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Restructuring Layoffs in Ontario: Know Your Rights When Companies Downsize

Layoffs during company restructurings are a reality in today’s economy—but that doesn’t mean you’re powerless. In Ontario, employees affected by restructuring layoffs still have legal rights, and understanding them can make a major difference in what you walk away with.

From severance pay to extended benefits and wrongful dismissal claims, there’s often more at stake than employers let on. In this blog, we’ll explore how Ontario employment law protects workers during restructuring—and why it’s so important to speak with a qualified employment lawyer in Toronto before signing anything.

What Is a Restructuring Layoff?

A restructuring layoff occurs when a company reorganizes its workforce—not because of performance, but potentially due to cut costs, merging of departments, or shift of strategy. It’s often referred to as a “position elimination” or “department-wide layoff.”

While the employer may have legitimate reasons, they’re still required to comply with Ontario’s Employment Standards Act, 2000 (ESA) and potentially offer common law severance depending on your tenure, role, and employment contract.

You’re Still Entitled to Severance—Even in a Restructuring

Employers sometimes suggest that restructuring layoffs are unavoidable and therefore exempt from severance rules. This is not true.

Under Ontario law, employees laid off due to restructuring may still be entitled to:

  • Termination pay (required by the ESA)
  • Severance pay (if you’ve worked at least five years and the employer has a $2.5M+ payroll or laid off 50+ employees in a short period)
  • Common law damages (which can exceed ESA minimums)

If you’re not sure what applies to your case, it’s worth reading our blog: “Vacation Pay Versus Vacation Time: What’s the Difference?” which explores how ESA entitlements often differ from employer policies—an important nuance in restructuring cases as well.

Severance Offers: Why You Shouldn’t Sign Without Legal Review

Many severance packages offered during restructuring contain release clauses in exchange for a lump sum payment, where you give up your rights to pursue damages, including your right to sue for more severance. But these offers may not reflect what you’re actually owed—especially if your employment contract doesn’t properly limit your entitlements, including your common law rights.

A wrongful dismissal lawyer in Toronto can review your offer and potentially negotiate a higher amount, particularly if:

  • You’re a long-tenured or senior employee
  • Your job prospects are limited (due to age, specialization, or economic conditions)
  • The offer fails to account for extended benefits during the notice period

For those facing employment uncertainty, our blog on “Planning for Job Security in 2025: Tips for Employees with Disabilities” provides broader insight into proactive legal planning during restructuring.

Benefits Coverage During Your Notice Period

Another area where employees are often misinformed is benefits continuation. Your employer may claim your coverage ends upon termination—but if you’re entitled to a reasonable notice period, your benefits may need to continue throughout that time.

This includes:

  • Health and dental insurance
  • Life insurance
  • Long-term disability (LTD) coverage

This is especially important if you’re experiencing or at risk of a medical issue. For more, see our related post: “Can You Be Fired While on Sick Leave in Canada? Know Your Rights” which explains how benefit rights can extend into or past the notice period if illness arises.

Layoffs Can Still Be Wrongful Dismissal

Just because a layoff is part of a restructuring doesn’t automatically make it legal. You may have grounds for a wrongful dismissal claim if:

  • Your employer failed to provide proper notice or severance
  • Your contract did not clearly limit your entitlement to ESA minimums
  • You were targeted unfairly (e.g., harassment, based on age, disability, or parental leave)

In some cases, even a constructive dismissal argument could arise if your job duties were changed significantly before a layoff. Learn more about how this works in our guide: “Constructive Dismissal, Wrongful Dismissal, Employment Lawyer – Explained”.

What If You’re on Sick Leave or LTD During a Restructuring?

If you’re already receiving long-term disability benefits or on medical leave when a restructuring happens, your situation becomes even more sensitive. Layoffs under these circumstances can trigger disability discrimination issues or lead to premature benefit cutoffs.

For a real-world look at how this plays out, read our article: “Losing Your Job While on Long-Term Disability in Ontario? Here’s What You Need to Know” which breaks down your legal options.

What to Do If You’ve Been Laid Off Due to Restructuring

If you’ve received notice of a layoff due to restructuring:

  • Don’t sign anything right away – especially a release
  • Request your full employment contract and benefit documents
  • Ask about the length and nature of your notice period
  • Get legal advice before accepting a package or walking away

Our blog “11 Signs You’re Being Pushed Out of Your Job (and What an Employment Lawyer Can Do)” highlights the subtle strategies some employers use to encourage resignation. Restructuring can sometimes mask similar tactics.

Speak with a Toronto Employment Lawyer Today

At Unified LLP, we help employees across Ontario and Alberta navigate complex job loss situations, especially when tied to company restructurings, health challenges, or severance disputes. We know the tactics employers and insurers use—and we know how to fight back.

Whether you’re facing a sudden layoff or just received a severance offer, a Toronto employment lawyer from our team can walk you through your options, explain what you’re legally owed, and advocate for a stronger result.

Reach out for a free, confidential consultation. We’re here to help you protect your income, your benefits, and your future.

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