Severance Pay in Canada: A Guide for Federally Regulated Employees

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Is Severance Pay Mandatory in Canada?

Yes. Severance pay is mandatory in Canada for federally regulated employees, provided they meet specific length-of-service requirements. Many workers ask, “do you get severance pay when laid off?” The answer is a definitive yes. Even if you are let go due to a “lack of work” or a business restructuring, your employer is legally required to provide a severance package to help bridge the gap to your next role.

Who Qualifies for Federally Regulated Severance Pay?

Federally regulated severance pay applies only to specific industries governed by federal law rather than provincial law. These sectors include:

• Banking (e.g., RBC, TD, Scotiabank, BMO, CIBC).
• Telecommunications (e.g., Bell, Rogers, Telus).
• Transportation (Airlines, interprovincial trucking, railways).
• Postal Services (Canada Post).

Not sure if your workplace qualifies? View our full list of federally regulated employers in Canada.

How Severance Pay Works Under the Canada Labour Code

Under the Canada Labour Code (CLC), your minimum entitlement is actually composed of two distinct payments.

1. Termination Pay (Notice)

Effective February 1, 2024, termination pay under the Code is graduated. After three months of service, you are entitled to:

• A minimum of 2 weeks’ notice (or pay in lieu).
• Increasing by 1 week for every year of service, up to a maximum of 8 weeks.

2. Statutory Severance Pay

If you have completed at least 12 months of continuous employment, you are entitled to an additional payment, which is the greater of:

• Two days’ wages for each completed year of service.
• Five days’ wages.

How Much Severance Am I Entitled To?

The biggest mistake federal employees make is assuming the CLC minimums are the “standard.” In reality, those minimums are just the beginning.

The Common Law Difference

Most employees — including managers and those with less than 12 months of service — are entitled to Canada common law severance pay. Common law ignores the small caps in the Labour Code and instead calculates your payout based on:

• Age at the time of termination
• Length of Service (how many years you were with the company)
• Position and Salary (level of responsibility)
• Availability of Similar Employment

A fair severance package in Canada can often reach up to 24 months of pay. This was demonstrated in the landmark case of Maticevic v. Bank of Montreal, where an 18-year employee was awarded 22 months of back pay. The employment lawyer who won that case, Stephen LeMesurier, is a key member of our team.

Unique Situations: Constructive and Unjust Dismissal

Severance pay isn’t only for when you are “fired.”

• Constructive Dismissal: If your employer makes a major change to your employment contract — like a pay cut or demotion — you may have the right to quit and claim full severance.
• Unjust Dismissal: If you have 12+ months of service and are not a manager , you might have the right to reject severance entirely and demand your job back through reinstatement.
• Wrongful Dismissal: This occurs when your termination without cause package does not meet your full Common Law entitlements.

Don’t Sign Your Offer Without a Review

Employers often set arbitrary deadlines to pressure you into signing a sub-par offer. You have up to two years to pursue your full severance, and 90 days to file an unjust dismissal complaint.

Before you sign away your rights, speak with the experts for federally regulated employee rights at Samfiru Tumarkin LLP.