If you have been recently let go from your job, your employer may have offered you a severance package paying you a certain amount of money in exchange for signing a release document relinquishing any legal claim you may have against your employer.  Before you sign the release document, you should consider whether the severance package they are offering is appropriate given your circumstances.

 

This article will provide some insight on this issue.  However, it is important to understand that the article is not meant to be a replacement of proper legal advice from an experienced Employment Lawyer.  The determination of the appropriate amount of notice or severance is not an exact calculation and depends on a variety of specific factors.  Therefore, if you have any further questions after reading this article, you should contact Nadi Law to discuss your case.

 

The appropriateness of a severance package is tied to an employee’s general right to notice prior to termination.  The Employment Standards Act (ESA) indicates that any employee employed for more than three months is entitled to written notice prior to being terminated ¹.  Certain categories of employees are excluded from this rule, most commonly “an employee who has been guilty of willful misconduct, disobedience or willful neglect of duty that is not trivial and has not been condoned by the employer”².  In other words, if you have been fired or terminated for cause, you will not be entitled to any notice under the ESA and can be immediately dismissed by your employer.  If this is your situation and you believe you were fired unfairly, please contact Nadi Law to discuss the strength of your case in a claim for Wrongful Dismissal.

 

The ESA provides guidelines on the minimum amount of notice to be provided upon termination.  This notice can be provided in the form of working notice where you continue to work for the notice period, or it can be paid out in an equal amount, in lieu of notice.  In most cases, the calculation for the minimum amount of notice under the ESA is approximately as follows ³:

 

Minimum Notice = (# of years worked (Maximum of 8 years)) x (1 week of salary)

 

The ESA does specify a different calculation in the unique scenario whereby there is a mass termination of more than 50 employees within a 4-week period.   If you find yourself in this situation, you should speak with an Employment Lawyer to discuss the appropriate amount of notice in your case.

 

The ESA also specifies that certain employees are entitled to “Severance Pay” on top of the amount of notice they are receiving.  In order to be entitled to this additional pay under the ESA, you must have been employed at the company for a minimum of at least 5 years, and one of the following conditions must also apply:

 

(a) the severance occurred because of a permanent discontinuance of all or part of the employer’s business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or

(b) the employer has a payroll of $2.5 million or more ⁴

 

Therefore, if you work for a larger company, you could be entitled to this additional severance pay.  Similar to the calculation of notice, this additional severance pay is calculated approximately as follows ⁵:

 

Severance = (# of Years worked (Maximum of 26 years)) * (1 week of salary)

 

The above calculations should assist you in determining whether the severance package being offered by your employer meets the minimum thresholds as set out in the ESA.  However, keep in mind this is the minimum amount you would be entitled to.

 

Canada is a common law jurisdiction.  This means in addition to statutes and legislation; the law is developed through the court system and cases.  Although the ESA specifies a minimum amount of pay you would be entitled to upon termination, you could be entitled to a significantly higher amount of pay under the common law/case law.

 

Unfortunately, the calculation of notice or severance is not as straight forward in the case law.  This calculation requires an assessment of various factors specific to your employment.  These factors include (but are not limited to): Character of Employment, Length of Service, Age and the Availability of Similar Employment having regards to the experience, training and qualifications of the employee ⁶.

 

The ESA sets out the minimum amount you should expect from a severance package being offered by your employer.  However, you will likely be entitled to significantly more than the minimum.  Before signing any release documents, contact Nadi Law and speak with an experienced Employment Lawyer to discuss your options.

 

 

Written by:

 

Adib Nadi, HBSc, J.D.
Barrister & Solicitor
Employment Lawyer

 

 

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¹           Employment Standards Act, 2000, SO 2000, c 41, S. 54
²             Termination and Severance of Employment, O Reg 288/01, S. 2
³           Employment Standards Act, 2000, SO 2000, c 41, S. 57
⁴           Employment Standards Act, 2000, SO 2000, c 41, S. 64
⁵           Employment Standards Act, 2000, SO 2000, c 41, S. 65
⁶           Bardal v. The Globe & Mail Ltd., [1960] O.W.N. 253 (H.C.J.)