“Severance” at common law is tied to the amount of termination notice an employee should be given
EMPLOYMENT STANDARDS ACT
How To Maximize Your Severance Pay?
The severance package that an employer should pay to a terminated employee depends on a number of factors. Relevant factors include, among others: length of service, age, reason for dismissal, the position the employee held within the company, compensation, whether the employee was actively recruited and the general economy. Employers will often present a terminated employee with a severance package and request that they sign the offer quickly. However, employees should carefully review a severance package offer, ideally with legal counsel, prior to signing. An experienced lawyer will be able to inform you of your entitlements under the law, and provide advice on how to maximize your severance pay. Most employees are offered much less severance than they are owed.
Severance exists in provincial legislation in Ontario, in the form of the Employment Standards Act, but common law remedies tend to be much greater for most employees in Ontario. To obtain a common law remedy it is normally best to seek legal counsel. There is no easy calculation to determine the amount of severance that an employee will receive at common law. The factors mentioned above will be weighed and examined in the particular circumstances of each case. That being said, the normal maximum range for common law reasonable notice is between 18 and 24 months. Further, courts in Ontario have found damages for breach of the implied obligation of good faith and fair dealing over and above the 24-month base notice period.
It should be noted that the term “severance package” is typically used to describe the total payout that a terminated employee will receive. However, “severance pay” is actually a defined term in the Employment Standards Act. It compensates employees for losses (like loss of seniority) that happen when a long-term employee is terminated. In order to qualify for severance pay an employer must have worked for the employer for at least five years and the employer must either have a payroll of $2.5 million or have severed 50+ employees in a six-month period as a result of a business closure.
Relevant cases dealing with severance packages and pay include Wallace v. United Grain Growers Ltd. (1997), 152 D.L.R. (4th) 1, (1997) 3 S.C.R. 701; Suttie v. Metro Transit Operating Co., (1983), 1 C.C.E.L. 123; and Kreager v. Davidson (1992), 44 C.C.E.L. 261. Please note that the above information does not constitute legal advice. It is general information about the law. If you require legal advice and assistance in an employment matter, please contact the experts at Ball Professional Corporation.
Canadian Employment Law
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