Terminating an Employee in Ontario: A Step-by-Step Employer Guide

Terminating an employment relationship is one of the highest-risk decisions an Ontario employer can make. Do it wrong — even when you are legally entitled to let someone go — and you face wrongful dismissal claims, Human Rights Tribunal applications, or Ministry of Labour complaints that cost far more than the termination itself.

This guide walks through the termination process step by step: from assessing what you owe, to the termination meeting, to the final paperwork. Getting this process right protects your business and treats departing employees with the dignity the situation requires.

Step 1: Determine the Type of Termination

Before you do anything else, clarify which type of termination you are dealing with. This determines almost everything that follows.

Without Cause

The vast majority of terminations in Ontario are "without cause" — the employer has a legitimate business reason for ending the employment (poor fit, restructuring, performance concerns that do not meet the legal bar for just cause) but is not alleging misconduct. No justification is required to terminate without cause. You simply owe the employee their entitlements.

For Cause (Just Cause)

Just cause is a high legal bar. Dismissal for cause means no notice or severance is owed, but you must be able to demonstrate serious employee misconduct — dishonesty, insubordination, significant breaches of trust, or repeated failures to meet clear expectations after progressive discipline. Many employers believe they have cause when they legally do not, and claiming cause incorrectly can expose you to aggravated damages.

If you are uncertain whether you have just cause, assume you do not and plan accordingly.

Step 2: Calculate the Statutory Minimums

ESA Notice or Pay in Lieu

After the three-month probationary period, employees are entitled to notice of termination (or pay in lieu) under the ESA, based on their length of service. The schedule begins at one week for employees with less than one year of service and scales upward to a maximum (as of writing — verify the current schedule at ServiceOntario). If you are providing pay in lieu rather than working notice, the payment must cover base wages plus benefits continuation.

Severance Pay

A separate entitlement — "severance pay" — is owed to employees who:

• Have five or more years of service, and
• Work for an employer with a specified annual Ontario payroll, or are part of a mass termination

Severance pay is calculated at a rate of one week per year of service (and partial years proportionately), up to a cap (verify current cap). This is distinct from and in addition to termination notice.

Common-Law Reasonable Notice

If there is no valid written termination clause, the employee may be entitled to common-law reasonable notice — which is typically significantly higher than the ESA minimum. For a mid-career employee with several years of service, common-law notice can range from several months to over a year. This is why having an enforceable termination clause in place before the hire is so important.

Step 3: Review the Employment Contract

Before proceeding, review the employment agreement:

• Is there a termination clause? Is it validly drafted?
• Does it limit notice to the ESA minimum, or does it provide more?
• Are there any fixed-term provisions that require payment for the remaining term?

If the contract's termination clause is invalid (as discussed in our separate article on enforceable termination clauses), you will owe common-law notice — or you can negotiate a release in exchange for a higher package.

Step 4: Prepare the Paperwork Before the Meeting

Assemble the following before the termination meeting:

• Record of Employment (ROE): must be issued promptly after termination so the employee can apply for EI (verify current deadlines with Service Canada)
• Final pay: all outstanding wages, accrued and unused vacation pay, and any other owed amounts — payable no later than the deadlines set by the ESA
• Termination letter: describes the date of termination, the amount and basis of the termination package, and (if you are seeking a release) reference to the separation agreement
• Separation agreement: if you are offering a package in exchange for a release of claims, have the agreement ready for the employee to take away and review with a lawyer

Step 5: The Termination Meeting

Keep the meeting short, private, and respectful. Best practices:

• Have a witness (another manager or HR) present in the room
• Be direct and clear: the decision has been made; this is not a negotiation meeting
• Provide the termination letter at the start or end of the meeting
• Do not over-explain or debate: lengthy justification invites argument and can be used against you if the matter goes to litigation
• Do not terminate by email or text: a face-to-face conversation (or at minimum a video call) is expected and reflects good faith
• Retrieve company property: keys, devices, access cards

A poorly conducted termination meeting — one that is humiliating, public, or dismissive — can support a claim for damages for bad faith in the manner of dismissal.

Step 6: Benefits Continuation

Benefits must continue during the statutory notice period (even if you are paying in lieu rather than providing working notice). A termination package that cuts off benefits immediately may not satisfy the ESA minimum.

Step 7: Human Rights and Other Risks

Before finalizing the termination, consider whether there are any factors that could give rise to a human rights complaint:

• Is the employee pregnant, on parental leave, or recently returned from leave?
• Has the employee recently made an OHSA complaint or exercised an ESA right?
• Does the termination decision have any relationship to a protected ground (age, disability, race, religion, etc.)?

These considerations do not necessarily prevent a legitimate termination, but they mean you should be especially careful about documentation and timing — and should consider getting legal advice first.

Step 8: Separation Agreement and Release

If you are offering a package above the ESA minimum in exchange for a release of claims (a full and final settlement), the employee must be given a reasonable opportunity to review and sign the agreement — they should take it away, review it with their own lawyer, and sign it voluntarily. A release signed under pressure or without opportunity for review may not be enforceable.

Frequently asked questions