Severance for Specialized and Executive Employees: What Are You Entitled To?

Employment agreements grant employers the freedom to end the employment relationship with an employee as long as they provide reasonable notice, or pay in lieu of notice, as prescribed by the Employment Standards Act (ESA). The common law provides employees with a much greater benefit than the ESA, especially for those who have a longer tenure or hold a specialized position.?

Under the ESA, the notice period required for termination depends on the length of employment with the employer. For example, an employee who has been employed for less than 1 year is entitled to 1 week of notice, and an employee who has been employed for 8 years or more is entitled to 8 weeks. In addition to notice of termination, employees can also be entitled to severance.?

Severance is provided where an employee has been employed for 5 years or more and their employer has one of the two qualifications:

(1) 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 6-month period as a result; or

(2)? the employer has a payroll of $2.5 million or more.?

Referring to the ESA minimums is only the first step in determining the amount of notice that an employee may be owed. Employees can be entitled to greater compensation under the common law regardless of the fact that they worked for an employer for a short period of time - especially when the employee has worked in a specialized or an executive level position.

In 2020, in Barry Gula v. Freed Developments Ltd., the Vice President of Development and Engineering of Freed Development Ltd. was terminated after working at the company for just over 5 and a half years. The Ontario Superior Court of Justice awarded him 11 months of notice, mainly due to the fact he held an executive position, and his employment contract, as it related to his entitlements at termination, was ambiguous.?

In 2021, in Chen v. MagIndustries Corp.,the President and CEO of MagIndustries was terminated on a without cause basis. Mr. Chen was 46 at the time of termination and had been working at MagIndustries for just over 4 years. At termination, Mr. Chen was offered severance that exceeded his statutory entitlements. However, since Mr. Chen declined the original severance offer, MagIndustries made no payment to Mr. Chen, not even the minimum payments required under the ESA. Consequently, the Ontario Superior Court of Justice decided that Mr. Chen was entitled to 20 months’ severance, and was awarded $20,000 in punitive damages for the employer’s delay in paying his ESA minimums.?

These cases serve as notable examples, highlighting the importance for employees in specialized or executive positions to recognize that their notice period can carry significant weight, irrespective of the duration of their service.?

To ensure that no significant amount of compensation is overlooked, contact Workly Law for a comprehensive review of any severance package.

Rebecca Stein

Law Student at Workly Law