How Do You Know if You Have a Fair Severance Package?
Losing a job can be incredibly stressful and difficult. When an employee’s job is terminated, there are many decisions that have to be made, such as whether you should sign an employer’s severance package, and if you were even given a fair severance package.
If you are an employee signs a severance package involving a legal release, you are giving up your right s to pursue legal action against your employer in exchange for the compensation (severance pay) the employer is offering you for terminating your employment. For most people, this can feel overwhelming at the moment, but it is critical to review all of the elements of your severance package carefully with an employment lawyer.
When you get a severance package following your termination of employment, a severance or separation agreement, it is extremely important that you consult with an experienced employment lawyer before you sign anything. For instance, it will be crucial to determine if your employer has given you a fair severance package when terminating your employment. In addition, an employment lawyer can help you determine whether you have potential employment legal claims against your employer you may not realize, such as wrongful dismissal, discrimination, constructive dismissal or other claims entitling you to financial compensation you deserve.
An employment lawyer at Bune Law, Toronto employment law firm, has years of experience reviewing, evaluating and strategically negotiating a fair severance packages for employees. As part of an initial consultation, our employment lawyer will help you determine how your specific situation would be impacted by signing a severance package, or it would be better for you to negotiate improvements to your severance package or consider proceeding with legal claims, such as wrongful dismissal. At Bune Law, Toronto employment law firm, you will receive personalized service, strong advocacy, with unwavering dedication to your rights and interests as an employee.
What is a Typical Severance Package?
A typical severance package in Ontario consists of a termination letter (which notifies the employee that their employment has ended and their last day of work), an offer to pay an employee financial compensation (termination pay and severance pay), and a legal release (a document where the employee agrees to give up any legal rights he or she may have to sue the employer, such as for wrongful dismissal).
What Should I Do if I am Offered a Severance Package?
Although a termination meeting can be a very emotional and intimidating time, it is best for employees to remain calm, stay professional and carefully listen to what a manager or human resources person explains regarding the termination of their employment. Among other things, it may also be helpful for employees to:
1. Take notes about what you were told at the termination meeting
2. Ask the employer why it has decided to terminate your employment (without reacting with anger or debate). This information will help an employment lawyer pursue your legal rights, and in some cases, may determine if you have other grounds for financial compensation.
3. If your employer has said that your employment was terminated due to “restructuring” or “downsizing” (or reasons of that sort), pay attention to whether other employees were also terminated. For example, were all of the employees who were terminated (or placed on temporary layoff) all older employees? After the termination meeting, consider calmly reflecting on the employer’s explanation for why you were placed on temporary layoff or terminated. Based on the circumstances, does it really make sense?
4. Ask the employer about your next steps now that your employment is terminated. For example, how long do you have to review the severance package with an employment lawyer? When will you receive your final paycheck and vacation pay? When can you collect your personal items? When will you receive information about Termination Statement for your pension plan?
5. Remember: Do not sign any type of termination letter or legal release you are given at the termination meeting. It is better to take your severance package documents home with you to review with an employment lawyer before you sign anything.
6. Talk to an Employment Lawyer
Employment Lawyer Consultation
Why should you have a consultation with an employment lawyer regarding your workplace issue?
A legal consultation at Bune Law, employment law firm in Toronto, will help you obtain the following benefits:
- Explain to an employment lawyer what you have experienced at your workplace (e.g., wrongful termination)
- Provide with legal advice tailored to your particular situation and objectives
- Design a clear strategy to assist you and appropriately respond to your workplace issues
- Explain the costs, risks, timeline and options for proceeding with your employment matter – in a way that respects your own needs.
Most importantly, our employment lawyer is here to support you and advocate on your behalf when you need guidance the most.
Is Severance Pay Mandatory in Ontario? And How Much Severance Pay Am I Entitled to as an Ontario Employee?
Ontario employment law generally requires employers to provide a financial severance package (severance pay) to an employee upon termination of their employment. Despite their obligations, some companies choose to provide severance packages that are far below what an employee is entitled to receive upon termination of employment – and sometimes, employers refuse to provide a severance package at all. However, our employment lawyer has helped many employees (and employers) negotiate a settlement that is fair and reasonable to both to an employee. This often benefits employers, since a properly negotiated severance package is often necessary to minimize their exposure to potential claims and lawsuits.
However, there are a few exceptions where employers may not be required to provide an employee with a severance package, such as:
- an employee has voluntarily resigned from their employment (quit)
- the employer has “just cause” for termination of employment
- the employer can prove the employee of “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”
- the employment contract is frustrated
Who is Entitled to Severance Pay in Ontario?
Generally, any employee whose job is terminated by an employer without cause is entitled to receive a financial severance package (or severance pay). However, this is a complicated question and will depend on many factors, such as:
- is there an enforceable employment contract that the employee signed limiting how much severance pay an employer must provide when terminating their employment (this is usually found in a termination clause)?
- did the employer have just cause for termination, or was the termination without cause?
- is the employee entitled to common law reasonable notice (or pay in lieu of reasonable notice) – see discussion below.
When Not to Sign a Severance Package
There is no legal requirement under Ontario employment law for employees to accept their employer’s severance package offer upon termination of employment. As such, employees should always refer to an employment lawyer with respect to respect to their severance package entitlements when asked to accept a severance offer as part of a termination package.
What is the Difference Between Termination Pay and Severance Pay in Ontario?
While often used interchangeably, there are important legal distinctions between “termination pay” and “severance pay” under Ontario employment law. Specifically, under the Employment Standards Act, 2000, “termination pay” refers to a lump sum (cash) payment paid by an employer to an employee (which is equal to one week of wages). Similarly, “severance pay” refers to a payment from an employer to an employee whose job is “severed” (terminated), and is mean to compensation the employee for immediate losses suffered from losing their job. This usually applies only if the employee has worked for the same employer for at least 5 years and the employer’s annual payroll is $2.5 million or more.
However, under common law, “severance pay” is used colloquially to refer to financial compensation an employer is required to provide an employee if they do not provide them with “reasonable notice of termination” (also referred to as “pay in lieu of reasonable notice”). To calculate an employee’s severance pay under common law, the courts take into account the following main factors (along with many others developed over time):
- the character of the employment (e.g., job title, responsibilities, compensation)
- years of service working for the company
- the age at the time of termination
- the availability of similar employment (taking into account the employee’s experience, training and qualifications).
While the above factors are the main factors a court will consider when determining an employee’s fair severance package in a wrongful dismissal claim, it is important to be keep in mind that each employee’s situation is unique, and will not be the same as those of another employee’s situation. Therefore, it is always important to speak with an experienced employment lawyer to assess your case and estimate what you may be entitled to upon termination.
Contact Bune Law, Toronto Employment Lawyer
If you are an Ontario employee who recently lost your job, it is important to an experienced employment lawyer at Bune Law to discuss your case. By obtaining a consultation with an experienced employment lawyer, you will be able to understand what rights you have following the termination of your employment or wrongful dismissal, especially your ability to obtain severance pay (a fair severance package) from your employer.
If you are an Employee or Employer who is looking for expert legal advice and representation regarding an employment matter (or workplace matter), our experienced Toronto employment lawyer is here to help you obtain the best possible outcome, including maximizing your severance package. Call 647-822-5492 for an employment lawyer consultation.
If you are an employer, you should speak with an employment lawyer to discuss your options before making the decision to terminate employment and obtain the fair severance package for your employee to avoid a discrimination claim.
While we have successfully fought in court for our clients’ interests, our main goal is to reach a timely and cost-effective resolution through amicable negotiations. Our depth and range of experiencing as an employment law firm allows us to remain firm and assertive in negotiations with employers, while ensuring we approach a solution that respects your legal rights and is tailored to meet your specific needs and objectives.
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