Recently announced large-scale layoffs at Twitter and Meta should serve as a wake-up call for workers across the country. With a recession looming, job losses across a variety of industries may be on the horizon. Now is the time to get up to speed on severance laws.
Employment standards legislation
Any form of permanent layoff or restructuring resulting in the loss of your job is technically a termination without cause. This requires employers to comply with employment standards statutes, which provides workers with a minimum period of notice of termination and in some cases additional severance pay. The amounts are calculated based on your tenure and range up to eight weeks’ notice or pay for most workers, although in Ontario this can be as much as 34 weeks’ pay.
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Increasingly, workers are signing employment agreements that purportedly operate to limit their entitlement to severance. Courts will adhere to these contracts, but only if the agreement is properly drafted, fairly implemented and worthy of being enforced. Only a handful of contracts will meet this test. If your former employer is relying on anything you signed that allegedly limits your severance, ensure you have an expert take a close look. Companies routinely rely on clauses that are illegal or should not be enforced.
Common law amounts
Workers in Canada without a contract that defines severance are entitled to a severance package that goes beyond the basic statutory amounts. There are various factors that are taken into consideration, including your tenure, your age, the position you held and relevant court precedents. Older age and longer tenure translate to more severance. Similarly, senior, high-level or unique and skilled workers have greater severance entitlements than workers where comparable jobs are more readily available. Severance packages generally can range as high as 24 months for the most senior or long-tenured employees. But even short-term employees can be entitled to a severance package that greatly exceeds the statutory amounts.
Could I be entitled to severance even though I resigned?
Timing of termination
How does being terminated during a labour shortage, or conversely during a recession, affect your entitlement to severance? The availability of comparable employment is an important factor. If there is a general downsizing in the industry or mass layoffs, finding other work is made more difficult and this should increase your entitlement to severance. Alternatively, if you work in a field or profession where other employment is plentiful and easy to find, then this would naturally reduce your need for a lengthy payout.
If a number of employees were let go as part of the same mass restructuring, it does not mean that they are all entitled to the same severance package. The amount and terms of any severance should always be based on your individual circumstances, such as your age and tenure, and often has nothing to do with what others may or may not have received or agreed to.
A severance package is supposed to bridge you to when you should be able to find another job. But what if you find other work before your severance period expires? Legally, an employer is normally allowed to deduct some of the income earned through other consulting or employment from the amounts you may be owed for severance. This is why there are clauses in most severance packages that require you to disclose when you find other work, and in some cases there is a reduction of the remaining amount of severance. However, these clauses can be negotiated.
Most severance packages should be calculated based on all of the compensation and benefits you earned while employed. This includes commissions, regular bonuses, profit-sharing payments, perquisite allowances, benefits, incentive programs or any other tangible and consistent payment beyond your base salary. This is one of the main areas where many severance packages are deficient. Employers will sometimes discontinue or discount some element of your total compensation in an unreasonable way. For example, if you have regularly received a bonus at the end of a calendar year, you may be entitled to payment in lieu of that bonus despite your dismissal.
The manner in which a company behaves toward dismissed employees should not be overlooked. Several recent court decisions have heavily criticized employers for playing “hardball” with former employees. For example, employers should not withhold or threaten to withhold any unpaid wages or statutorily required terms. Also, employers who unjustly or strategically come up with performance or misconduct allegations can be ordered to pay additional compensation on top of any severance.
What should workers do if they were recently dismissed? Here is a simple pocket guide:
- You are entitled to a reasonable period of time to review the terms of any severance offer with a lawyer and make an informed decision. Generally, this is five to 10 days.
- Trying to negotiate for more severance or better terms will hardly ever jeopardize the initial offer.
- Do not assume your employer has given you everything you are entitled to or that it is being fair.
- The manner in which you approach any negotiation or discussion with your ex-employer will set the stage for your results. If you indicate or give the impression you are not prepared to see through a dispute, you should not expect to receive the company’s best offer. Conversely, taking a kitchen-sink approach to negotiations can quickly backfire as asking for too much money or raising unsupportable allegations about how you were treated may cause your former employer to resist offering anything else at all. This is why getting good legal advice from the outset matters.
Daniel A. Lublin is a founding partner of Whitten & Lublin, Employment & Labour Lawyers. Do you have a question about workplace law? You can e-mail him here.