Severance packages in mass layoffs

Over the last few weeks, a number of Canadian tech companies have announced mass layoffs.

• Shopify is cutting 10 per cent of its workforce after the e-commerce giant said it misjudged the growth of e-commerce during the COVID-19 pandemic.
• Clearco is shedding a quarter of its staff after the e-commerce investing platform claimed that it increased its headcount “too quickly in anticipation of continued economic growth.”
• Article is laying off 17 per cent of its workforce as the online furniture company grapples with a slowdown in e-commerce demand.
• Hootsuite is cutting 30 per cent of its staff as part of the social media company’s global restructuring.

In provinces such as Ontario, a mass layoff or mass termination occurs when 50 or more employees are let go at the same workplace within a four-week period.

LEARN MORE
• Employment lawyer on mass layoffs in the tech industry
• Layoffs in Canada

Am I entitled to full severance pay if I’m let go during a mass layoff?

The short answer is yes. Employees and senior executives are owed full severance pay when they lose their jobs due to downsizing or corporate restructuring.

LEARN MORE
• Mass layoffs in Ontario: Rights to severance
• Rights to severance during a mass layoff in Alberta
• Severance entitlements during a mass layoff in B.C.

How much is severance pay in a mass layoff?

In Canada, severance following a mass layoff can be as much as 24 months’ pay. The amount of compensation you are owed is calculated using a number of factors, including:

• Age
• Length of service
• Position
• Ability to find new work

Our firm’s Severance Pay Calculator is a free online tool that can help you determine how much you are owed. If it falls short of what is appropriate, you have been wrongfully dismissed and should file a claim for compensation.

ADDITIONAL RESOURCES
• Severance pay in Ontario
• Severance pay in Alberta
• Severance pay in B.C.

WATCH: Employment lawyer Lior Samfiru explains everything you need to know about severance pay on an episode of the Employment Law Show.

My employer is struggling financially, does that affect how much severance I can get?

Even if your employer is struggling financially, they can’t reduce your severance entitlements.

During tougher economic conditions, it’s going to be harder for you to find new employment, which means more compensation is owed.

READ MORE
• Severance Pay in a Recession

Severance packages are meant to help you bridge the gap between jobs. If the gap is expected to be longer than usual, your compensation must reflect this.

Does my time with the company affect how much severance I’m owed if I’m laid off?

If you have been laid off, make sure you have your employment contract as well as any documentation that supports your work history and experiences with your employer.

Look for references to a:

• Promotion
• Pay increase
• Performance evaluation
• Bonus
• Benefits
• Stock options

This information helps provide a complete picture of your employment history with the company. It could make the difference between your severance package being a few weeks’ pay or many months’ pay.

READ MORE
• Ontario court awards Diamond Estates Wines employee 24 months of severance

If your current employer actively recruited you from another business, your time spent with the previous company could also be counted toward your years of service — and overall compensation.

My employer provided working notice before laying me off, does that affect my severance pay?

Most employers prefer to provide severance pay and end their relationship with an individual immediately. However, some companies choose to give working notice instead.

While the length of the working notice is subtracted from what is paid out in severance, some employees could be owed additional compensation after this period has ended.

Example: If you worked at a company for 27 years and you are let go with three months’ notice, your employer could potentially owe you an additional 21 months’ pay in severance.

READ MORE
• ’60 days or more’: Is it an enforceable termination clause?

My employer is asking me to sign my severance offer immediately, should I?

While mass layoffs can feel overwhelming, your employer can’t force you to accept a severance offer before you leave a meeting or by a particular date.

In some cases, companies take advantage of chaos or confusion to get an employee to agree to the bare minimum or far less compensation than they are legally entitled to.

Carefully review your employer’s offer and seek legal counsel before accepting. You have two years from the date of your layoff to pursue full severance pay.

READ MORE
• I already accepted a severance package, what should I do?

Don’t sign until you speak with an employment lawyer

Severance offers sometimes include a termination clause that tries to limit the amount of compensation you can receive or non-compete clauses that prevent you from finding work elsewhere in your industry following a mass layoff.

Before accepting any offer, have an experienced employment lawyer at Samfiru Tumarkin LLP review the agreement to ensure you are receiving the compensation you are owed.