OptiMax Partners Inc.
← All articles

When Does a Layoff Become a Termination in Ontario?

2026-08-19

In Ontario, a temporary layoff that does not meet the extension conditions automatically becomes a deemed termination once it exceeds 13 weeks within any 20 consecutive weeks, or, where the employer keeps paying benefits, once it reaches 35 weeks within 52 weeks. Since November 27, 2025, employers can extend a layoff to just under 52 weeks in 78 weeks with written consent and Director approval, but common law risk remains.

What Are Ontario's Basic Temporary Layoff Time Limits?

Ontario's Employment Standards Act, 2000 sets out the point at which a layoff stops being "temporary" and becomes a termination in law. A layoff can last more than 13 weeks in any period of 20 consecutive weeks, but less than 35 weeks in any period of 52 consecutive weeks, only where the employee continues to receive substantial payments from the employer, continued benefit or pension contributions, or supplementary unemployment benefits, among other qualifying conditions.

Outside of those conditions, the basic rule is simple: 13 weeks of layoff in a 20-week window is the ceiling. Cross it without qualifying for an extension, and the ESA treats the employee as terminated on the first day of the layoff, not the day the limit is crossed.

What Changed Under the Working for Workers Seven Act, 2025?

Bill 30, the Working for Workers Seven Act, 2025, received Royal Assent on November 27, 2025 and added a third layoff window on top of the existing 13-in-20 and 35-in-52 rules. Non-unionized employers and employees can now agree in writing to extend a layoff of 35 weeks or more in a 52-week period, provided the total layoff stays under 52 weeks in any 78-week period.

This extended layoff option is not automatic. It requires the employer and employee to agree in writing, and before the agreement is made the employer must tell the employee in writing the latest recall date and that the employee cannot withdraw consent once given. It also requires formal approval from the Director of Employment Standards before it takes effect. Employers must also retain a copy of each extended layoff agreement for three years after the approval expires.

For most employers, this changes the outer boundary of a compliant layoff from 35 weeks to just under 52 weeks in a rolling 78-week window, but only with paperwork, consent, and government sign-off in place.

Ontario layoff duration ceilings (weeks) 13 weeks in 20 (basic limit, no conditions needed) 35 weeks in 52 (benefits/pay continued) under 52 in 78 (consent + Director approval, since Nov 27, 2025)

Can an ESA Compliant Layoff Still Be a Constructive Dismissal?

Meeting the ESA time limits does not automatically make a layoff legal. In Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831, the Ontario Court of Appeal stated that at common law an employer has no right to lay off an employee, and that absent an agreement to the contrary, a unilateral layoff is a substantial change to the employment and would be a constructive dismissal.

The Ontario Superior Court applied this same reasoning in Bevilacqua v. Gracious Living Corporation, 2016 ONSC 4127. A facilities manager with 15 years of service was laid off for a three month period during a downturn, and his contract contained no layoff clause. The court held that it did not matter whether the layoff followed the ESA and found a constructive dismissal. Because he turned down the employer's offer to return to the same job on the same terms, the court awarded three months' salary rather than the 15 months he claimed.

In practice, this means two separate legal tracks run at once: the ESA clock (13-in-20, 35-in-52, or the new extended window) and the common law question of whether the employer ever had the right to lay the employee off in the first place. An employer can be fully within ESA time limits and still face a constructive dismissal claim for common law reasonable notice, which can be far larger than the statutory minimum.

What Must Employers Pay Once a Layoff Becomes a Termination?

Once a layoff is deemed a termination under the ESA, two separate statutory payments can come into play.

ESA termination pay depends on length of service: one week for three months but less than one year, two weeks for one year but less than three years, then one more week for each further year, up to a maximum of 8 weeks at eight years or more (ESA s. 57), regardless of how long the employee has worked there.

Length of service ESA termination pay owed
Less than 3 months None (no ESA notice requirement yet)
3 months but less than 1 year 1 week
1 year but less than 3 years 2 weeks
3 years but less than 4 years 3 weeks
4 years but less than 5 years 4 weeks
5 years but less than 6 years 5 weeks
6 years but less than 7 years 6 weeks
7 years but less than 8 years 7 weeks
8 years or more 8 weeks (statutory cap)

This table is the ESA standard for individual terminations. If an employer terminates 50 or more employees at one establishment within a four-week period, separate mass termination notice rules apply.

ESA severance pay is a separate, additional entitlement. It applies only where the employee has at least 5 years of service and the employer has a global payroll of at least 2.5 million dollars, or severed 50 or more employees within a six month period because all or part of the business permanently closed. Where both conditions are met, severance pay equals one week of regular wages per completed year of service (plus completed months divided by 12 for a partial year), capped at 26 weeks.

Combined, a long-service employee whose employer meets the payroll threshold can be owed both ESA termination pay and ESA severance pay, and that combined statutory floor can still sit below what a court might award under common law reasonable notice if the layoff also amounts to a constructive dismissal.

What Should Employers Verify Before Placing Anyone on Temporary Layoff?

  • Confirm the employment contract contains an express layoff clause, or that the employee has otherwise agreed to layoffs.
  • Track the layoff against the 13-in-20 and 35-in-52 week windows from day one, not just from the most recent notice.
  • Continue benefit or pension contributions if you intend to rely on the 35-week extension.
  • If you need 35 weeks or more, get written employee consent with a firm recall date and secure Director of Employment Standards approval before relying on the extended window.
  • Calculate both ESA termination pay and ESA severance pay exposure for any layoff that may be deemed a termination, and budget for potential common law claims separately.

FAQ

Is a temporary layoff automatically legal in Ontario if it stays within ESA time limits?

No. Meeting both the ESA time limits and the applicable extension conditions only means the layoff has not yet become a deemed statutory termination. Under Elsegood v. Cambridge Spring Service, 2011 ONCA 831, the employer still needs the employee's agreement, usually a layoff clause in the contract, to impose the layoff, otherwise the employee can treat it as a constructive dismissal at common law.

How long can a temporary layoff last in Ontario in 2026?

The basic limit is 13 weeks in any 20 consecutive weeks. It can extend to just under 35 weeks in any 52 consecutive weeks if the employer continues benefits, substantial payments, or supplementary unemployment benefits. Since November 27, 2025, non-union employers and employees can agree in writing, with Director of Employment Standards approval, to extend a layoff to just under 52 weeks in any 78 consecutive weeks.

What happens if an employer lets a layoff run past the ESA time limit?

The ESA deems the employee terminated as of the first day of the layoff. The employer then owes ESA termination pay based on length of service, and ESA severance pay as well if the employee has 5 or more years of service and either the employer's global payroll is at least 2.5 million dollars or 50 or more employees were terminated within six months because all or part of the business permanently closed.

Can an employee sue for more than ESA termination and severance pay after a layoff?

Yes, if the layoff was not authorized by the employment contract or the employee's agreement, the employee may pursue a common law wrongful dismissal claim for reasonable notice, which courts can set well above the ESA statutory minimums.

Facing a layoff decision or a possible constructive dismissal claim in Ontario? OptiMaxWork AI can generate a verified answer for your specific case. Get your verified answer

Disclaimer: This article summarizes Ontario's Employment Standards Act, 2000 layoff and termination provisions, the November 27, 2025 amendments under the Working for Workers Seven Act, 2025 (Bill 30), and relevant case law as published on CanLII and by the Court of Appeal for Ontario. It is general information, not legal advice, and does not account for your specific contract terms or circumstances.

Sources: