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What to know about buyout packages before taking voluntary departure

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What would you do if offered a voluntary severance package: celebrate, cry or crunch the numbers?

Leaving a job can be an emotional experience, but it pays to remain calm and check out the options in a systematic way before making a decision.

"What's right is going to be different for each person, depending on where they are in their career, and what they expect will happen next," said KBA Partners LLP partner Kimberly Boara Alexander, who practices career law in Toronto.

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"Really, it's about making the right decision for that person at that particular time in their lives," Alexander said.

"Depending on how it's structured, that buyout package could be a real windfall."

Ideally, you would assemble a team of advisers with different skills, including an accountant to help with tax questions, a financial adviser, a recruitment or career professional familiar with your location and industry, as well as a lawyer familiar with employment law.

However, the costs of meeting with such a team can add up, so there are also some basics that can help chart a path to the best outcome on your own.

Those faced with such a choice should review the following:

  • Details of the severance offer, preferably in writing,
  • Documents showing pension and other benefits,
  • Individual employment contract or union contract, if there is one,
  • The letter of employment received at time of hiring and similar letters received with promotions or other changes.

Using this information, compare what you'd get under a voluntary package versus an involuntary termination.

Depending on what the employment contract looks like, a person may ultimately receive more through involuntary termination, Alexander said.

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"If you leave at the employer's behest because they've terminated you without cause, you're entitled to — at very minimum — statutory notice and severance."

The terms of statutory notice are spelled out by federal or provincial law, depending on the circumstance.

Companies in federally regulated industries such as telecommunications and banking, for instance, would be covered by the Canada Labour Code.

Among other things, the code usually requires employers to notify the federal labour minister in writing at least 16 weeks in advance of group terminations involving 50 people or more.

Federally regulated employers must also give individual employees at least two weeks of written notice ahead of the termination, or regular wages instead of the notice.

Other employers may be covered by provincial laws, which vary from place to place, and differ from federal rules.

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In general, however, Alexander said that the statutory provisions should be seen as minimums — not maximums — and lawyers are adept at looking for ways to get a better deal.

That may include terms of an employment contract or the provisions of common law.

Alexander said there's a mistaken belief among some that common law provides for one month of severance per year of service, but she said there's actually no easy guideline.

"Two people who do exactly the same job, but one is 39 and the other is 65, would be entitled to different things."

Furthermore, Alexander said, many people don't realize that the company, unionized or not, likely outlined its notification and severance policy at the beginning of the employment.

The vast majority are focused on the compensation provisions and the role they'll play "and they gloss over the termination provisions because they're not thinking about the 'divorce' as they're entering into the 'marriage.' "

"The result is, there's a large component of my practice which focuses on finding reasons why clauses like that should not be applied against an employee."

Employers sometimes will provide employees with a budget to spend on legal advice, she said, because they want the employee to sign a "rock solid" release from any further obligations.

Similarly, several employees who get the voluntary departure offers at the same time may want to consult the same lawyer or law firm so that the research process can be streamlined.

"Ultimately, what you need to know is what you're giving up, what you're getting and what that means in terms of your freedom to pursue whatever's the next chapter for you if you decide to take the package."

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