Can I get severance if I have already found a new job?

Do I get to keep my severance if I get a new job?

If you are making the same or more money in your new position, your earnings at the new job will effectively “cancel out” your severance pay. This happens the day you begin earning money in your new role.

If an employee is making less money in their new position, their former employer must cover any difference in income between the old job and the new one. This is to ensure that the employee is “made whole” for the notice period.

Example

Let’s look at an employee whose severance pay is 6 months, but who obtains a new position after 3 months.

The new the position pays $2,000 less per month than their old job. The former employer would be required to provide the employee with severance for the first 3 months. For the remaining 3 months, the former employer will have to pay the difference in earnings between the new and old position. In this example, the former employer would continue to be responsible for only the loss of $2,000 per month during the final 3 months of the applicable notice period.

When an employee is let go without cause, the employer is required to provide the provincial minimums for severance. In many cases, the employee will also be entitled to additional amounts under their employment contract or the common law. For information on your entitlements where cause for termination has been alleged.

The role severance plays

Severance pay, also known as common law reasonable notice or pay in lieu of notice, is the money paid by an employer to an employee upon their termination. It is meant to give the former employee financial stability between jobs. The amount the employer must provide depends on certain factors. It also depends on previous legal decisions that awarded severance to individuals in similar circumstances in the past.

It is important to note that severance will not necessarily be enough financial support for the entire period of unemployment following the loss of a job. The former employer is obligated to ensure that the terminated employee does not suffer losses caused by their termination during the applicable reasonable notice period.

In exchange for the severance payout, the former employee has a responsibility to improve their situation during the same period. This means that the employee is required to take reasonable steps to reduce or eliminate their losses by actively seeking new employment. In the event that a comparable position is offered, the former employee should accept the job, unless there is a significant reason not to do so.

What the courts say

Our courts have held that income earned from a comparable position during the reasonable notice period is deemed “mitigation income”, which reduces any losses caused by the termination. This new income will be credited against any severance pay amounts owing from the former employer.

In essence, the law does not permit the employee to “double dip”. You cannot receive both severance pay and the income earned through your new position at the same time. This is because the new income reduces the losses that your former employer is responsible. In other words, “mitigation income” acts to counter whatever losses may have been caused by an employee’s termination.

Questions about your severance pay?

If you have been let go from your job in Ontario, Alberta or BC, contact our experienced employment law firm today for a free consultation. Whether you are still unemployed or have already arranged new employment, we can review the details of your situation and determine if your employer owes you more compensation.