Severance packages and what that online reasonable notice calculator isn’t telling you
April 4, 2019 By: Jill Lewis Read Time: 3 minutes
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After two or three decades of employment, you have been handed a severance package and shown the door – now what?

Notice periods or “severance” will vary between employees. An employee’s length of notice will be determined through three sources.

Notice periods or “severance” will vary between employees. An employee’s length of notice will be determined through three sources.

Before sending your employer a hasty email based on what the “Reasonable Notice Calculator” told you, ensure you understand what your entitlements are.

Severance packages should include the following:

Notice Period:

Notice periods or “severance” will vary between employees. An employee’s length of notice will be determined through three sources:

  • First, all provincially regulated employees are entitled to statutory notice under the Employment Standards Act, 2000 (“ESA”).
    • The ESA provides employees with one-week notice per year of completed service. This can be provided as a lump sum or as working notice. Regardless of whether you are receiving working notice, or notice in lieu
    • Depending on length of service and the size of the company, employees may also be entitled to statutory severance pay, which is one week per year of service to a maximum of 26 weeks.
  • Second, an employee may have termination entitlements in an employment agreement. The terms in these agreements may or may not be valid. It is highly recommended that you bring this agreement to an employment lawyer for review before signing one and/or after being fired.
  • Finally, employees often have a common law entitlement to reasonable notice. A common law notice period is intended to compensate an employee from the date of termination to the date of reemployment. To determine how long that notice period should be, courts will examine factors such as age, length of service, nature and seniority of position, and any other relevant factor that could affect a person’s ability to find wok.
    • If you have used an online reasonable notice calculator, then you would have entered those factors and received an estimate.
    • What the estimate does not explain is that during that notice period you have a duty to mitigate. This means you must make all reasonable efforts to find a comparable position. To read more about this duty to mitigate, check out Alison McEwen’s blog : https://nelliganlaw.ca/article/tips-on-navigating-tricky-mitigation-waters/

Benefits

Employees are entitled to compensation for the loss of their group health and dental benefits. This can be provided through continuation of benefits (if the insurer permits) or through a lump sum payment in lieu.

Bonus/Commissions/Equity Compensation Payments

Employees are entitled to bonus payments that are an integral part of their compensation. Employees are also entitled to commission payments that would have been earned during the notice period. An employee may be entitled to compensation for the granting and vesting of stock units and options depending on the language of the governing plan documents.

Employer can restrict entitlements to any and/or all of these payments during the notice period through a contract or company policy. If your employer has not included these amounts into your severance package, you will want to speak with an employment lawyer.

Pension Contributions

Pension contributions made by your employer is another form of compensation and as such, you are entitled to those contributions for the duration of the notice period. If you are part of a defined benefit plan, you are entitled to the value of pension benefits that would have accrued during that time.

Fringe Benefits

Severance packages should also include other forms of compensation, such as a car allowance, club memberships, cell phones etc.

Outplacement


Some employers will also provide outplacement services to assist employees in their job search. We can negotiate on your behalf to secure extended outplacement services.

Some packages will also include a claw back, which means if the employee finds another job during the provided notice period, the employer gets to claw back some or all of the severance payments that went above and beyond the statutory payments. This can also be negotiated.

When you bring your package to one of our employment lawyers, we will review it in detail, advise you of your entitlements, and provide an opinion regarding whether the package should be increased. Our lawyers can provide cost efficient results in a reasonable time frame.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2019 Nelligan O’Brien Payne LLP.