Severance During an Economic Recession

An economic recession leading to downsizing and layoffs is not an excuse to terminate employees in Canada without providing them with a proper severance package. In fact, recessionary circumstances can entitle employees to more severance.

Were you terminated during an economic recession? Whitten & Lublin Employment & Labour Lawyers can assist you to understand and protect your rights and to pursue the compensation you are entitled to. Consult with a severance lawyer with exceptional experience at Whitten & Lublin Employment & Labour Lawyers. To book a consultation please contact us online or by phone at (416) 640-2667 today!  

More Information on Terminations During a Recession – Justified or an Unjust Dismissal?

Economic recessions are an inevitable part of life. After every boom comes a bust, following which the cycle continuously repeats. As businesses try to keep their heads above water during these hard times, payroll is often the first target for cost-cutting measures. Do recessionary circumstances, however, affect the amount of severance an employee is owed if terminated?

Scenario 1: Terminated for Cause Due to a Recession

If an employee is terminated for cause because of the recession, then that is a wrongful dismissal. The bar to terminate for cause is very high—it is considered the “capital punishment” of employment. An employer going through hard times economically cannot use this reason to terminate with cause . The employee is considered to have been terminated without cause and will thus be entitled to a severance package, which depends on factors like age, position, length of service, and salary, and even recessionary circumstances can be taken into account.

Scenario 2: Terminated Without Cause, but for a Discriminatory Reason

If an employee is terminated without cause, it is important to see if there are any discriminatory reasons behind it. Human rights codes across the country prohibit termination of employment on the basis of protected grounds, such as: citizenship, race, place of origin, ethnic origin, colour, ancestry, disability, age, creed, sex/pregnancy, family status, marital status, sexual orientation, gender identity, gender expression, and criminal record. Even if it is just one factor in a larger decision to terminate during a recession, it is still enough to taint the action and entitle an employee to moral damages. The recession cannot be a smokescreen for otherwise illegal terminations. For example, “cost-cutting” ushered in by an economic recession is not an excuse to get rid of all the older employees or disproportionately fire female employees.

Scenario 3: Terminated Without Cause, Without a Discriminatory Reason

Just because the termination was without cause and there are no discriminatory reasons behind it, does not mean that is the end of the story. The usual advice for receiving a severance package still applies. An employee will almost always be asked to sign a release in order to receive their severance package beyond their statutory entitlements. It is vital that you do not sign it before receiving independent legal advice.

What you are entitled to will depend on various factors such as age, position, tenure, and salary. In fact, being terminated during a recession actually entitles you to more notice or pay in lieu. Due to a worse job market during recessions; this results from the lower supply of comparable jobs and the higher competition from terminated employees. Added together, it means it will take you longer, on average, to re-employ. The higher severance package gives you a longer “financial bridge” to get to your next job.

The bottom line is that a recession is no excuse to terminate an employee for cause and not give them their rightful entitlements. Even if terminated without cause and offered a package, the recession cannot be a smokescreen for discriminatory reasons for termination. And as with terminations during any period, an employee should make sure the employer is not shortchanging them with a subpar severance package. Employees should seek advice when faced with any of the above scenarios. This is where the lawyers at Whitten & Lublin can help.  We are one of Canada’s premiere workplace law firms. Contact us to find out more.

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