Severance Offers: Are They Ever Fair?

With the recent downturn in the technology sector and the increasing number of layoffs, many employees are being presented with termination packages. However, employees who spent many years at one employer cultivating their seniority and expertise may feel the loss of employment warrants more than just some severance pay.?

While a severance package goes by many names, it is effectively a legal settlement of an employee’s entitlements flowing from their employment and its termination. In Ontario, this typically includes but is not limited to:?

• an employee’s entitlements under the?Employment Standards Act, 2000 ?(the “ESA”);?
• an employee’s entitlements pursuant to their employment contract;?
• an employee’s entitlements to common law reasonable notice; and?
• Damages for other claims arising out of employment, such as employer?violations ?of the Ontario?Human Rights Code ?(the “Code”).?

Some employers offer generous severance packages in exchange for a Full and Final Release from any legal action from their former employees. Others pay the employee their minimum entitlements under the ESA and force their employees to negotiate with or sue them for more.??

Before accepting a severance package, employees should ensure they are receiving a fair offer. This article will explain when you are entitled to severance pay,?how to calculate your severance entitlements, and how an employment lawyer can help.?

When Am I Entitled to Severance Pay?

When an employer intends to terminate your employment without sufficient cause, they must provide you either advanced working notice or pay instead of such notice. Terminations can be with formal notice, or through an employer’s actions resulting in a?constructive dismissal .?

Most terminations are straightforward. An employer advises you in writing they want to end the employment relationship without cause and provide you with working notice, pay in lieu of such notice, or a combination of both.?

The less straightforward form of termination known as constructive dismissal occurs when an employer:?

1. Makes a change to a fundamental term of employment without an employee’s consent; or?
2. The employer creates or condones a work environment that makes it unreasonable for an employee to continue working.?

Common examples resulting in constructive dismissals are:?

• Cutting an employee’s compensation, hours, or duties;?
• Demoting an employee in title or by taking away some of their duties or subordinates;
• Refusing or failing to?reasonably accommodate ?an employee’s disability, family-status needs, religion, or other needs in the workplace pursuant to the point of undue hardship;??
• Subjecting an employee to and/or failing to address a toxic workplace situation;?
• Moving an employee’s office within a workplace, or to another geographic location; and?
• Laying off or suspending employees without pay and without the express contractual right to do so.?

Where an employer formally or constructively owes their employee severance, the fairness of the amount will depend on the unique circumstances of each case.?

How Much Severance Are You Entitled To??

In Ontario, all employees must receive their statutory minimum entitlements upon termination without cause. This includes but is not limited to:

• Working notice or termination pay at a rate of one (1) weeks’ regular wages per year of service, up to a maximum of eight (8) weeks;?
• Statutory severance pay at a rate of one (1) weeks’ regular wages per year of service for eligible employees, up to a maximum of twenty-six (26) weeks;?
• Continuation of benefits of one (1) week per year of service, up to a maximum of eight (8) weeks; and?
• Accrued but unpaid wages up to the employee’s termination date, which includes vacation pay.??

Employees terminated without cause may also be entitled to common law reasonable notice if there is no enforceable termination provision limiting their entitlements to their ESA minimums. This includes an employee’s minimum entitlements under the ESA, but can be as high as twenty-six (26) months of pay depending on an employee’s unique circumstances.

Courts determine how much common law reasonable notice an employee is entitled to based on a number of factors, including but not limited to the employees:

• Age;?
• Position/title;?
• Salary;
• Experience;?
• Length of employment; and?
• Likelihood of locating other similar employment positions.?

What is a fair severance package to accept from an employer will therefore depend on each employee’s individual circumstances. An employee may also be entitled to damages in addition to their notice pay which should be a part of their severance package. The best way to determine the fairness of a severance package is to consult with an employment lawyer.?

How an Employment Lawyer Can Help

Like any area of law, determining your severance and legal entitlements flowing from a termination can be complicated. If you accept an employee’s severance offer and sign the required paperwork, you may be waiving your right to sue for a lot more than what you are receiving. That is why it is important to always seek legal advice from an employment lawyer before taking any action to accept an employer’s severance offer.?

If your employer offers you a severance package, an employment lawyer can help you by:

• Advising about your entitlements and whether it is reasonable to accept the severance package offered to you;?
• Determining the most efficient and effective strategy to maximize the value of your severance package;?
• Negotiating your severance package and other entitlements with your employer;?
• Suing your employer in a legal proceeding to achieve your desired result;
• Reviewing and drafting legal documents for your case; and?
• Providing guidance about navigating the stressful and unjust termination of your employment.?

Conclusion?

An employee is entitled to severance pay when they are either formally terminated without sufficient cause or they are constructively dismissed from their employment.?

Upon termination of employment, an employee could be entitled to up to twenty-six (26) months of pay, including but not limited to their minimum entitlements under the ESA. This is determined by a variety of factors that help the court determine how much reasonable notice is warranted for the employee to secure a job comparable to the one they were terminated from.?

It is always best to consult with an employment lawyer before signing any legal document relating to your employment or accepting a severance package. An employment lawyer can help you both determine what you are actually entitled to for severance, negotiate with your employer for a fairer severance package, and sue your employer if necessary to achieve your desired result.?

Contact Us

If you are an employee with questions about your severance entitlements or want a review of your severance package, our team of experienced employment lawyers at Achkar Law can help. Contact us by phone toll-free at 1 (800) 771-7882 or email us [email protected], and we will be happy to assist.

If you are a small or medium-sized company looking for full-service support with a same-day response, visit our?CLO Program?page for our strategic solutions.?

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