Federally regulated employers can pay severance with tools: Alberta court

Hubbard v. 651398 British Columbia Ltd.

If your employer owes you severance, can they pay you with goods or services instead of cash? A recent Alberta Provincial Court case shed light on this very question. In Hubbard v 651398 British Columbia Ltd., the employer, a hauling company, fired an employee, Mr. Hubbard, after eight years of service, before the company shut down.

Instead of providing the employee with cash severance after they were terminated as most employers, the employer gave the individual welding tools and fabrication material, such as steel and aluminum, as severance pay. In her decision, Judge Sihra found that the employer did provide adequate severance, and that they were permitted to provide the employee with tools and materials as severance pay instead of cash.

Facts

• The employer was a hauling company, which means the employment relationship was federally regulated and governed by the Canada Labour Code (CLC).
• The employee, Mr. Hubbard, was employed for a period of approximately eight years, from June 28, 2010 to November 22, 2018.
• Hubbard was first hired as a truck driver and was later employed as a fabricator.
• During an October 31, 2018 meeting, the employer told Hubbard that the company was shutting down. The businesses assets were to be sold to the Ritchie Bros., heavy equipment auctioneers.
• Hubbard was told to look for a new job, and that his time with the company would end a month later.
• The parties agreed that Hubbard was owed $10,861 in severance pay under the CLC.
• At the time of the employee’s termination, the employer gave him with a welder, a set of torches, welding curtains, steel, aluminum, and other business supplies. Hubbard alleges that he was told there was no severance pay, while the employer claims that the tools were given as a form of severance.
• Hubbard filed a wrongful dismissal lawsuit against his former employer for $9,828 in severance pay and $1,033.39 in vacation pay.

Court’s Decision

The court ultimately determined that under the CLC, the employer had the option of providing severance to the employee through benefits other than cash. This method is allowed if the benefit to the employee exceeds the severance owed to the employee under the CLC.

SEE ALSO
• Severance packages for provincially regulated employees
• Federally regulated severance pay

The court also found that Hubbard had essentially agreed to receive the tools and material as severance pay instead of cash. The evidence also proved that he had accepted the tools and material without protest or any expressed disagreement.

READ MORE
• List of federally regulated industries
• Federally regulated companies in Canada

Lastly, the Judge Sihra found that the tools and the materials were worth at least $30,000, which exceeded the severance owed under the CLC. The employer was therefore permitted to give tools and materials to the employee as severance pay.

Lessons for employees

• Provincially regulated employers must pay severance in cash: While the court did permit the employer in Hubbard to pay out severance in the form of tools instead of cash, this is only permissible under the CLC. In other words, this rules applies only to federally regulated employees (i.e. employees working in banking, transportation, aviation, etc.), not provincially regulated employees. If your employer is offering you goods instead of cash as your severance pay, you will be owed cash severance in the vast majority of cases. An employment lawyer at Samfiru Tumarkin LLP can review your situation to determine how much pay you should receive.

• Companies must pay severance when they close down: A business can’t ignore their legal responsibilities when they permanently shut down operations. They must provide full severance to employees who lose their job as a result of the closure. The amount needs to factor in both government legislated minimums and full common law considerations. The Severance Pay Calculator provides a quick understanding of what a severance package might look like.

Lessons for Employers

• You likely can’t pay severance in tools: In most cases, employers are required to provide an employee with cash severance when they are fired. For businesses regulated by provincial legislation, many provinces expressly prohibit employers from paying severance with anything other than cash. For instance, the Alberta Employment Standards Code requires that severance must be paid in Canadian currency.