When employees face wrongful dismissal or constructive dismissal, one of the most significant concerns is often the severance package. After all, the terms of a severance package can mean the difference between financial stability and a stressfully long period of unemployment. However, in many cases, some long-term employees are offered severance packages with a standard 24-month cap on reasonable notice period entitlements. This is often considered a 24-month “cap” on an employee’s severance package entitlements, but it in some cases been exceeded by in employment litigation disputes.
An important questions is: In what circumstances can employees get more if they challenge the traditional 24-month cap on reasonable notice periods? In this blog, we will dive into the nuances of severance packages, address whether the 24-month cap can be “busted,” and explain the steps employees can take to ensure they receive a fair severance package.
What is a Severance Package?
A severance package is a payment and benefits package provided to an employee who faces a termination of employment without cause. This offer often includes a combination of financial compensation (termination pay or severance pay), continuation of benefits (including pension plan), and sometimes outplacement services to help the employee transition into a new job. Severance is meant to soften the financial blow of losing a job and compensate for the potential difficulty of finding new employment.
While a severance package is not mandatory in every single instance of termination of employment (i.e., when there is no proven wrongful dismissal claim, constructive dismissal claim or legitimate temporary layoffs), it is a common practice. The terms of a severance package are typically negotiable with the help of an experienced Ontario employment lawyer, depending on the circumstances surrounding the dismissal, including the employee’s length of service, job position, the reason for the termination and whether there is a valid employment contract restricting an employee’s severance package entitlements.
The 24-Month “Cap”: Is it a Hard-and-Fast Rule?
A commonly held belief in the employment world is that severance packages are capped at 24 months. This figure often pops up in conversations about the maximum amount of compensation an employee can receive after being dismissed from their position. But does this cap hold water?
The 24-month cap is not a legal standard but rather a reference to the general upper limit that some employers use when calculating severance packages. This 24-month cap often comes from industry norms in employment law in Ontario, including typical awards when long-term employees are successful in wrongful dismissal claims, but it is not necessarily the case. In fact, in many cases, severance packages are highly negotiable, and many factors can influence the amount offered.
Factors Affecting Severance Package Calculations
While the 24-month “cap” is often used as a benchmark, severance package calculations depend on various factors, and it’s important to note that this number is not necessarily a hard and fast rule. The following factors can influence the amount of severance compensation an employee might be entitled to:
1. Length of Service
The number of years an employee has worked for a company is one of the primary factors in determining the severance amount. In many cases, a crucial factor when calculating severance pay is the number of years the employee has been employed (especially employees who have worked more than 30 years with the same employer).
2. Position and Responsibility
An employee’s role in the company, as well as their level of responsibility, can impact their severance. High-level executives or employees in specialized positions may be entitled to a larger severance package due to the difficulty in replacing them and the potential income loss caused by termination.
3. Employment Contract
The terms outlined in an employment contract are crucial when determining severance package entitlements. Some contracts may already specify a fixed amount of termination pay and severance pay, or set out a predetermined formula for calculating an employee’s severance package entitlements. If an employee has a contract that includes specific severance terms, the employer is typically obligated to honour those terms, even if they exceed the standard 24-month cap.
Bustin’ the 24-Month Cap: Is It Possible?
Now, let’s dive into the central question: Can the 24-month cap on severance packages be broken? The answer is yes, it is possible to bust the cap, but doing so requires understanding employment laws, recognizing your rights, and being prepared to negotiate. Here are a few circumstances where wrongfully dismissed employees may be able to challenge the 24-month cap:
1. Review Your Employment Contract
The first step is always to examine your employment contract review lawyer. Contracts may have clauses that directly influence the severance package. If the contract specifies a larger amount of severance or provides a more favourable formula for calculating severance pay, the employer must adhere to these terms. It is crucial to work with a Toronto employment lawyer or a wrongful dismissal lawyer to evaluate whether your contract entitles you to more than what is being offered.
2. Seek Legal Advice for Wrongful Dismissal
If you feel your termination was wrongful – meaning you were fired without just cause or in violation of your rights – consulting a wrongful dismissal lawyer is a vital step. Wrongful dismissal claims are one of the most common ways to challenge severance packages. A lawyer specializing in wrongful dismissal can help you determine whether you have grounds for a claim and can often negotiate for a more substantial severance package than the standard 24-month cap.
3. Severance Package Negotiation
While the 24-month cap might be a standard offer, many employees don’t realize that severance packages are negotiable. In fact, it’s possible to negotiate for a larger severance if you have been employed for a long time or have held a high-ranking position. A severance package negotiation should be conducted with the assistance of an experienced lawyer who understands how to advocate for the best possible terms for the employee.
5. Exceptional Circumstances
In some cases where the courts or employers have agreed to award a wrongfully dismissed employee more than the traditional 24-month cap on severance package are usually based on the employees had long service; the employee has specialized skills set; and the available job market is uncertain. Specifically, the courts have typically focused on:
- extraordinarily long years of service (including more than 30 or 40 years), where the courts emphasize an employee spending his or her his entire career with the same employer, and this long tenure limited his ability to secure new employment in his late 50s.
- older age, where the courts take into account the diminished prospects for employees at a more advanced age, particularly those who have been with one company for a significant amount of time.
- an employee has specialized in the software unique to the employer’s hardware manufacturing
- an employee’s skills were tailored to his specific workplace experience
- an employee developed patents for the employer each year
- an employee was identified as a “key performer” in one of his last performance reviews
- similar jobs would be scarce where he lived throughout his employment.
- The level of the employee’s compensation in an uncertain economy.
- The technical nature of the employee’s skills geared towards the employer’s business.
The Importance of an Experienced Toronto Employment Lawyer in Severance Package Disputes
Negotiating or disputing a severance package can be a complex process, and it’s essential to seek professional legal guidance. Employment contract review lawyers, wrongful dismissal lawyers, and Toronto employment lawyersspecialize in ensuring that employees are treated fairly and that their rights are protected when faced with termination or dismissal. These legal professionals understand the intricacies of employment law and can help employees navigate complex legal issues, fight for a fair severance package, and, if necessary, represent the employee in court.
Conclusion: Don’t Settle for Less Than What You Deserve
While the 24-month cap on severance packages may seem like a hard limit, it’s essential to recognize that there are many factors that can influence the final severance offer. Whether you’re facing termination, considering a constructive dismissal claim, or looking to negotiate a better severance package, understanding your rights and having the right legal support can make all the difference. If you’re unsure about your severance package or believe it doesn’t adequately reflect your years of service and position, consult with a wrongful dismissal lawyer or Toronto employment lawyer to ensure that you get the compensation you deserve.
Call for Employment Lawyer Consultation Today
If you were terminated from your employment for working a second job and were not offered a fair severance package, call today to discuss your options. As an employment law firm in Toronto, Bune Law has reviewed many severance packages and are skilled at negotiating improvements. You will review and get guidance on your severance package before you agree to sign any termination documents, and help ensure that your severance package is fair and reasonable.