Laid Off vs. Fired: Learn The Differences and What Rights Employees Have

There are many ways that an employee can leave a company, but when it comes to terminations, the two most common situations are being laid off or getting fired. However, as common as those scenarios are, there’s still room for confusion while making the distinction between getting laid off vs. fired.

To make things clearer, this article will explore the key differences between being fired and laid off, and discuss the rights employees have in these common, if unpleasant, work-related events.

First, we’ll examine two overarching categories of termination: voluntary and involuntary.

Before delving into the “laid off vs. fired” distinction, let’s see the difference between voluntary and involuntary terminations. Learning about these broader concepts will make it easier for us to fully understand the main topics we want to examine.

A voluntary termination happens when an employee leaves an organization of their own choice. Some scenarios in which this occurs include taking a voluntary layoff package, quitting to take another job at a different company, or simply retiring.

In short, voluntary termination means the individual is making the decision to leave.

As you can imagine, an involuntary termination is when the company chooses to let the employee go. If someone is laid off because, for example, the business is relocating or undergoing a merger or acquisition, it means the business decision has impacted that person’s employment situation beyond their control. Hence, involuntary termination.

The most common involuntary terminations are layoff events and firings—although the latter comes with a caveat which we’ll discuss later on.

In both layoffs and firings, employees lose their jobs against their will. However, while all layoffs are involuntary terminations, that’s not necessarily the case with someone who’s been fired. Let’s examine how that works in real life.

A layoff is the involuntary termination of employment due to a business decision. For example, when a company shuts down a plant or decides to downsize due to financial reasons, the laid-off worker has no control over the situation. In other words, they’re not to blame.

The most common layoff scenario in Canada is a temporary layoff, where the employee stops working—for example, if there isn’t enough work to do—but the employer retains the option to recall them if the business situation changes. In those cases, the layoff doesn’t end the employment. A temporary layoff can become a termination if the employee doesn’t return or the pause extends beyond the time specified in the Canada Standards Labour Regulation.

When someone is fired, the employer typically makes this decision due to poor performance, misconduct, policy violations, or insubordination. Technically, however, this is not considered an involuntary termination. Because the firing happens as a consequence of individual actions (or inaction), the reasons for termination were within the employee’s control, so it’s voluntary.

Employers must give fired employees at least two weeks’ notice of termination or compensation in lieu of notice. 

In Canada, employers and laid-off or terminated employees have obligations and protections established by federal and provincial law. In general, organizations must provide workers with severance pay after a permanent layoff or termination. In most cases, workers are also eligible for unemployment benefits. And if an employee believes their employer treated them unfairly or hasn’t complied with its obligations, they can file a formal complaint against the company.

An employee is eligible for severance pay in the case of termination or if they’re on a temporary layoff that results in termination, provided they have been continuously employed for a minimum time. Each province has its own rules: while in Ontario you must stay at least five years with the company, this period is reduced to three months in British Columbia, for example.

The severance pay calculation varies, but companies typically pay one week’s worth of the employee’s salary for each year spent with the company. If the employee stays for less than one year, the payment will be proportionate to the time worked. Severance pay doesn’t exempt employers from providing a notice of termination or pay in lieu of notice.

Workers in Canada are eligible to receive Employment Insurance regular benefits if they:

• Lost their jobs through no fault of their own
• Had an insurable employment
• Have been without work and pay for at least seven consecutive days in the last 52 weeks
• Have worked for the required number of insurable employment hours in the last 52 weeks or since the start of their latest claim, whichever is shorter
• Are ready, willing, and capable of working each day
• Are actively looking for work

All laid-off workers who fit into those categories can receive Employment Insurance. Fired employees are eligible, too, as long as they didn’t lose their jobs due to misconduct.

In other words, laid-off employees can apply for employment insurance, but someone who has been fired may not be eligible for unemployment benefits. However, the employee can dispute the company’s decision to terminate them by filing a complaint: let’s see how it works.

When someone is laid off or fired, they can file a complaint with the Labour Program if they disagree with the terms or reasons for the dismissal. The most common types of complaints are:

• Monetary complaint – Refers to unpaid salary or other amounts such as severance pay or pay in lieu of notice of termination of employment.
• Unjust dismissal complaint – When the employee disagrees with the reason for their termination—for example, if they deny any misconduct.

If the employee and employer don’t reach an agreement, the Canada Industrial Relations Board may order the company to reinstate and / or pay compensation to the worker.

Performance-based terminations are one of the most common types of involuntary exits that companies need to handle. These terminations can also be delicate and challenging. 

Performance-based terminations happen when an individual is fired due to consistently not accomplishing work according to expectations or failing to show improvements after coaching sessions or a Performance Improvement Plan (PIP). Terminations caused by misconduct or policy violations don’t fall into this category.

While performance issues stem from employee behaviour, most companies treat these terminations as involuntary. This is particularly true if the employee made clear, genuine efforts to improve their performance, but still didn’t meet expectations from management.

To ensure fairness and reduce legal risks after a performance-based termination, it’s common that employers:

• Categorize performance-based terminations as involuntary
• Provide a severance package, especially when there was no misconduct
• Offer outplacement services to support the employee in their transition
• Document conversations and improvement efforts to support their decision

Discerning between being laid off vs. fired helps any organization to prepare for involuntary terminations. When this distinction is clear, companies can better assess outcomes, build an effective communication plan, and support employees during challenging times.

Here’s a table for you to better visualize the main differences between the two scenarios:

Laid off vs. fired: main differences
LAID OFF	FIRED
Involuntary termination	Voluntary termination
Caused by a business decision	Caused by employee action
Can be recalled (in a temporary dismissal)	Can’t be recalled (all firings are permanent)
Includes severance	No severance (in many cases)
Includes outplacement	No outplacement (with exceptions)
Won’t impact future employment	Could impact future employment
Eligible for Employment Insurance	May not qualify for Employment Insurance

If you’re planning a layoff event in your organization, you may want to speak with our experts and learn about our modern approach to outplacement. With the right outplacement partner, you’ll see employee satisfaction rates and productivity go up, while preserving your brand reputation. Get in touch with Careerminds today—we might be the partners you need.