notice, from posting, to anyone they bump, and must still meet ESA notice lengths. If a lay-off may exceed a temporary lay-off and saying employment is ending might breach the collective agreement, written notice of indefinite lay-off counts as notice of termination. ESA rights are generally enforced through the collective agreement, not a ministry complaint, unless the Director permits one.

Federally regulated employers follow the Canada Labour Code

Federally regulated employers, such as banks, airlines, interprovincial railways and radio broadcasters, follow the Canada Labour Code, not the ESA.

• Notice: two weeks after three consecutive months' continuous employment, rising to eight weeks after eight years, or wages in lieu.
• Severance: after twelve consecutive months, the greater of two days' wages per completed year and five days' wages, unless dismissed for just cause.
• Group termination of 50 or more employees in an industrial establishment within four weeks: besides individual notice, written notice to the Head of Compliance and Enforcement at least 16 weeks before the first termination, copied immediately to the Minister of Employment and Social Development, the Canada Employment Insurance Commission, any union and non-unionized redundant employees (or posted).
• A joint planning committee must then meet within two weeks to develop an adjustment program, unless qualifying collective agreement terms or the technological change rules exclude unionized employees.
• Lay-offs generally count as terminations, but not one of three months or less.
• Union notice: written notice, as long as individual notice, when a position with seniority bumping rights becomes redundant, and, unless certain collective agreement terms apply, at least 120 days' notice of a technological change likely to affect a significant number of employees' terms or job security.

Non-unionized non-managers with twelve consecutive months' service may complain of unjust dismissal even if notice and severance were paid, but the Canada Industrial Relations Board cannot consider complaints from people laid off for lack of work or discontinuance of a function, so document the business case.

Communication and timing

Build the timeline backwards from the effective date, then:

1. Confirm each person's entitlements and the total cost.
2. File first: any Ontario Form 1, which must reach the Director before notice takes effect. Federally, the group notice must be copied immediately to the union and to non-unionized affected employees (or posted), so prepare managers and individual meetings before filing it.
3. Engage the union as the collective agreement and, federally, the Code require.
4. Prepare managers and written notices.
5. Meet affected employees individually before any wider announcement.
6. Give each a written statement of amounts owed: in Ontario, by the day final wages are due; federally, at least two weeks before termination with working notice, or by termination with wages in lieu.
7. Then brief remaining staff on the changes and support.

How Zamat Workplace Solutions can help

Zamat Workplace Solutions supports employers, unions and boards with restructuring and workforce planning, collective agreement interpretation, employee terminations and organizational change.

Frequently asked questions

The content of this site is general information and is not legal advice. Contacting the practice does not create a solicitor-client relationship. Appointment of a mediator or arbitrator is subject to confirmation and conflict screening.