What is a Termination of Employment and Severance Package?

What is Included in a Termination of Employment Severance Package?

Termination of employment can be a significant life event for workers across Ontario with far-reaching consequences, both psychologically and financially. Understanding the components of a severance package is crucial for both employees and employers. This blog will explore the various aspects of termination of employment, including the types of termination, the role of employment contracts, and the elements of a severance package.

What is a Termination of Employment?

Termination of employment refers to the end of an employment relationship between an employer and an employee. It can be voluntary (initiated by the employee) or involuntary (initiated by the employer).

Different Types of Termination of Employment

There are two primary types of termination:

(a) Termination Without Cause

This occurs when an employee is dismissed due to reasons unrelated to misconduct, which often included business restructuring, permanent layoffs or restructuring due to an economic downturn or poor company performance. In such cases, employers must provide reasonable notice of termination, or alternatively, financial compensation in the form of a severance package.

(b) Termination for Just Cause

This occurs when an employee is dismissed due to serious misconduct that warrants immediate termination without notice or severance package. To establish a termination without notice or a severance package under the Ontario Employment Standards Act, 2000, an employer must generally prove that an employee who has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.” However, if an employer cannot prove this high level of employee misconduct, it can still termination without cause under the less onerous common law standard (which is still a heavy burden) of just cause for termination, which can include poor performance. In the latter case, the employer must still provide the employee with his or her minimum statutory entitlements to notice of termination (or termination pay), benefits continuation and severance pay, as follows:

**Amount of notice required if an employee has been continuously employed for at least 3 months**
Period of employment	Notice required
Less than 1 year	1 week
1 year but less than 3 years	2 weeks
3 years but less than 4 years	3 weeks
4 years but less than 5 years	4 weeks
5 years but less than 6 years	5 weeks
6 years but less than 7 years	6 weeks
7 years but less than 8 years	7 weeks
8 years or more	8 weeks

How an Employment Contract Can Influence an Employer’s Ability to Terminate Employment

Employment contracts can include provisions (or sections) that can affect an employer’s ability to terminate employment, typically referred to as a termination provision or termination clause. If an employment contract does not contain any such restriction on an employee’s entitlements upon termination, the employee may have valid legal grounds to common law notice of termination (or severance package). In this case, in a termination of employment without cause, the amount of severance pay may depend on factors such as the employee’s length of service, salary, age, and the availability of comparable employment having regard to the employee’s skillset, type of job and economic conditions.

What is Included in an Employee’s Severance Package Upon Termination

Usually, a termination of employment severance package may include the following:

Severance pay offer: A lump sum payment or ongoing salary continuation (which should include salary, benefits, pension plan, bonus pay, and so on)
Full and Final Release: the employer’s primary request in exchange for providing the employee with financial compensation in the severance package (which forfeits the employee’s ability to sue the employer in the future, such as wrongful dismissal claim, constructive dismissal claim or discrimination of human rights).
Outplacement services: Assistance with job search and career counselling with a third-party provider
Confidentiality: an agreement whereby the employee agrees to keep all of the employer’s private business information and the term of settlement secret (not disclose to other people).

Best Practices for Employers

Consult with an employment lawyer for employers: Seek advice from an employment lawyer to ensure compliance with applicable laws and regulations.
Document everything: Maintain detailed records of all relevant information, including performance reviews, warnings, employment contracts, paystubs, and disciplinary actions.
Provide clear reasons: Clearly communicate the reasons for the termination to the employee in a termination for just cause, including a workplace harassment investigation report.
Offer a fair severance package: Ensure the severance package is reasonable and complies with legal requirements, as well as any employment contract termination clause the employee previously agreed to sign.
Avoid discriminatory or retaliatory actions: Ensure that the termination is not based on protected grounds and that the employee is not being retaliated against or subject to discrimination, and ensure you are honest, respectful and sensitive during the employment termination process.

Best Practices for Employees

Review your employment contract: Understand your rights and obligations under the contract.
Document everything: Keep records of performance reviews, warnings, and any other relevant information.
Consult with an experienced Ontario employment lawyer: Seek advice from an employment lawyer in Ontario to understand your rights and options upon termination, including whether you have a wrongful dismissal claim, ability to negotiate your severance package and if you have a valid termination clause in an employment contract restricting your employee legal rights.
Review Your Severance Package or Negotiate your severance package: If you are terminated without just cause, you may be able to negotiate a better severance package, which starts with having a severance package review with a Toronto employment lawyer.
Consider alternative employment options: Start your job search in a timely manner to minimize financial hardship and avoid an employer’s failure to mitigate arguments when negotiating a severance package.

By following these and other best practices with the help of an employment lawyer, both employers and employees can navigate the termination process more effectively and minimize the potential for disputes.

Book a Consultation with an Employment Lawyer in Toronto

At Bune Law, we understand and are familiar the complexities of workplace law and are committed to helping both employers and employees navigate these challenges. Whether you are an employer or employee dealing with employment contracts, workplace disputes like a wrongful dismissal or constructive dismissal, or simply need guidance on your rights and obligations for a severance package review and negotiation, our experienced employment lawyer is here to assist you.

Book a confidential consultation with our Toronto employment law firm to protect your legal rights to understand your options and protect your rights.

Why Choose Bune Law When You Need an Ontario Employment Lawyer?

Experience in all areas of workplace law, including wrongful dismissal claims, constructive dismissal claims, severance package reviews, severance package negotiations, discrimination and human rights disputes, and employment contract reviews.
Proven track record of successfully resolving workplace disputes through negotiation, mediation, and employment litigation.
Compassionate and personalized approach to each case, ensuring tailored solutions that meet your specific needs.

If you need a Toronto employment lawyer who is committed to delivering strong results and proactive solutions, please contact Bune Law online or by phone today at 647-822-5492.