Review of Severance Package

It is shocking that so many employees that are “let go” assume that the severance package offered must be fair and don’t bother to have it reviewed by a lawyer that specializes in Employment Law. The reality is that the vast majority of first offers for severance packages are inadequate. By failing to ensure that their rights are protected, many people leave substantial amounts of money on the table.

Employment laws in Canada are designed to protect employees. They can be complex, and involve far more than “employment standards”. Another common mistake is to contact the Ministry of Labour and ask about the package; they only comment on employment standards, and ignore the common law, which is where the significant entitlements typically exist. This can mean the difference between, for example, eight weeks of termination pay and 24 months of severance.

There are lots of myths out there, the most common being that everyone is entitled to one month of severance per year of service. That is not the law, and in some cases, it can be substantially more than that.

The common law provides that all employees are entitled to “reasonable notice” of termination. Common law notice operates in a regime separate from the notice periods set out as minimums in the Employment Standards Act, 2000.  Our courts have deliberately refused to define reasonable notice or provide an easy way to calculate an individual’s entitlement. Rather, our courts have steadfastly maintained that every situation is to be assessed based upon its own particular characteristics. The entitlement to notice of dismissal, or severance, is calculated based upon a number of factors, including

  1. length of service,
  2. age of the individual,
  3. nature of position / employment, and
  4. the availability of similar employment.

In addition, if you were recruited away from a previous job, you may be entitled to more notice.

By default, a dismissed employee is entitled to receive all forms of compensation during the period of notice, as they would have received if they were still actively working. In other words, employers cannot offer base salary only unless they have a contractual right to do so by way of a termination clause. Many individuals assume that they will not get their  bonuses, commissions, or other forms of compensation, when they should.

You may have a contract which purports to limit your entitlement to severance. However,  many such clauses are unenforceable at law.

Another misconception is that notice, or severance, is an absolute entitlement. It is intended to be a “bridge” to your next job. If you find new work quickly, that can dramatically impact  your entitlement.

If you have been offered a severance package from your employer and are in need of a thorough, qualified review, we are available to examine the details of the package using our breadth of experience in this area. Rudner MacDonald’s lawyers have helped hundreds of employees understand and negotiate a package upon termination that adequately reflects their legal entitlements. It is a very rare circumstance that we have been unable to negotiate a better package than what was initially offered to these employees.

If your employment is terminated, our firm offers expertise and sage advice during this stressful experience. We help ensure your severance package offer is both reasonable and fair. In addition to assessing how many months of notice to which you are entitled, we will help you understand whether all obligations have been met, including variable compensation such as bonuses and commissions, car allowances, pensions, stock options, and medical, dental and disability benefits. We can work with you to negotiate a reasonable outcome, and if that cannot be achieved through negotiation, then we will represent you in your claim against the company. You can trust and rely on our advice and expertise.