Since beginning my career in employment law decades ago, I have encountered countless myths around severance pay and the concept of a severance package.
Years ago, I launched the Employment Law Show on TV and radio stations across the country to expose and dispel these severance pay myths, and to shed light on the fact that employees have more rights than they may realize when they lose their job.
Here are five important facts about severance packages that you need to know to maximize the amount of compensation you receive if you are let go from your job.
Severance pay is often more than one week’s pay per year of service
Many employees erroneously believe that a complete severance package, also known as termination pay, consists of one week’s pay for every year of service.
A caller to one of our most recent Toronto radio shows revealed that they had been offered 26 weeks’ worth of severance pay after nearly 30 years of continuous employment with the company. They were intent on accepting the allegedly generous offer, but called into the program on their spouse’s advice to get my opinion.
They were extremely glad they made that call, especially after I informed them that the true value of their severance package was closer to 24 months’ pay. The difference between what the caller was offered and what they are likely owed is tens of thousands of dollars.
The employer in this case made the mistake of basing the employee’s severance pay solely on what they are owed under the provincially regulated Employment Standards Act (ESA). The maximum amount under the ESA is 26 weeks in Ontario and eight weeks in British Columbia.
Non-unionized employees, however, also have the right to claim common-law severance pay, which is calculated by analyzing the individual’s age, length of time spent with the employer and the position they held, among other factors. Twenty-four months’ pay is generally considered the cap on common-law severance packages.
If an employer does not provide an outgoing worker with enough common-law severance pay, the employee can pursue a claim for wrongful dismissal through one of our employment lawyers.
You’re owed severance if you’re terminated without cause
The termination of an employee can be without cause or for cause.
A termination without cause means that an employer can legitimately fire an employee without a good reason, as long as the reason isn’t discriminatory. The employer must provide full severance pay to the employee.
A termination for cause is valid only when an employee engages in serious workplace misconduct. When an employee is dismissed for cause, their employer is not required to provide severance pay.
There are many scenarios where an employer’s reasons for termination for cause do not hold up to legal scrutiny. If an employee is let go from their job due to poor performance, restructuring, cost-cutting, personality clashes, an inability to show up to work on time, social media habits or inappropriate off-duty conduct, their dismissal likely does not qualify as a “for cause” situation. An employer would still need to provide a fair severance package.
An employment lawyer will examine the factors for a termination to determine which category it falls under, and whether or not the employee is owed substantial severance pay.
Some contractors may be owed severance
The misclassification of employees as contractors is an ongoing problem across Canada, exacerbated by the rise of the gig economy. Legal action, like my firm’s class-action lawsuit again Uber in Ontario, has brought the problem to the forefront.
Companies are hiring workers under the guise of independent contractors to perform part-time or full-time duties. The contractor invoices the employer for the work they perform; pays their own taxes; and has no access to vacation days, sick leave or other benefits.
An individual employed in this manner will rarely receive a severance package from a company.
But many independent contractors are actually considered employees in the eyes of the law. When a contractor is let go, they are likely entitled to a severance package and should consult my team to find out what their rights are.
You could be owed severance even for a short period of employment
Many people assume that an employee whose career at a company is cut short by a termination is owed very little severance pay. But a past trial win by employment lawyer Lia Moody, a partner in our Vancouver office, showed the opposite.
Our client, 43-year-old James Greenlees, was employed as a sales associate at a company for six months. When his employer let him go without cause, he was only handed one week’s pay as compensation.
Moody successfully argued that Greenlees had been wrongfully dismissed and was in fact owed six months’ pay, due to his level of income at the time and difficulty in immediately securing new employment.
By law, severance packages for short-service employees can often be disproportionately larger than those awarded to employees with decades of history at the same company.
You don’t have to meet your employer’s deadline to get severance
Many employers put arbitrary deadlines on severance offers.
The expiry date on the package can range from one day to one week. The employer will suggest that if the offer isn’t signed back by the deadline, they’ll pull the package and the employee will walk away empty-handed.
Your right to pursue termination pay does not expire after a matter of days. You have two years from the moment your job is terminated to file a claim and pursue a full severance package.
An employer may push a severance offer deadline in an attempt to pressure you to accept an inadequate severance package smaller than the one you are actually entitled to according to common law.
You should also know that your employer cannot force you to accept a severance offer before leaving a termination meeting. You are well within your legal rights to walk away from your dismissal with offer in hand to have it reviewed by an employment lawyer at Samfiru Tumarkin LLP.
Have you lost your job during the COVID-19 pandemic? Are you trying to determine if your severance package is fair?
Contact the firm or call 1-855-821-5900 to secure assistance from an employment lawyer in Ontario or British Columbia. Get the advice you need — and the compensation you deserve — during this crisis.
Lior Samfiru is an employment lawyer and partner at Samfiru Tumarkin LLP, one of Canada’s leading law firms specializing in employment law and disability claims.