5 Things You Should Know About Your Severance Package

Recently Fired? 5 Things You Should Know About Your Severance Package

Have you or someone you know found yourself unemployed? Downsized, laid off, fired – whatever the official reason, you are no longer at a job and may be entitled to notice of termination,(also known as a “severance package”). You might be wondering, what is a severance package? Well, a severance package is the pay and benefits an employee may be entitled to receive when they are terminated from employment.

At Emerge LLP, we have launched the HRzone where our employment lawyers help you determine if the severance package you have been offered by your employer is fair. Often, employees receive far less than the amount that they are actually owed upon termination. That’s where our employment lawyers come in and assist.

We have also drafted this legal insights article to answer some of your questions and provide insights into obtaining the severance package you deserve. 

Should I sign the employer’s offer right away?

Before you sign any form given to you, regardless of what the employer calls it (e.g., a termination agreement or a release agreement), understand that it is a contract and is likely stating that you do not hold the company liable for terminating you. It is a good idea to run this paperwork by a lawyer.

That being said, under common law, you have 2 years from the moment of termination to pursue full severance pay from your former employer.

What if my employer has put a deadline on accepting the offer?

Severance offer deadlines are often a pressure tactic to make you accept a poor offer. If your employer has imposed a deadline on a severance package offer, speak with a lawyer as your best course of action may be to ignore it.

What if I was terminated for cause?

Employers may use termination for cause as an attempt to avoid paying severance. In many cases, those just cause dismissals are not legitimate, and full severance pay is still owed.

a severance package is the pay and benefits an employee may be entitled to receive when they are terminated from employment

How is severance calculated?

It depends on the employment contract you signed when accepting the job. The contract may contain a termination clause that impacts the amount of severance you are owed upon termination.

Contrary to popular belief, there is no rule of thumb of one month per year of service (or any other amount). Depending on how the contract and termination clause is drafted, you might be entitled notice under the Employment Standards Act, 2000 or common law notice.

In addition, the general rule is that notice of termination in Ontario is intended to include all forms of compensation, and not just base salary, as employers routinely offer.

This should include bonuses, overtime pay, commissions, car allowance, and any other form of compensation the employee would have received if they had continued to work during the period of notice. In other words, employers cannot offer a base salary only unless they have a contractual right to do so. Otherwise, all forms of compensation are to continue.

What does common law notice provide? 

The common law provides that all employees are entitled to “reasonable notice” of termination. Our courts have deliberately refused to define reasonable notice or provide an easy way to calculate an individual’s entitlement. Rather, our courts have maintained that every situation is to be assessed based upon its own particular characteristics. Severance is calculated based upon a number of factors, including:

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

The weight given to each factor will vary depending on the circumstances of each case.

Because courts have significant discretion in determining what is “reasonable”, it is difficult to predict with any certainty what a court will award in any particular case. As you can imagine, where there is no contractual term which clearly sets out what the individual is entitled to, there will often be negotiations.

The content of this article is written for general information purposes only and does not constitute specific legal advice. This article should not be used as a substitute for competent legal advice from a licensed lawyer. Please contact us at 416-238-5527 if you’d like to speak to one of our lawyers.