Employment Law

Severance Pay in a Recession


Can I get severance in a recession or bad economy? 

Yes. You can get more severance pay if you are fired or lose your job during a recession, because it will be harder for you to find new employment.

The fact that economic times are difficult doesn’t mean a company can decide to not provide compensation when they end your employment.

Severance pay in Ontario
Severance packages in Alberta
• Understanding severance pay in B.C.

Does a recession affect severance pay? 

Employees who are fired or let go during a recession get more severance pay than usual. That’s because it is often more difficult for them to find new employment quickly during a difficult economy.

Economic downturn usually leads to an increase in unemployment and job losses, and it is harder for someone to find new employment. The ability to find new employment is a factor when calculating an individual’s severance package.

Employers may feel that in order to stay afloat during a recession, they are not obligated to pay employees their full severance entitlements because of the financial hardships the company may be facing.

This reality does not allow an employer to avoid their responsibilities in providing a complete severance package to terminated workers.

Severance pay for federally regulated employees
Severance for provincially regulated employees
Employee rights when an employer downsizes

Calculating severance in a recession

Non-unionized employees working in Ontario, Alberta or British Columbia who are fired without cause or laid off from their job during a recession are owed severance pay.

Compensation is calculated by using many factors, including someone’s age, length of service, position, bonuses, benefits and the ability to find new work. Since the ability to find new work may be difficult in a recession, employees may be entitled to additional severance pay.

That’s why you should consult with an employment lawyer at Samfiru Tumarkin LLP immediately once you are let go.

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

Employers often incorrectly calculate severance pay. There is a belief that severance pay is one week’s pay, two weeks’ pay, or a week for every year of service an employee has with the company.

While this formula may cover the minimum amount owed by a company as per provincial legislation, our legal system (“common law”) has determined that a full severance package should be higher – as much as 24 months’ pay.

Use our helpful Severance Pay Calculator to determine your severance entitlements.

Don’t sign on the dotted line!

Do not accept any severance offer, termination papers or exit agreement that you employer may provide you with. Once you sign back these documents, you eliminate your ability to negotiate a fair and proper severance package.

Changes to your job in a recession

Employees do not have to accept a significant change to their job just because there is a recession. Large modifications, such as a demotion, cut in pay, reduction in hours, negative change to commission, are illegal.

When the terms of your employment are significantly changed, the law allows you to resign from your job and seek full severance pay through a constructive dismissal claim.

Ontario and changes to your job
Changes to your employment in Alberta
Can your employer change your job in B.C.

Have you been temporarily laid off?

Temporary layoffs occur when an employer significantly reduces or completely stops an employee’s employment. There is usually a mutual understanding from both sides that the employee will be called back to work, to the same position, after a reasonable period of time.

It is important for employees to understand that temporary layoffs are considered illegal – even in a recession – unless you agree to the layoff or it is addressed in your employment contract.

You have the option to wait to be called back, or can treat this as a termination through a constructive dismissal and pursue severance.

Considerations for employees

  • Have your employment contract reviewed: If your employment contract lacks a clause that allows for your employer to make changes to your job, this could support your case for a constructive dismissal. It is important to have your contract reviewed by an experienced employment lawyer to understand your rights, entitlements, and obligations from your employer.
  • Consider how the changes impact you: Do they impact compensation, job duties or both? It is much easier to object to significant changes to compensation.
  • Review history of changes to your job: Consider whether there have been changes made in the past, or if this is the first one. If you did not object to a past change, you may be deemed to have accepted further changes.
  • Talk to a lawyer: A change to your job can be embarrassing. You can consider obtaining legal advice to determine whether you are entitled to compensation from your employer.

Talk to an employment lawyer

If you are a non-unionized employee in Ontario, B.C. or Alberta that has been let go or experienced significant changes to your job during a recession, and have questions about your workplace rights and entitlements, consult with an experienced employment lawyer at Samfiru Tumarkin LLP today.

Fired? Changes to your job?

Contact one of Canada's most experienced and trusted employment law firms to find out how much severance pay you are actually owed.


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