Termination pay (pay in lieu of notice)

Termination pay comes up when employees are let go as part of a sale. The statutes cited here put it on the employer that ends the employment, so the purchase agreement should say which party that is, and a buyer should ask whether any has already been paid or promised.

How it works

Ontario’s Ministry of Labour guide says an employee who does not get the written notice required must be given termination pay in lieu of notice. It is a lump sum equal to the regular wages for a regular work week the employee would have had during the notice period, and the employee earns vacation pay on it. The guide treats it as separate from severance pay. Alberta’s Employment Standards Code defines termination pay as pay given instead of a termination notice. For federally regulated employers, the Canada Labour Code lets an employer give wages in lieu of notice (s. 230(1)(b)). Other provinces run their own regimes.

What to check or ask

• Which employees are being terminated, and who ends their employment
• Whether the purchase agreement allocates this cost between buyer and seller
• Whether the employees are exempt under their province’s statute

Read who pays severance when a business is sold. See also statutory minimum notice.