Pandemic's Impact on Severance Packages

The Pandemic’s Impact on Severance Packages

COVID-19 pandemic has resulted in mass layoffs and terminations all across the world. With every termination comes the topic of severance packages and especially that of the pandemic’s impact on severance packages. Nearly all employees who are dismissed during the COVID-19 pandemic should receive a greater severance package because their employment ended during an economic downturn.

According to the courts, severance packages are meant to financially assist a terminated employee while they look for alternate work. Contrary to popular belief, a severance package is not meant to reward the employees for their service or punish an employer for firing an employee. The severance package is primarily meant to bridge a dismissed employee to a similar job.

An employee’s severance package is typically based on 4 key factors:

(1) the character of employment – the more specialized an employee’s role, the tougher it will be for them to find similar employment;

(2) the length of service – the longer an employee’s service, the more severance they will get;

(3) the age of the employee – the older an employee, the tougher it will be for them to re-employ; and

(4) the availability of similar employment for the employee – a lack of similar job opportunities, due to the economy, market trends, outsourcing, etc., will make it harder for an employee to find a comparable job.

Do you have questions about pandemic’s impact on severance packages? Call us today at (416) 640-2667.

In a poor economy, the 4th factor – the availability of similar employment – will be greatly reduced and contribute to a longer period of unemployment for a dismissed employee. That employee will usually face tougher competition for jobs and employers in certain industries may not be hiring at all.

The main exceptions to this rule will occur when:

  1. An employee has signed an employment contract that limits their severance entitlements, regardless of the current pandemic; and
  2. An employee works in an industry that has flourished due to the pandemic (these situations are rare but do exist).

Interestingly, a poor economy leads to a greater severance for a dismissed employee but does not permit an employer to pay less severance. Put another way, an employer cannot rely on a poor economy and reduced profits to justify paying out less severance.

To better understand your workplace rights or to explore the viability of a claim during these unprecedented times, we encourage employees and employers to seek legal advice. We at Whitten & Lublin are happy to provide insight and advice into your specific circumstances. If you are looking for employment lawyers and would like more information about what Whitten & Lublin can do for you, please contact us online or by phone at (416) 640-2667 today.

Author: Simone Ostrowski