Can an Employer Avoid Paying Statutory Notice or Severance?
What statutory entitlements are employees owed upon termination?
Whether your job is provincially or federally regulated, employees are generally owed statutory entitlements upon termination without cause. These can be found in the Employment Standards Act, 2000 and Canada Labour Code, respectively. For provincially regulated employment, “just cause” alone wouldn’t even be enough to disentitle an employee to their statutory entitlements. A higher “wilful misconduct” standard would be required. These entitlements must arrive regardless of whether there are ongoing negotiations for an employee’s larger common law severance package.
But what happens when an employer does not pay out the required statutory entitlements, namely notice of termination and severance pay? Beyond the employee having recourse to get these amounts, will employers be punished for flouting the rules?
What happens when an employer intentionally withholds statutory entitlements?
While it is generally a big no-no, each case must be examined on its own facts. If an employer intentionally withholds statutory entitlements, like as a form of punishment or as leverage to get an employee to accept a smaller common law settlement, then this is likely to draw the ire of the courts. The courts have constantly recognized the power imbalance that exists in employment relationships, and employers seeking to exploit that are often liable to pay moral, aggravated, bad faith, or punitive damages on top of whatever reasonable notice period is awarded.
There are cases where a failure to pay statutory entitlements will be looked upon less harshly by the courts. For example, if an employer in good faith believes it has just cause to terminate an employee (or that there is wilful misconduct, for a provincially regulated employee), a court will not necessarily punish an employer. This especially applies if an employee is seen to be less credible at trial. Baseless or tactical claims of cause, however, are more likely to incur additional damages as described above.
Another example is if a failure to pay out statutory entitlements is an oversight or administrative error rather than a malicious action. An employer might accidentally underpay an employee or cut off benefits too early. Particularly if an employer immediately corrects this upon being notified, a court is unlikely to find against the employer.
In summary, an employee’s statutory entitlements should be seen as the bedrock of what they’re owed. While they are often owed far greater amounts under the common law if there is no enforceable termination clause, these statutory amounts should be paid out no matter what, and without any sort of negotiations.
When should you speak to an employment lawyer?
Employees should take heed of their rights to make sure that they are not taken advantage of at termination. On the flip side, employers would do well to ensure that they are properly pay out without delay the ESA requirements when they have to let any employee go.
An experienced employment lawyer can help ensure employers stay compliant, and also fight for employees who have been denied their statutory entitlements. If you have questions about statutory entitlements upon termination, please contact Whitten & Lublin online or by phone at (416) 640-2667 today.
Author – Sohrab Naderi