Laid Off From an Ontario Manufacturing Job in 2026? Your Severance & Financial Planning Guide

Question: Am I entitled to severance pay if I was laid off due to US tariffs in Ontario?

Answer: Yes. The reason for your layoff — including US trade tariffs — has no impact on your legal entitlement to severance. Under the Ontario Employment Standards Act (ESA), if you have at least one year of service, you are entitled to termination pay (1 week per year, up to 8 weeks). If you have 5+ years of service and your employer's Ontario payroll is $2.5 million or more, you are also entitled to ESA severance pay (up to 26 additional weeks). Beyond the ESA minimums, most Ontario employees are also entitled to common law reasonable notice, which is typically significantly higher. Your employer's financial difficulties or the reason for the layoff do not reduce these entitlements.

Question: How does the temporary EI rule work for 2026 tariff layoffs in Ontario?

Answer: Canada introduced temporary EI measures to respond to the economic impact of US-Canada trade tariffs. For all EI claims established between March 30, 2025 and April 11, 2026, the standard one-week waiting period is waived — meaning you can receive EI benefits starting immediately after your last day of work. Additionally, the rules around the treatment of severance pay (allocation period) may also be modified under these temporary measures. Apply at canada.ca/ei the day after your last day of work. Do not wait for your severance period to run out before applying.

Question: What happens to my union pension (defined benefit) if I am laid off?

Answer: If you are a member of a defined benefit (DB) pension plan — common in Unifor and USW workplaces — a layoff triggers a critical, often irreversible decision: (1) Take the commuted value — a lump sum equal to the actuarial present value of your future pension, transferable to a LIRA (Locked-In Retirement Account) or RRSP (within limits); or (2) Leave it deferred — leave your pension in the plan and begin receiving monthly payments at the normal retirement age. The right choice depends on your age, health, financial situation, interest rates at the time of the transfer, and whether the plan is financially healthy. A fee-only financial planner should model both options before you choose.

Question: Can I collect both EI and severance pay at the same time in 2026?

Answer: Under normal EI rules, a lump-sum retiring allowance does not delay EI (you can collect both). Salary continuation or wages in lieu of notice are allocated against EI and delay benefits. However, under Canada's temporary EI measures (active until April 11, 2026), the treatment of monies paid on separation has been modified — check the current rules at canada.ca or contact Service Canada directly, as these measures were designed specifically to help tariff-affected workers access income support faster. If your collective agreement includes Supplemental Unemployment Benefits (SUB), you can receive both your SUB top-up and EI simultaneously.

Question: What is Supplemental Unemployment Benefits (SUB) and do I qualify?

Answer: Supplemental Unemployment Benefits (SUB) is a program negotiated into many manufacturing collective agreements (particularly Unifor contracts in the auto sector) that tops up your EI benefits during a layoff period. For example, your EI may pay $668/week, and your SUB plan may top you up to $800 or $900/week for a defined period (often 26-52 weeks depending on your collective agreement). SUB payments do not reduce your EI benefits — they are specifically registered with the federal government to allow this stacking. Check your collective agreement or union rep for whether your workplace has a SUB plan and the specific terms.

Question: Does my employer have to pay severance even if the plant is closing permanently?

Answer: Yes. In fact, a permanent plant closure often triggers additional obligations. Under Ontario's mass termination rules (ESA, Section 58), if 50 or more employees are terminated within a 4-week period, your employer must provide 8 to 16 weeks' notice to the Ministry of Labour, and individual notice periods under the ESA are increased. Your union collective agreement may also include provisions that specifically address plant closures, including enhanced severance schedules, bridging to early retirement, or retraining funds. Plant closures do not reduce your ESA or common law entitlements.

Question: Should I take the commuted value of my pension or leave it in the plan after a layoff?

Answer: This depends on several factors: (1) Your age — younger workers (under 50) may benefit more from commuting; older workers (55+) approaching retirement may be better off waiting for monthly pension payments; (2) The health of the plan — if the pension is underfunded, a commuted value takes your money out of an at-risk plan; (3) Interest rates — commuted values are lower when rates are high (as in 2024-2026); (4) Your financial discipline — a LIRA/RRSP is only as good as the investment decisions you make with it. There is no universal right answer. Model both options with a financial planner before the transfer deadline (typically 90 days after termination).

Question: What is the RRSP retiring allowance transfer and how does it apply to me?

Answer: If you were hired before 1996, a portion of your severance payment may qualify as a 'retiring allowance' and can be transferred directly to your RRSP at a rate of $2,000 per year of pre-1996 service. This transfer is over and above your regular RRSP contribution room — it does not use up your annual limit. For example, if you have 10 years of service before 1996, you can transfer up to $20,000 of your severance directly to your RRSP, sheltering it from immediate tax. This strategy is particularly valuable for long-service manufacturing workers hired in the 1980s and 1990s.