THE QUESTION
I was recently laid off and received a severance package from my employer. What happens if I refuse to sign or accept the package? Am I allowed to negotiate the package? Is there a “grace period” to respond to whether I want to accept the package or negotiate?
THE FIRST ANSWER
Sania Chaudhry, lawyer, Forte Workplace Law, Calgary
If you refuse to sign a severance package, your employer must pay you any amounts owing to you under employment standards legislation (including legislated termination pay), but likely won’t pay you anything more. You could be owed more. Unless you have a (valid and legally enforceable) written contract that says your employer can terminate your employment by providing only what is required by the applicable employment standards legislation and no more, you are entitled to common law severance. An employment lawyer can tell you if your contract’s termination clause is valid.
Common law severance is normally more generous than employment standards severance and is calculated based on your age, length of service, nature of the job and availability of alternative employment.
You can negotiate your severance package (there is often room to improve the first offer) but when you negotiate, you also risk losing the offer on the table or it changing in ways you do not want. For instance, at common law, you have a duty to mitigate, which means you have a duty to look for and take new employment. If your first severance offer did not discuss your duty to mitigate, your second offer might. An employment lawyer can help you assess your situation and the potential benefits and risks of negotiating to come up with a strategy that works for you.
Your employer should give you time to consider a severance package and, most of the time, the offer will list a specific date to accept by. Many employers will give you additional time to consider the offer if you ask for it, especially if you say you need time to review the offer with a lawyer.
If you are part of a union, other rules may apply and you should consult with your union representative.
THE SECOND ANSWER
Marion Blight, Associate, Randy Ai Law Office, Toronto
Under employment legislation in Canada, employers must provide their terminated employees with a minimum amount of “reasonable notice of termination” based on their length of service. This is usually paid out in cash, rather than provided as actual notice. The amount isn’t negotiable and will be paid whether or not the employee accepts a larger severance package. You do not have to sign anything in order to receive your minimum entitlements under your province’s employment standards act.
On top of the minimums, however, most employees are entitled to “common law” reasonable notice, which is either a longer period or a higher amount. Because employees can and do sue for their full common law reasonable notice entitlements, most employers will offer a terminated employee a portion of their potential entitlement up front as a severance package, but only in exchange for a promise not to sue the employer. This is called a release.
You can absolutely refuse a severance package if you do not want to sign the release. But it tends to be more favourable to negotiate a better package in exchange for your signature. This is a large part of the business of most employment law firms – a lawyer can help you understand what you are entitled to when you are terminated, and whether it makes sense to pursue a larger package. Employers are obliged to give employees time to get this legal advice, so feel free to ask your employer for more time to make your decision.
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