Severance Pay | HTW Law - Employment Lawyer
How Much Severance Pay Am I being Owed?
Severance Calculation: Under the Employment Standards Act (ESA), employees continuously employed for 3+ months are entitled to at least one week of notice, and more is required if the tenure is more. Common law severance is usually more than ESA severance. You should consult an employment lawyer whenever a severance proposal is presented by employer.
Who Is Not Entitled to Severance?
The employer – employee relationship is governed by the Labour Relations Act for unionized workers and the Employment Standards Act for non-unionized workers. Only non-unionized workers are caught by the Employment Standards Act (ESA). In unionized environments, collective agreements provide for employees’ rights and responsibilities. All our discussion here regarding severance only applies to non-unionized workers.
Part XV - Termination and Severance of Employment of the Employment Standards Act (ESA) governs termination and severance of employment under the ESA. O. Reg. 288/01: TERMINATION AND SEVERANCE OF EMPLOYMENT clearly stated that employees are prescribed for the purposes of section 55 of ESA as employees who are not entitled to notice of termination, termination pay, or severance under Part XV of ESA, if the employee has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.
To rely on this provision, the employer must generally show that the employee’s conduct was both serious and intentional (i.e., the product of a deliberate or intentional act or failure to act). It’s strictly statutory. This standard is not the same as the common-law “just cause” standard which was much broader. Thus, it is possible that an employee’s misconduct may provide just cause for dismissal at common law but not be sufficiently culpable to disentitle him or her to ESA termination pay and severance.
What is ESA Notice aka Termination Pay and How is It Calculated?
Under the ESA, employees who have been continuously employed for three months or more and less than one year are entitled to at least one week of notice of termination; two weeks if the period of employment is one year or more and fewer than three years, and thereafter an additional week of notice for each additional year of employment up to a maximum of eight weeks. However, employers are allowed to terminate employment without notice by paying termination pay equivalent to the required period of notice and maintaining any benefits the employee would otherwise have received over that period.
Who is Entitled to ESA Severance?
Termination without cause requires Termination Pay. In addition, ESA severance pay is required, under the ESA when an employer “severs” the employment of an employee with five years or more of service and:
the severance occurred because of a permanent discontinuance of all or part of the employer’s business 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
the employer has a payroll of $2.5 million or more.
Under ESA, the calculation of an employer’s payroll relates to its payroll in all jurisdictions, and not just in Ontario.
When you are terminated without notice, you have two possible theories of recovery: 1. The common law remedy of wrongful dismissal, or 2. ESA Notice (Termination Pay) plus ESA severance if certain conditions are met.
Common Law Severance Calculation: The severance that an employer needs to pay to a terminated employee depends on a list of factors such as the length of service, age, reason for dismissal, the position the employee held within the company, compensation, whether the employee was actively recruited and the general economy. Do note that common law doesn't draw a distinction between Payment in lieu of working notice and "severance" (payment for long term service), everything is calculated as a full package in a wrongful dismissal claim. Entitlements under common law for damages for wrongful dismissal may dramatically exceed the statutory entitlements described in this section. A damage award in a successful wrongful dismissal case be as high as 24 to 26 months in some extreme cases. However, there's much less uncertainty involved in an ESA termination pay and ESA severance pay determination as compared to that of a wrongful dismissal action, thus it allows a more speedy resolution.
ESA Severance Pay Calculation: The statutory severance pay is calculated specifically by multiplying the employee’s regular wages (excluding overtime) for a regular work week by the sum of:
(the number of completed years of employment) + (the number of completed months of employment of the final year divided by 12)
The maximum severance pay entitlement under s. 65 of the Employment Standards Act (ESA) is an amount equal to the employee’s regular wages for a regular work week for a period up to 26 weeks. Severance must be paid as a lump sum within seven days after termination of employment or on the next regular pay day, whichever is later, unless the employee agreed otherwise.
We recommend that legal advice be obtained whenever a severance proposal is provided by an employer. In many cases the severance package offered is of much lower value than what you would otherwise be entitled to under the common law wrongful dismissal.
If you are an employer contemplating a severance package to workers, it's important that you comply with all statutory requirement, which can be tedious at times.
HTW Law can help. Free Initial Consultation. No-Win-No-Fee for wrongful dismissal cases. Call us now at 647-849-6582 or Contact Us Now if you have inquiry / questions about severance pay or want to schedule an appointment with a severance pay lawyer.