Common Misconceptions about Severance Pay

by Kyle Shimon


Friday, August 12th, 2016 at 8:00 am


Losing your job is never an easy ordeal to experience. Apart from the shock of finding out you are now unemployed, the process of being terminated naturally raises a lot of questions, not least of which being whether you are entitled to severance and how much severance you are entitled to. In Ontario, figuring this out is a complex task and people will often walk away from a termination without realizing that they were entitled to severance or that they were owed considerably more than their employer might have offered them. In this entry, we help clear-up some of the most common misunderstandings that terminated employees have about their entitlements and severance pay.

Just Cause and Severance Pay

What many people do not realize is that, in most situations, it is very difficult for an employer to prove that they had just cause to terminate someone. It is true that if the employer can prove just cause, then the employee will likely not be entitled to any more than their accrued wages and vacation. However, if the employer cannot prove that they had just cause, then the employee is still entitled to their full severance entitlements.

Where the employer is claiming that they had just cause to let someone go, it is important for the terminated employee to know that just because their employer is saying that they had just cause, does not mean that they actually did. Any time an employer is claiming that they had just cause, the employee should always talk to an experienced employment lawyer.

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Check out our Severence Pay Calculator to find out more.

The Employment Standards Act is a Minimum, not a Maximum

When terminating an employee without just cause, many employers in Ontario will only provide the employee with the minimum amounts required by either the Employment Standards Act, 2000 (ESA) or the Canada Labour Code (CLC). The CLC helps govern the employment relationships of federally regulated employees, such as people working for most airlines and railways, and the ESA helps govern everybody else employed in Ontario.

 

The vast majority of employees in Ontario will be eligible for either notice of their termination, severance pay, or both through one of these statutes. However, what many employees do not realize is that these statutes only create minimums and that, in nearly every case, the employee will be entitled to more notice or severance according to the common law.

Unless the employee has agreed to an employment contract with an enforceable termination clause, there is a presumption in law that, upon termination, all employees are entitled to reasonable notice of their termination. While how much that is depends on each person’s circumstances, reasonable notice will almost always be considerably more than the minimum amounts provided by the CLC or ESA, subject to how quickly the terminated employee is able to find a comparable job. No matter what, though, qualifying employees are always entitled to their ESA or CLC minimums and it is very likely that they will receive more through the common law.

Talking to an experienced employment lawyer will help you understand your rights and common law entitlements.

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Written Employment Contracts and Termination

In the last decade, it has become extremely common for employers to have their new or current employees sign employment contracts. One of the biggest reasons that employers do this is to try and limit how much severance they will have to pay to their employees when they terminate them. What is important for employees to remember is that very often those termination clauses will not be enforced by a court. Some of the reasons this will happen is that the clause provides for less termination entitlements than the ESA or CLC would provide or that the employee was only presented with the contract after they started working for the employer without being offered anything for signing it.

When the termination clause is not enforceable, as is often the case, then the employee is entitled to their full common law severance entitlements. A common misconception of recently terminated employees is that the written contract will dictate their entitlements no matter what. That is not always true and the terminated employee should always have an experienced employment lawyer look over the contract for them.

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Kyle Shimon is an associate lawyer with Samfiru Tumkarin’s Labour and Employment Law Practice Group in Ottawa, Ontario.

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