How to Tell if Your Severance Package is Fair

You have just been given the bad news that your employer is letting you go. They brought you into a room, made a brief statement and handed you some papers to sign. You have been told you have a few days to review and return the documents.

What do you do now? How can you tell whether what the company has offered in severance is fair? What about this "Release" that they are asking you to sign — should you do it?

These are all common questions that arise when an Ontario employee loses a job.

Here are a few things to remember if you ever find yourself in this situation:

1. Determine 'Why' You Were Dismissed

Knowing why you were let go can be important. Unfortunately, learning this information is not always easy. Be sure to take note of any reasons given by your employer when they terminate your employment, whether verbally or in writing. Beyond this, query if you think there might be a different reason at play (such as if you have been let go during a maternity leave or you were fired after making a harassment complaint).

Most important of all, however, is to learn whether you have been fired on a "cause" or "without cause" basis. This is critical because if your employer has asserted cause then they are taking the position that you are not entitled to receive any severance whatsoever.

2. Get a Copy of All Employment Contracts

If your employer has made you a severance offer, there is a good chance that your dismissal was "without cause." That said, you can only assess the fairness of the offer by having the proper tools at hand. Critical in this process will be any employment contracts, agreements, letters of offer or other such documents that you might have signed.

If don't have a copy of these, request them from your employer. Most often, your employer will provide them to you when asked.

Next, look at the contract(s) and see if they say anything about what happens should you lose your job. How does this compare to what the company has offered?

3. Do Not Assume the Severance Offer is Fair

If you have never signed an employment agreement, you are entitled to something called "common law reasonable notice of dismissal" as your severance. This is the default entitlement for all Ontario employees and is based on judge made law as to what is "reasonable" in your individual circumstances. Your age, length of service and the type of job you were performing may all be relevant factors. If you would like an idea of your entitlement to fair or reasonable severance, click here to access our assessment tool.

If you have signed an employment contract(s) but it does not include any language (such as a termination clause) setting out what entitlements you will have at the end of your employment, the same rules as those without a contract will apply to you (i.e. reasonable notice).

Finally, if there is a clause in your employment agreement addressing dismissal, do not automatically assume that it is binding. There is no area of employment law more contentious than that around clauses attempting to limit an employee's severance entitlement upon dismissal. Many Ontario employers attempt to draft clauses limiting a worker's right to severance. However, this is a highly technical process where even one wrong word or mistake in the implementation process may lead to unenforceability.

Consider the following severance clause:

"You are not entitled to any notice of the termination of your employment or salary in lieu of notice where your employment is terminated for any breach of this Agreement or any other cause deemed sufficient in law or in any other circumstances in which no notice or salary in lieu thereof is required by law.

Subject to the provisions of applicable legislation, probationary employees may be terminated at any time without notice or cause.

Regular employees may be terminated at any time without cause upon being given the minimum period of notice prescribed by applicable legislation, or by being paid salary in lieu of such notice or as may otherwise be required by applicable legislation.

Should you resign your employment you are not entitled to any payment and shall give A.B.M. Canada at least 30 days' notice of such resignation."

Miller v A.B.M. Canada Inc., 2015 ONSC 1566

This is a typical example of what severance limiting language may look like in an employment agreement. At first blush, it seems to suggest that all the worker gets is minimum severance as per "applicable legislation." So what does that mean? In essence, you get the lowest amount that Ontario law will allow.

If you assume that this language is correct and enforceable, you may find yourself losing out on a considerable sum of money.

In Miller v. ABM, an employee of 17 months was dismissed. The company paid two weeks' severance, as required by the termination clause. That amounted to $5,532.21. However, when the worker went to Court the termination clause was found to be unenforceable.

As a result, the default common law rules about reasonable notice were applied. This resulted in the judge finding that the worker was entitled to receive an additional $28,125.00, or 2.5 months more pay, than the amount specified in the employer's written contract.

The Takeaway

If, as an employee in Ontario, you find yourself without a job, make sure you are properly informed before signing any agreement or Release from your employer. Typically, once you sign a severance agreement you are stuck with the deal you made.

Vey Willetts LLP is an Ottawa-based employment and labour law firm that provides timely and cost-effective legal advice to help employees and employers resolve workplace issues in the National Capital Region and across Ontario. Contact us at: 613-238-4430 or info@vwlawyers.ca