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CHAUDHRI: Replaced by AI? Know your rights!

Many people don’t realize they may be owed far more than what they were initially offered on termination

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AI, restructuring, mergers and downsizing – these are just a few reasons employees hear when they are laid off or terminated.

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But what many people don’t realize is that you may be owed far more than what you were initially offered on termination.

CHAUDHRI: Replaced by AI? Know your rights! Back to video

Lately, between the discussions of AI implementation in organization and geopolitical tensions, the news has been flooded with stories of major layoffs and downsizing. From public sector cuts to restructuring across tech and finance, employees are learning that the dreaded layoff email can arrive at any time. Even highly paid executives are discovering that their roles can disappear in an instant.

But while layoffs may be a business decision for employers, they often come with significant legal consequences. As an employee, it is important to know your rights.

Many employees assume if they are “laid off” that their employer owes them little or nothing more than minimal payments. In reality, Canadian employment law often tells a very different story. You may be entitled to notice of termination or pay in lieu, employment insurance (EI), severance pay, equity payouts, pension and retirement savings payouts, as well as the continuation of benefits.

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CHAUDHRI: Terminated executives entitled to more than they may think

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CHAUDHRI: 'Ghost job' postings – do’s and don’ts for employers

In Canada, there are two types of layoffs: temporary and permanent. A temporary layoff is where an employer may recall you to your job after a short period of time. A permanent layoff marks the end of your employment or, more accurately, is a termination without cause.

Not every employer has the legal right to temporarily lay someone off in the first place. In Ontario, a temporary layoff is only permitted if your employment contract specifically allows it, or if layoffs are an established practice in the industry. Without that contractual right, sending an employee home without pay, even temporarily, may actually amount to the termination of employment.

That distinction matters because termination triggers an employee’s entitlement to compensation for wrongful dismissal.

Many employees focus on the statutory minimums set out in employment standards legislation. In Ontario, for example, employees may be entitled to termination pay, and in some cases severance pay, based on their length of service. But these statutory amounts are only the beginning. You may be owed significantly more under the common law.

Courts determine these damages based on what is known as “reasonable notice.”

For some employees, reasonable notice periods can range from 12 to 24 months. During that time, employees are entitled to the compensation they would have earned had they remained employed. That can include base salary, bonuses, commissions, benefits, pension contributions, and in many cases equity compensation such as stock options or restricted share units.

Layoffs can also create complications around bonuses and long-term incentives. Employers sometimes assume that if an employee is no longer actively working when a bonus or equity award vests that the entitlement disappears. However, the courts have made it clear that employees may still be entitled to compensation for bonuses or equity that would have vested during the notice period.

None of this means that every layoff will result in a large payout. Some employment agreements contain carefully drafted termination clauses that limit entitlements to statutory minimums. But many do not, and when those clauses are missing or unenforceable, the financial exposure for employers can be substantial.

For employees, particularly executives whose compensation packages include bonuses, equity and deferred incentives, the key takeaway is simple: a layoff notice is not necessarily the final word on what you are owed.

Downsizing can feel like the end of the road, but legally it is often just the beginning of the conversation. Best practice is to consult with an employment lawyer as soon as you receive notice of layoff. Having a termination or layoff package reviewed may significantly increase your payout.

– This column was co-written by employment lawyer Sunira Chaudhri and her associate Samantha Khaouli

Have a workplace problem? Maybe I can help! Email me at sunira@worklylaw.com and your question may be featured in a future column.

The content of this article is general information only and is not legal advice.

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