Severance pay (often used interchangeably with “termination pay”) is what an employer has to pay when it fires an employee. In almost all cases, employees fired in Ontario should received some form of severance pay.
Calculating that severance pay, however, can be more difficult. Here are several common questions we get about severance pay in an initial consultation.
Why does the Government of Ontario website give me a smaller number than the law firm severance calculators?
The Government of Ontario website gives information on the minimum notice and severance pay under the Employment Standards Act, 2000 (the “ESA”). The ESA requires about 1-2 weeks of termination and/or severance pay per year of service. ESA pay is, generally, the bare minimum.
On the other hand, law firm “severance calculators” reach their figures based on the common law of wrongful dismissal. Only judges can create and enforce the common law. Your entitlement to common law severance is based on a number of factors, primarily age, length of service, character of employment, and availability of similar employment. Common law severance is typically a lot more than ESA pay — about 2 to 4 times as much.
Do I get both ESA pay and common law severance?
ESA pay and common law severance do not “double up”; if you receive any ESA pay, your common law severance will be reduced by that amount.
The good news is that if you work in Ontario, you should receive both ESA pay and common law severance — that is, unless you’ve agreed to give up your right to common law severance.
Why would anyone agree to give up their right to common law severance?
You may have done so without realizing it, when you were hired. Specifically, that may have been a term of your employment agreement. Few employees appreciate the significance of this legalese, but may be in for a disappointment when they speak to an employment lawyer.
It looks like my employment agreement says I only get ESA pay. Is it hopeless?
Not necessarily. Employment agreements are notoriously tricky to draft in Ontario. Because the law in this area is constantly changing, even sophisticated lawyers have difficulty writing an enforceable termination provision. If your employment agreement contains an unenforceable termination provision, it’s as if you had no contract at all. Thus, you should receive common law severance.
I have no employment contract. Why is my employer only giving me ESA pay?
ESA pay is rock-solid. It should be paid to all terminated employees, no matter what. It’s easy to calculate. An employer who fails to pay ESA pay is usually acting in “bad faith”.
On the other hand, calculating common law severance is more art than science. Common law severance falls within a range of reasonability which can be as wide as 6 to 8 months’ pay. What’s more, common law severance is reduced by any money you earn after being fired. For instance, even if your common law entitlement is 24 months, you may only get your ESA pay if you land at a new job right after being fired. Therefore, employers can withhold common law severance it up until they are ordered by a judge to pay it.
Why would I start a new job if it reduces my common law severance?
Because the one legal responsibility you have, when suing your employer for common law severance, is to make “reasonable efforts” to secure comparable employment. For instance, putting out job applications, attending interviews, and accepting any reasonable job offer. If you fail to do so, it can seriously reduce your common law severance.
Will I have to go to trial?
It’s possible, but not likely. Your employer does not want to spend legal fees any more than you do. For this reason, the vast majority of straightforward wrongful dismissal cases settle before trial.
If you are wondering what your entitlement to severance pay is, contact Hyde HR Law today for a consultation.
[crossposted from Goldhawk]