Hi everyone,
I am Nadia Zaman, Associate at Rudner Law, and this video addresses how to assess entitlements
upon termination without cause.
Contrary to popular belief, employees are not necessarily entitled to one month per
year of service.
Employees are also not limited to what the employment standards legislation says, unless
they signed a contract which says so.
And even if they did, the contract, or the termination clause, may not be enforceable.
And it sometimes surprises people to learn that generally speaking, employees are entitled
to have a package comprised of all forms of compensation, and not just base salary.
The entitlement to notice has two distinct sources.
The Employment Standards Act (or the ESA) provides for specific periods of notice based
upon length of service.
An employee is entitled to notice of termination (or termination pay instead of notice) if
they have been continuously employed for at least three months.
The maximum amount of termination pay required to be paid under the ESA is 8 weeks.
An employee is also entitled to severance pay if they have been employed with the employer
for at least 5 years (whether the employment was continuous or not and whether the employee
was active or not), and the employer has a payroll in Ontario of at least $2.5 million
or the employer has severed the employment of 50 or more employees in a six-month period
because all or part of the business permanently closed.
The maximum amount of severance pay required to be paid under the ESA is 26 weeks.
It is generally easy to assess what an individual will be entitled to under the ESA.
The common law situation is quite different.
The courts have deliberately not defined what "reasonable notice" is using a black and
white formula.
There's a common myth out there that it's one month per year of service, but courts
have repeatedly said that no one factor is determinative, and that all relevant factors
should be considered in order to assess how long it will take an individual to obtain
new employment, as common law notice is a bridge to new employment.
The factors include but are not limited to: · length of service
· age of the employee · the type of position held, and
· availability of similar positions.
Another common factor is inducement - that is, if the employee was induced to leave long-term
secure employment.
In calculating common law reasonable notice, we usually use length of service as a starting
point and then adjust it up or down based upon age, position, and other relevant factors.
Common law reasonable notice is an art, not a science - and it is impossible to predict
with certainty what an individual will be entitled to.
Every case will be assessed based upon its own particular facts.
The best that we can do is provide an estimated range of what we feel a court might award
in a particular case, based upon previously decided cases with similar circumstances.
It must be kept in mind that the common law notice includes statutory notice and severance,
if applicable.
It is not to be added on top of the statutory amounts.
By default, employees are entitled to receive all of the compensation that they would have
received had they continued to work during the notice period.
This includes not only base salary, but also commissions, bonuses, benefits, and perks
such as phone or car allowance.
So it is not sufficient to simply continue salary and some benefits, and all compensation
should be continued throughout the notice or severance period.
The only exception is if the contract or policy explicitly excludes it.
There are various factors that go into determining an individual's entitlement upon termination
without cause.
And no two cases are the same.
So if you are an employee, how do you know that your package is fair?
If you are an employer, how do you ensure that you provide a fair package prior to termination?
We always recommend seeking legal advice in such situations.
So whether you are an employer or an employee, feel free to contact us.
When employers seek our legal advice as they consider dismissal, we provide our opinion
regarding the employee's entitlements and then present options for moving forward.
Once our client determines how they want to proceed, we will prepare the necessary dismissal
letters and guide them through the process so they can minimize risk.
We encourage our clients to consider every termination and assess the most strategic
way of approaching it.
Many organizations fall into the trap of doing every termination the same way.
Perhaps they always offer a lump sum payment, or salary continuance.
However, the law allows employers to decide whether they will provide:
* Working notice, * Salary and benefit continuance,
* A lump sum payment, or * Some combination thereof.
When individuals come to see us to review their severance packages, we explain the law,
ensure that we understand all relevant factors, including whether there are extenuating circumstances
that could entitle the employee to damages beyond severance.
We also explain some of the nuances, such as the pros and cons of lump sum payments
versus salary and benefit continuance.
Finally, we will review the severance package that has been offered and assess where it
is deficient.
At that point, we can discuss strategy.
After all, if you are an employee, you probably don't want to spend $5,000 to get an extra
$2,000.
And you may not have a claim if you can find new work quickly.
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