Understanding the distinction between termination and layoff isn’t just a matter of semantics—it can have a profound impact on your rights, your entitlements, and your next steps.
We often speak with clients who are unsure whether they’ve been terminated or laid off, and what that means for their future. This confusion is common, but the legal differences are significant. In this article, we’ll break down what each term means, how they affect your rights, and what you should do if you find yourself facing either situation.
The terms “termination” and “layoff” are often used interchangeably, but in Ontario employment law, they mean very different things. Misunderstanding your employment status can lead to missed entitlements, wrongful dismissal claims, or unnecessary stress.
We’ve seen clients come to us after being told they were “laid off,” only to discover their employment was actually terminated—and that they were owed more than they realized.
Termination is the permanent end of the employment relationship. When you are terminated, your employer has decided that your job is over—sometimes for a specific reason, sometimes not. There are two main types:
This occurs when an employer ends employment due to serious misconduct, such as dishonesty or repeated performance issues. In these cases, the employer does not have to provide notice or pay in lieu, but the threshold for “cause” is very high and often challenged in court
Far more common, this is when employment ends for reasons unrelated to
misconduct—think restructuring, cost-cutting, or business closure. Here, the employer must provide either advance notice or pay in lieu, and sometimes severance pay, depending on your length of service and the size of the employer’s payroll.
After termination, employers must also provide a Record of Employment (ROE), which is necessary for Employment Insurance (EI) eligibility.
A layoff, by contrast, is a temporary suspension of employment. You are not fired, but you are not working or being paid for a period of time. The expectation is that you may be recalled to work if circumstances improve.
There are two types:
This is meant to be short-term. In Ontario, a temporary layoff can last up to
13 weeks in a 20-week period, or up to 35 weeks in a 52-week period if certain conditions (like continued benefits) are met. If the layoff exceeds these timeframes, it is deemed a termination, and you are entitled to notice or severance as if you had been let go.
This is essentially a termination, as there is no intention to recall you to work.
It’s important to note that, under common law, unless your employment contract specifically allows for layoffs, a temporary layoff may be considered a constructive dismissal—meaning you could treat it as a termination and claim severance.
We’ve worked with employees who were placed on “temporary layoff” only to find that their contracts didn’t allow for it. In those cases, we helped them pursue constructive dismissal claims and secure the compensation they deserved.
Let’s clarify the main legal distinctions:
|
Factor
|
Termination
|
Layoff (Temporary)
|
|---|---|---|
|
Employment ends immediately?
|
Yes
|
No
|
|
Employer must provide notice/severance?
|
Usually
|
Not always
|
|
Employee can be recalled to work?
|
No
|
Yes
|
|
Triggers EI eligibility?
|
Yes
|
Yes (if conditions met)
|
No matter your situation, you have rights. After termination, you should receive notice or pay in lieu, and possibly severance pay, depending on your circumstances. Laid-off employees may also be entitled to these if the layoff becomes a termination or if the employer didn’t have the contractual right to lay off staff.
Always check your employment contract. If it doesn’t mention layoffs, your employer may not have the right to lay you off, and you could be entitled to treat it as a termination. If you’re unsure, that’s when legal advice is crucial.
I see employers make several recurring mistakes:
Mislabeling a termination as a layoff: Sometimes, employers use the term “layoff” to avoid paying severance, but if you’re not recalled within the legal timeframe, it’s a termination.
Failing to provide proper notice or severance: Employers sometimes underestimate what’s owed, especially for long-term employees or when contracts are unclear.
Exceeding the layoff period: If you’re laid off for longer than the ESA allows, you’re entitled to termination pay
If you’re unsure about your status, your severance offer seems low, or you’ve been laid off for longer than allowed, reach out to a lawyer. We’ve helped many clients in these exact situations—sometimes recovering tens of thousands of dollars more than the original offer.
Signs you should seek legal advice include:
• Your layoff is dragging on with no recall date
• Your employer won’t provide written notice or severance
• Your contract doesn’t mention layoffs, but you’ve been sent home without pay
• You’re pressured to sign a severance package quickly
The legal difference between termination and layoff is more than just a technicality—it determines your rights, your entitlements, and your next steps.
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