Aria NguyenCompulsion Games Closure: What Montreal's 90+ Developers Must Know About Their Legal Rights
Xbox is reportedly shutting down Compulsion Games, the Montreal-based studio behind South of Midnight and We Happy Few — leaving more than 90 employees facing unexpected job losses just weeks after the team celebrated winning Game of the Year at the Canadian Game Awards.
The closure, reported by multiple gaming industry outlets on June 15, 2026, follows an internal email from Xbox CEO Asha Sharma citing an "over extended" studio system and steep revenue declines. Compulsion Games leadership is reportedly in ongoing negotiations with Microsoft over the studio's fate. For the 90+ developers caught in the middle, the uncertainty raises urgent questions about what they are legally owed.
A Studio Shut Down at Its Highest Point
The timing of the reported closure is striking. Just three weeks ago, the Compulsion Games team attended the Canadian Game Awards and received seven awards for South of Midnight, including Game of the Year. The game had already won Games for Impact at The Game Awards 2025, Outstanding Achievement in Animation at the D.I.C.E. Awards, and New Intellectual Property at the BAFTA Game Awards. After the original Xbox release, South of Midnight was also ported to PS5 and Switch 2 in March 2026.
Two months before the closure announcement, Compulsion was actively hiring for an unannounced new IP. Founded in Montreal in 2009 and acquired by Microsoft in 2018, the studio became one of the highest-profile Canadian game developers in the country.
What Quebec Employment Law Says
Compulsion Games is headquartered in Montreal, Quebec, which means its employees are protected under Quebec's Act Respecting Labour Standards (ARLS) — and for a closure of this scale, under the Act Respecting Collective Dismissals as well.
Under the ARLS, notice periods for termination without cause depend on length of uninterrupted service:
- Less than 3 months: no statutory notice
- 3 months to 1 year: 1 week
- 1 to 5 years: 2 weeks
- 5 to 10 years: 4 weeks
- 10 or more years: 8 weeks
These are minimums, not offers — an employer can provide pay in lieu of notice rather than working notice.
For collective dismissals — defined as terminating 10 or more employees within any two-month period — Quebec law also requires the employer to file notice with the Minister of Labour. The required collective notice periods are:
- 8 weeks for 10 to 99 employees
- 12 weeks for 100 to 299 employees
- 16 weeks for 300 or more employees
With 90+ employees reportedly affected at Compulsion Games, the studio falls in the 10-to-99 bracket, which means a mandatory 8-week collective dismissal notice period applies. If Microsoft proceeds without providing this notice — or equivalent pay in lieu — affected employees may have grounds for a legal claim under Quebec law.
The Commission des normes, de l'équité, de la santé et de la sécurité du travail (CNESST) is the provincial body that enforces the Act Respecting Labour Standards. Employees who believe their statutory rights have not been respected can file a complaint directly with the CNESST.
The Difference Between Minimums and What You're Actually Owed
The ARLS is a floor, not a ceiling. Many employees at Compulsion Games — particularly those in senior technical roles or with longer tenure — may be entitled to considerably more than the statutory minimums under Quebec's common law principles or under their specific employment contracts.
Under common law "reasonable notice," courts consider factors including:
- Total length of service
- Age
- Seniority and nature of the role
- The availability of comparable work in the market
A senior technical artist or lead developer with eight years at Compulsion Games, for example, would be entitled to 4 weeks under the ARLS minimum — but a Quebec lawyer assessing their full circumstances might identify 3 to 6 months of reasonable notice as appropriate, based on their role and how specialized the gaming industry labour market is.
Employees with written employment contracts should also review whether those agreements contain specific termination clauses, cap on severance, or notice provisions that differ from the ARLS defaults — either more or less favorable.
What Affected Developers Should Do Now
Quebec employment lawyers advise employees facing a studio closure to take these steps immediately:
Do not sign any agreement quickly. Employers sometimes present separation packages under time pressure. Once signed and released, the package is very difficult to renegotiate. Have any termination agreement reviewed by a Quebec employment lawyer before signing.
Get everything in writing. Request written confirmation of your last day of employment, final salary, accrued vacation pay, and the continuation (or termination) of any benefits during the notice period.
Preserve all communications. Keep any emails, Slack messages, or documents related to the closure, your role, the timeline, and any offers made by the company. These may be relevant if you pursue a claim.
Track your timeline. The date you were first formally notified matters for calculating whether required notice was provided. Document this date carefully.
Employment Insurance and Professional Transition
Employees losing jobs through an involuntary studio closure are generally eligible for Employment Insurance (EI) through Service Canada. Closure-related terminations qualify as job loss through no fault of your own.
To access EI benefits:
- Apply as soon as your last day of employment is confirmed through your My Service Canada Account
- Your employer must issue a Record of Employment (ROE) within 5 calendar days of your final day (if issued electronically)
- The waiting period and benefit amount depend on your insurable earnings and your regional unemployment rate at the time of application
Filing for EI does not affect your ability to pursue a legal claim for additional severance. The two processes are independent.
A Pattern in Canadian Gaming
This is not an isolated closure. Earlier in 2026, Warner Bros. Games Montréal also reported significant layoffs. The Canadian games industry has navigated multiple studio restructurings this year, driven in part by major publishers — including Microsoft — cutting overhead following declines in gaming revenue.
For employees at Compulsion Games, the most important distinction is between what the law requires Microsoft to provide and what they are actually offering. That gap — between your minimum entitlement and the package on the table — can be substantial, and understanding it requires professional legal advice.
On Expert Zoom, you can connect with a Quebec employment lawyer who specializes in wrongful dismissal, collective layoffs, and the rights of tech and creative industry workers.
This article provides general legal information only and does not constitute legal advice. Employment situations vary; consult a licensed Quebec lawyer for advice specific to your circumstances.
