Severance pay is compensation you receive in place of proper notice of termination
Gain a better understanding of the details of a severance package and your entitlements.
What is a severance package?
Severance pay has many different labels including termination pay, severance package, pay in lieu of notice, exit package, layoff package or a package. Ultimately, they all refer to the same concept of severance pay.
A severance package is the pay your employer provides you in place of the proper advanced warning known as notice, if you have been dismissed without cause.
Are you entitled to a severance package?
Unless you are dismissed for just cause, you are entitled to a severance package.
Your employer will typically provide you with a written termination letter setting out a proposal that they are prepared to pay, in exchange for a signed release.
Your employer may take the position that there is an enforceable severance provision in your employment contract that limits your entitlement to severance. The good news is that these provisions are often not enforceable.
If your employer alleges that there is just cause to terminate your employment without severance, the high standard of proof required to back this position up is rarely met. In many cases, you may still be entitled to severance despite your employer’s claim that there was just cause for dismissing you.
What is termination without cause?
You do not have the right to continued employment in Canada. In other words, you can be fired from your job at any time and for almost any reason, as long as your employer provides you with the proper advanced warning or payment, known as severance.
However, there are several rules regarding how to properly terminate and compensate you once you have been dismissed without cause.
- Wrongful dismissal laws protect you from inadequate notice or severance.
- Constructive dismissal laws protect you from fundamental changes to your job position or compensation.
- Human Rights laws protect you from discrimination during employment and at time of dismissal.
- Statutory laws (like the Employment Standards Act) protect you from terminations that do not respect the legislated minimums.
In Canada, employers are required to provide you with a reasonable notice of termination. In other words, your employer must provide you with advance working notice of a defined termination date. During your notice period, all your working conditions must remain constant. For example, your employer cannot demote you or decrease your pay during your reasonable notice period. Failing to provide you with these rights is a form of wrongful dismissal.
Your employer can also provide you with payment in place of a reasonable notice of termination, which is known as severance pay.
The concept of “notice of termination” as required by the Employment Standards Act, provides only a minimum amount of notice that an employer must provide you. But you may be entitled to significantly more than statutory notice.
In addition to notice of termination, you may also be entitled to reasonable notice or payment in lieu of this notice. The length of a reasonable notice period is determined by characteristics such as age, tenure, position, salary, and re-employability.
It is not uncommon for employers to offer severance packages that are not fair and reasonable. Employers usually offer lowball severance packages on the assumption that you will be happy to get anything, or that you will sign a release without knowing your rights. This is why it is vital that you speak to an experienced employment lawyer before accepting any severance package.
As well, an experienced workplace lawyer will consider how to best deal with the circumstances of your case, such as how to set aside any restrictive severance provisions in your employment contract, or the right strategy to deal with a just cause termination.
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