Calculating Severance Pay in Ontario | Co-Authors: Bram Lecker & Simon Pelsmakher, Student-at-Law
Severance Pay Calculations
Your employer has just fired you. This is going to impact you financially and without doubt, you are in for a stressful period ahead. If they offered you Notice and Severance, it is time to take a very close look at the details. These payments represent a financial bridge until you find another job. You must ensure you understand your legal entitlements and do not leave money behind. There are many factors that come into play when calculating severance pay in Ontario.
In Ontario, the Employment Standards Act 2000 (ESA) governs the rules your employer must follow for terminations. This article will help guide you about your rights under these circumstances.
For-Cause or Not-For-Cause Terminations.
When your employer makes the decision to let you go, they must prepare several documents for you. Legally, one of them must be a written notice of the termination. It should state whether your employer let you go “for cause“ or “not-for-cause“.
Here are typical reasons why an employer might let you go for cause. Misconduct, theft, insubordination, intoxication at work, continuously being late, performance issues, etc.
Under these circumstances, your employer may terminate your position on the spot and without notice. Even so, they owe you severance pay unless they prove willful misconduct on your part. And the courts set the bar very high for this determination – it cannot be for trivial reasons.
In the event of a for cause termination, it is well worth a one-hour consultation with one of our employment lawyers to review your termination circumstances, if only to ensure you have not been short changed.
Do Employers Need a Reason to Fire Employees?
Actually, your employer does not need to provide a reason for a not-for-cause termination. Rather, the law merely requires them to provide you with reasonable notice. In this situation, your employer is not alleging you are at fault. Therefore, this puts you in the best possible position as a litigant in any province in Canada.
When you do not receive any written documents, the analysis of your notice and severance package shifts. It is no longer about whether you are entitled to them, but how much.
Video: Employment Lawyer Bram Lecker on Notice & Severance
Minimum Notice and Severance
When an employer initiates a not-for-cause termination in Ontario, they must provide you with sufficient notice. During this period, you will receive Notice Pay. Essentially, it is a continuation of your salary for a set period of time. At minimum, the ESA guarantees that you receive 1 week of notice per year of employment, up to a maximum of 8 weeks.
The ESA expects more by way of notice and severance from larger businesses compared to a small business owner. In addition to notice pay, you may also be eligible for severance pay if you have 5 or more years of service with an employer that has 50+ employees or a payroll of $2.5 million+. Severance is calculated at 1 week of regular pay per year of employment, up to a maximum of 26 weeks.
These are the minimum notice and severance terms guaranteed to all employees of Ontario regardless of what is stipulated in your employment contract.
Reasonable Notice & Common Law Entitlements
The ESA stipulates the minimums. However, many Ontario employees do not fully understand a second layer of protection they receive in the event of a job loss. And to boot, some employers “conveniently” address this issue rather inadequately when preparing severance packages. It relates to the interpretation of reasonable notice.
According to the courts, reasonable notice is the amount of time it will take you to find similar alternative employment in your industry at the same salary and position. These are your common law entitlements, a set of judge made laws based upon precedents.
Using on-line Severance Pay Calculators
Any terminated employee, particularly tenured ones in their senior years, should have their termination packages thoroughly vetted by our lawyers. On-line severance pay calculators often prove woefully inadequate in these circumstances because of the subjectivity and variability that arrive with each case. We will examine your situation very closely to ensure your offer includes all your entitlements. Our courts are not shy in foregoing the ESA’s minimums to award you a superior package better suited for your circumstances.
Negotiating Your Severance
Lecker & Associates have been practising employment law for over 35 years. We understand common law precedents extremely well and have actively participated in shaping them over the years. Our lawyers have clarified ambiguous laws and fiercely advocated for employee rights. Common law entitlements are where we usually find additional money for our clients.
We look at your specific circumstances to determine if the severance package offered to you is fair. Does it reasonably compensate you for sufficient time to land an equivalent position and become “whole” again? We examine all aspects of your termination, including your age, length of service, seniority and the job market.
For instance, if you are 47 years of age, with 7 years of senior management service in the IT sector, you may be entitled to reasonable notice of approximately 8 months. Employers in this sector tend to hire younger new graduates. It could take you this long to find a job with a similar pay and title.
Notice and Severance: What About Your Benefits?
Our employment lawyers do not limit calculating your severance pay to salary alone. We look at commissions, bonuses as well as medical, dental and disability benefits, which sometimes amount to 15% of your income. In fact, for a not-for-cause termination your salary and all perks, including your vacation benefits, must continue to accrue through the notice period.
For some people the journey to gainful re-employment may involve re-positioning your skills in a new industry, retraining for a new career or transitioning into self employment as a consultant. In certain situations we can negotiate for outplacement services and personalized career coaching, invaluable resources that can help you move forward efficiently.
Furthermore, if you were bullied or harassed prior to your termination, forced into an unwilling resignation, let go because you are pregnant or returning from a disability leave, then we go to bat for extra damages for mental injury.
Employment Insurance and your Severance Pay
Notice and severance payments have implications on your Employment Insurance benefits. These termination payments tide you over financially while you are in between jobs. Employment Insurance Benefits fulfill the same purpose. The Employment Insurance Act quite fairly, does not permit you to double-dip. For more information on this topic, visit Severance Pay and Employment Insurance.
Lecker & Associates exclusively represents employees. Contact us to examine your notice and severance packages if you have recently been laid off. You can count on us for sound advice and aggressive representation.
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