- What is appropriate notice?
- Employment Standards vs. Wrongful Dismissal - What is the Difference?
- Should I Sign a Release?
- Terminated for Cause - Where Do I Go?
- Should I File an Employment Standards Claim?
- Do I Have a Case?
Quantifying notice is an art not a science. The major factors a Court will use to determine appropriate notice are the individual's age, position, years of service and the availability of alternate employment taking into consideration the employee's education and training. However, there can be literally hundreds of other factors that may be relevant in determining notice in any particular case. The Supreme Court of Canada has stated that notice will be determined by the facts of each case. Therefore, it is important that one obtain legal advice to assess notice in your matter taking into consideration all of the factors relevant to your particular case.
Termination can be one of the most traumatic experiences in one's life. An added stressor in a termination meeting may be a demand by the former employer that the employee agrees to terms of a severance package. The easy response is to sign on the dotted line, accept whatever the employer is offering, and move on. However, like most things in life, the easiest option may not always be the best.
Having practised employment law for more than 18 years, I can say without hesitation that the biggest mistake that a terminated employee can make is to sign the initial offer either because it is easy, or there is pressure placed on them by the employer to do so. The best advice I can give is to seek legal advice on the offer before you sign. If the offer is reasonable, it will likely be there after you have obtained advice. The more pressure that is put on you by the employer to sign, the greater is the likelihood that the offer is unreasonable. It is understood that seeing a lawyer is as much fun as going to see a dentist. However, in both cases they are necessary.
Many people assume that any severance package received is reasonable, and that their employer would never try to take advantage of them. Such theory ignores the fact that the employer is running a business and it makes business sense to pay less rather than more. Using that basic principle, it is rare that the opening offer will be its best offer. There is however a certain level that an employer cannot go below. These payments are referred to as statutory termination and severance pay pursuant to the Employment Standards Act (the 'Act'). Termination pay is equal to one week per year of service up to a maximum of eight weeks, and severance pay is the equivalent of one week per year of service (or part thereof) up to 26 weeks. Severance pay under the Act is only paid if the payroll of the employer exceeds $2.5 million and the employee has more than five years of service.
An employer cannot offer less than minimum statutory payments or base payments. But what if the employer adds a few weeks to the 'base' payment? To the layman, it may appear that the employer is being generous, when in fact it is not. To use an example, take a five-year employee who is entitled to severance and termination pay in the equivalent of 18 weeks. In that situation, the employee is entitled to 18 weeks' pay at an absolute minimum and without signing a release. If the employer seeks a release of common law entitlements in exchange for 20 weeks, the employee would receive only two weeks over Employment Standards minimum payments and in exchange for giving up rights to common law damages which could represent 12 months’ pay or more. Common law entitlements to notice are based on several factors including the person’s age, position, years of service, and the availability of alternate employment taking into consideration the employee's education and training. Unlike statutory notice, common law notice is not fixed but is based on what a Court believes is reasonable in the circumstances. In monetary terms, an employee could be leaving tens of thousands of dollars on the table.
It should be understood that Employment Standards minimum payments are payable without an employee having to sign any release whatsoever. In other words, the employer would be obligated, in the above example, to pay 18 weeks pay and the employee would retain the right to bring a civil claim.
It is therefore extremely important that an employee understand what minimum (base) payments they are entitled to. The closer the offer is to the base, the worse the offer. The quantification of common law damages is in most cases significantly greater than base payments and which can only be assessed by a qualified lawyer.
An employer who dismisses an employee without cause is obliged to provide notice of termination or pay in lieu thereof. Minimum notice periods/payments for provincially regulated employers are set out in Ontario's Employment Standards Act (the 'Act'). For federally-regulated employers, statutory obligations upon termination are set out in the Canada Labour Code. In addition to notice, employees with five years or more of service and who are either part of a mass termination or were employed by an employer with a payroll of $2.5 million or more, will be entitled to severance pay.
These payments are mandated by statute and must be made within seven days of termination or by the employee's next pay date. These payments however, do not exhaust the rights of a dismissed employee under the common law or by operation of other statutes such as the Ontario Human Rights Code. Further remedies however, may and often do require the commencement of a civil or court action for wrongful dismissal or a complaint to the Ontario Human Rights Commission if discrimination is at issue.
At termination, the employer may offer the employee a 'termination package'. The termination package, usually described in the letter of termination, sets out the payments, benefits or other offers such as a letter of reference the employer is prepared to provide upon termination. Termination packages are often made conditional upon the signing of a Release by the employee. The Release is a contract which spells out the payments and any other consideration to be provided by the employer in exchange for a release by the employee of any further legal claims he may have against the employer with respect to his employment and/or termination of employment. Put simply, if an employee signs the Release, he is accepting the employer's offer in full and final satisfaction of any claims he may have and will therefore not be able to pursue any further legal action against the employer.
The Release typically contains the type of jargon familiar to lawyers but not to most employees confronted with the document. Given what is a stake, employees are always advised to refrain from signing a Release until they have obtained legal advice. The value of the offer is dependent upon a whole host of factors such the damages for wrongful dismissal the employee can obtain as well as the other remedies he can pursue. Few employees have the legal expertise to make a proper assessment on their own of the offer contained in a Release. Pressure to sign on the spot should immediately raise suspicions that the employer is seeking to have the employee agree to an unequal bargain and should be resisted at all costs.
No action is required by an employee and specifically, no forms must be signed in order to obtain employment standards notice or severance payments from an employer. An employer therefore has no right to a Release in exchange for employment standards payments. Unfortunately, this will not stop some employers from making such payments conditional upon a Release in order to avoid or at least discourage legal action on the part of a terminated employee. There is therefore no benefit to an employee in signing a Release under these circumstances as the employer is obliged to make payment of employment standards entitlements even if the employee refuses to sign.
1 While the following discussion of termination packages applies to all terminated employees, employment standards referred to in the article are those set out in the Act.
Being terminated can be one of the most traumatic experiences in one's life. In the normal course, and when cause is not alleged, the legal issue to be resolved is whether the payment offered by the employer is appropriate. This is routinely resolved through negotiation with or without the assistance of a lawyer. But what if the employer alleges cause, and offers nothing? What does one do?
Whether 'appropriate cause' exists is a legal issue and should be discussed with a lawyer. There are some cases where cause is obvious. There are some cases where there is doubt which way a Court would rule. Finally, there are cases where it is obvious that no cause exists and the employer makes the allegation simply to make life more difficult for the employee. In the latter situation, a Court can award additional damages for bad faith.
If the employer does not have appropriate cause to terminate, the employee is entitled to minimum payments (or base payments) of up to eight weeks' termination pay and up to 26 weeks' severance pay.
The termination/severance provisions of Employment Standards Act (the 'Act') are set out below:
(a) At least one week notice (or pay in lieu of notice) if the employee's period of employment is less than one year;
(b) At least two weeks notice (or pay in lieu thereof) if the employee's period of employment is one year or more and fewer than three years;
(c) At least three weeks' notice (or pay in lieu thereof) if the employee's period of employment is three years or more and fewer than four years;
(d) At least four weeks' notice (or pay in lieu thereof) if the employee's period of employment is four years or more and fewer than five years;
(e) At least five weeks' notice (or pay in lieu thereof) if the employee's period of employment is five years or more and fewer than six years;
(f) At least six weeks' notice (or pay in lieu thereof) if the employee's period of employment is six years or more and fewer than seven years;
(g) At least seven weeks' notice (or pay in lieu thereof) if the employee's period of employment is seven years or more and fewer than eight years; or
(h) At least eight weeks' notice (or pay in lieu thereof) if the employee's period of employment is eight years or more.
An employer that severs an employment relationship shall pay severance pay to the employee if the employee was employed by the employer for five years or more and,
(a) the severance occurred because of permanent discontinuance of all or part of the employer's business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or
(b) the employer has a payroll of $2.5 million or more.
Severance pay shall be calculated by multiplying the employee's regular wages for a regular work week by the number of years (or part years) of employment the employee has completed to a maximum of 26 weeks.
If terminated for cause and without any payment whatsoever, it is a natural instinct to contact the Ministry of Labour. The Ministry of Labour will be able to provide information as to the statutory severance and termination payments owing if appropriate cause cannot be proven. However, there are several reasons why filing a claim with the Ministry of Labour could prove to be a disaster.
WHAT YOU SEE IS NOT WHAT YOU GET
Assume that during the initial communication with the Ministry of Labour one is advised that they are entitled to 20 weeks severance/termination pay commensurate with a 12-year employee in a company with a payroll in excess of $2.5 million. Assuming an annual salary of $52,000.00, this payment represents $20,000.00. Common sense would dictate that if you bring a claim with Employment Standards and there is found to be no validity to the employer's allegations of cause, that one would be entitled to payment of $20,000.00. This assumption is wrong. The Employment Standards Act contains a provision which limits the amount of any Order for wages (which term includes severance and termination pay) to $10,000.00. Therefore, unless the employer voluntarily pays severance/termination, the Labour Board only has authority to Order it to pay up to $10,000.00.
ADDING INSULT TO INJURY
To make matters worse, if an employee files a claim with Employment Standards for severance or termination pay, there is also a provision of the Act which would then preclude the employee from bringing a civil action for wrongful dismissal. Given that wrongful dismissal damages are almost always significantly greater than Employment Standards minimums (base payments), one can see the significant prejudice in filing an Employment Standards claim. Not only would the employee be limited to $10,000.00, but the employee would also be giving up a right to common law damages which can be tens of thousands dollars more than base damages.
It appears that the Employment Standards Act gives with one hand and takes away with the other. In fact, the Employment Standards Act as is presently formulated, is designed to deter individuals from filing claims for severance or termination and directs them to the civil courts. If one pursues a claim with Employment Standards, that person must understand that they are limiting their claim for wages to $10,000.00 and are giving up any claim for wrongful dismissal damages. For these reasons, few people in fact file Employment Standards claim for severance and termination. When an employee does file such a claim, they may in fact be helping the employer by limiting their liability to $10,000.00 from what would otherwise have been a significantly greater sum.
With that in mind, one should understand that filing an Employment Standards claim should only be made in very limited circumstances. It is important in all cases to seek legal advice before any action is taken.