No, severance packages are not fully protected from the Family Responsibility Office (FRO) in Ontario. If you have child or spousal support arrears, the FRO can legally garnish up to 50% of your net lump-sum termination payout directly from your employer. However, once the remaining funds are deposited into your bank account, the FRO can legally garnish up to 100% of those funds through a bank account garnishment.
Losing your job is a devastating experience, and receiving a severance package is often the only financial lifeline you have to survive while looking for new employment. However, if you are paying child support or spousal support in Ontario and have fallen behind on your payments, your severance pay is highly vulnerable. The Family Responsibility Office (FRO) has sweeping powers under the Family Responsibility and Support Arrears Enforcement Act to seize these funds.
Many people mistakenly believe that severance pay is legally protected or capped at the standard 50% garnishment limit applied to regular wages. This is a dangerous misconception. 💰 When an employer issues a lump-sum termination payout, the FRO aggressively targets these funds to instantly clear out years of accumulated support arrears. This guide explains how the FRO operates, what happens to your severance, and what steps you can take to manage the situation.
How the FRO Treats Severance Pay in Ontario
In Ontario, the law considers severance pay, termination pay, and retiring allowances to be forms of income. Because it is income, it falls under the jurisdiction of a Support Deduction Order (SDO). When you are ordered to pay support by the Superior Court of Justice or the Ontario Court of Justice, an SDO is automatically generated and filed with the FRO.
Under normal circumstances, the FRO can only garnish up to 50% of your regular net wages to cover ongoing support and slowly chip away at arrears. 📈 Because severance pay and termination pay are legally defined as “wages” under Ontario’s Wages Act, this 50% cap also applies to lump-sum termination packages at the employer level. The employer cannot legally withhold more than 50% of the net lump sum. However, once the remaining 50% of your severance package is deposited into your personal bank account, the FRO can issue a bank account garnishment to seize up to 100% of those deposited funds to satisfy the arrears.
Step-by-Step: What Happens When You Are Terminated
Whether you work in Toronto, Ottawa, or Kitchener, all employers in Ontario are legally bound to cooperate with the Family Responsibility Office. Here is how the garnishment process unfolds upon termination.
Step 1: Employer Notification
When you are fired or laid off, your employer’s payroll or HR department realizes you have an active Support Deduction Order on your file. By law, the employer must notify the FRO within 10 days that your employment has ended and that a severance package is being prepared.
Step 2: FRO Issues a Notice of Garnishment
Once the FRO learns about the impending lump sum, they will calculate your exact arrears balance. They will then send a legally binding directive (a Support Deduction Order) to your employer, demanding that up to 50% of the net severance funds be diverted directly to the FRO to pay the arrears. 📄 The employer has no choice but to comply; failing to do so makes the employer liable for the debt.
Step 3: Funds Are Diverted to the Recipient
Your employer will deduct standard statutory taxes (CRA payroll deductions) from the gross severance. On behalf of the FRO, the employer will withhold up to 50% of the remaining net severance to pay towards your support arrears. The employer then pays you the other 50%. Be aware, however, that once these remaining funds are deposited into your personal bank account, the FRO can legally initiate a bank garnishment to seize up to 100% of those funds from your financial institution.
Step 4: Filing a Motion to Change (Your Responsibility)
Because you have lost your income, your ongoing support obligations may now be disproportionately high. The FRO cannot change your monthly support amount; they only enforce court orders. 📋 It is highly recommended that you immediately file a Form 15 (Motion to Change) at the local courthouse to legally reduce your future support payments based on your sudden unemployment.
Costs and Financial Limits of Garnishment
Understanding the numbers is crucial when dealing with termination pay and family law obligations.
- Statutory Exemptions: Under Ontario’s Wages Act, the employer-level garnishment limit is strictly capped at 50% for all wages, including lump-sum severance packages. However, the FRO can garnish up to 100% of these funds once they are deposited into your bank account.
- Court Filing Fees: Filing a Motion to Change to reduce your support is generally free of court filing fees in Ontario, but serving the documents and commissioning affidavits will cost a small amount.
- Law Firm Fees: Hiring a family lawyer to negotiate an urgent stay of enforcement or file a Motion to Change can cost between $2,500 and $6,000 CAD.
How Long Does the FRO Process Take?
The FRO acts remarkably fast when lump sums are involved. Employers usually hold the severance funds for a few weeks to finalize the exact garnishment numbers with the FRO. Once the FRO receives the money, it is typically disbursed to the support recipient within 48 to 72 hours. Conversely, resolving a Motion to Change in court to legally lower your ongoing support can take 4 to 8 months, which is why you must act immediately after losing your job.
Frequently Asked Questions (FAQ)
Can I hide my severance package from the FRO?
No. Your employer is legally mandated to report the termination and the severance payout directly to the Family Responsibility Office. Attempting to hide it or asking your employer to pay you under the table is illegal.
Will the FRO take my entire severance?
Directly from your employer, the FRO is legally limited to garnishing a maximum of 50% of your net severance payout. However, if you have outstanding support arrears, the FRO can garnish up to 100% of the remaining funds once they are deposited into your bank account through a bank garnishment.
Does the FRO stop taking money now that I am unemployed?
No! Your ongoing monthly support order remains active and arrears will continue to accumulate every month until a judge signs a new court order reducing your payments. You must file a Motion to Change immediately.
What if my severance is paid as salary continuance instead of a lump sum?
If your severance is paid out as a regular bi-weekly salary continuance, the FRO will generally continue to garnish it at the standard rate (usually up to 50%) just like a regular paycheck, rather than seizing it all at once.
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