If you are an executive or senior-level employee that has been let go, you are likely entitled to a substantial severance package.
Unless you’ve committed a serious act of misconduct, such as insubordination or theft, your layoff is considered a termination without cause. In this situation, you can be let go for any number of non-discriminatory reasons, including workplace performance issues, so long as the severance package you receive meets the appropriate legal benchmarks.
Here’s what to know about severance pay if you’re an executive or senior-level employee.
How to calculate severance pay
For people in a C-suite role, severance packages often have many components.
A severance package should always account for all forms of compensation and benefits received at the time of termination. For executives, this should include salary, bonuses and incentive payments, as well as allowances, long-term incentive plans, stock options, profit sharing and restricted share units.
The package should also take into consideration RRSP and pension contributions, extended health and dental benefits, as well as short-term disability and long-term disability insurance benefits.
Many of the individuals I speak to are surprised to find out that a comprehensive severance package will also include professional development expenses and membership dues, retraining costs and outplacement counselling, and accounting and legal fees.
The role of an employment contract
An employer can severely limit the size of a severance package by having employees sign an employment contract that contains a termination clause.
The purpose of a termination clause is to reduce the amount of compensation an employee receives when they lose their job. For senior managers, this could result in the loss of tens of thousands of dollars — if the termination clause is properly crafted. In many cases, however, those passages are not adequately constructed, meaning the outgoing employee is still able to access full severance pay.
READ MORE: What you need to know before you sign a contract — even if your employer asks you to
Maximizing severance for a client
As an experienced employment lawyer at Samfiru Tumarkin LLP, I have helped many executives secure full compensation when they are laid off.
I recently worked with a senior-level employee who had been let go after 26 years with a company. When it came to his severance package, the employer relied on the termination clause in the employee’s contract to offer the minimum amount required by government legislation — mere weeks of pay. The employee was told that if they did not accept the meagre lump-sum payment within three days, the offer would expire.
The company was hoping the employee would accept the offer, even though it was much less than what the employee was owed under common law, which can be as much as 24 months’ pay.
READ MORE: The top 5 termination myths — and what you need to know about being fired from a job
After reviewing the employee’s contract, we discovered that the termination clause was unenforceable, and the individual had in fact been wrongfully dismissed. We were able to pursue a severance package in accordance with their full rights, which was tens of thousands of dollars more than what had been offered at termination.
As this employee was well into their 60s, we were able to negotiate a disproportionately larger severance package due to the difficulty they would have experienced finding comparable employment at this stage in their career.
In addition to salary and extended benefits coverage, the final severance package included the employee’s bonus, RRSP contributions, stock options that were scheduled to vest several months following the termination date, a car allowance, career counselling and legal fees.
READ MORE: The 5 facts you need to know about severance pay, according to an employment lawyer
As an executive or senior-level employee, you may find yourself in a similar situation. Before you accept a severance package offered at termination, however, I recommend you have your contract and severance package reviewed by an experienced lawyer, like the ones at Samfiru Tumarkin LLP, to ensure nothing is left on the table.
Are you a senior-level employee who has been let go from their job? 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, British Columbia or Alberta. Get the advice you need — and the compensation you deserve.
Brock Ouellet is an employment lawyer and associate at Samfiru Tumarkin LLP, Canada’s most positively reviewed law firm specializing in employment law and long-term disability claims. The firm provides free advice on Canada’s only Employment Law Show on TV and radio.