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You’ve Just Been Told Your Employment Is Over
In Canada, employers only have certain avenues by which they are able to legally dismiss an employee. One is called “with just cause” and it applies where the employee has committed an act that in most people’s opinion (and more importantly in case law) justifies dismissal. Think insubordination, lying, stealing, harming someone in the workplace, etc. And even in these cases, an employer often has to build a case over time in order to take such action. This case-building is undertaken in conjunction with what is called “progressive discipline” – a process which usually involves a verbal warning, then written warning, then suspension with pay, then a short suspension without pay, followed by a longer suspension, and then, finally, firing.
The other alternative is “dismissal without cause”. Here, all an employer really has to do is say, in essence, “Sorry, we no longer want you to work here.” But when he/she does say that, the employer has to provide a reasonable “severance package” to the employee they are letting go.
The reasonableness of the severance package is determined by many factors. These include, but are not limited to: length of service, level of position, any promises that had been made, an employee’s age, whether they were enticed to take the job in the first place and leave a former employer or did they apply on their own, the current labour market conditions (i.e. the likelihood of you finding comparable employment quickly), precedent in the legal jurisdiction, and precedent of the employer, etc.
What a dismissed employee usually wants to know is, “Did I get a fair or adequate deal? Could I have done better?” And that’s where you need some objective and knowledgeable advice.
We will provide a FREE exploratory discussion with respect to your severance package in Canada!
Call 416-930-8472 or contact us at firstname.lastname@example.org to arrange your FREE over-the-phone session.
What A Good Severance Package Look Like
The best place to start is to check and see if you signed an employment contract that contains a termination clause. If so, the next step is to make sure the contract was legal, and whether or not it can be challenged.
Where there is no such contract, you want to make sure you were not wrongfully dismissed by being provided an unreasonable severance package. So, what does a reasonable severance package look like?
Here are 12 key components that should be at least sought out or considered, based on a list provided by Kenneth A. Krupat, Barrister & Solicitor, Toronto:
- Salary Continuation and/or Severance Pay: Does it satisfy the applicable provincial (or if you were employed in a federally-regulated industry, the federal) standards amount? In addition, one needs to ensure that this continuance of salary or severance payment(s) are sufficient with respect to their size or applicable period of length, what happens when the employee finds alternative work, when the payments are actually paid (to reduce taxes paid), etc.
- Additional Payouts Due: Bonus, Commissions, Variables This would include any earned payments due to the employee as part of a bonus plan (for work performed or goals achieved) as well as anything due to him/her that would have been paid for the equivalent of the “notice period” (although this is often much harder to obtain). In any case, these payments are often subject to the rules and regulations of the bonus plan. Your chances of getting a bonus payment for the “notice period” after you have been dismissed are increased if you can prove your receipt of such payments in the past. (Of course, this too, is subject to any contract you may have signed.) If you were not on a steady form of salary or wages, but on some form of commission or other variable pay system, you’ll need to make sure you get (during the “notice payment period” what “history” says you’re estimated to likely get again. Bottom line here, go after all your estimated earnings, not just base pay.
- Benefits*: You should be offered the continuation of all extended health benefits, STD and LTD compensation benefits during the “notice period” equivalent as well as other perks that you enjoyed.
- RRSP*: You should try to get the company to continue making RRSP contributions through the “notice period” equivalent.
- Pension Contributions*: The same is true for Pension contributions by the company.
* Note: Where it is not possible, due to the rules of the provider or other reasons to provide you with the items in 3, 4, and 5 above, you should be compensated for the equivalent value.
- Car or Mileage Allowance: If you had the use of a company car, you should be compensated, during the notice period for the normal “personal use” you were allowed in the past. This one is a pretty standard requirement of employers.
- Outplacement or Retraining: Being provided with this or being compensated for its value usually goes hand in hand with the employee agreeing to any “mitigation” provisions, that is, where you agree to have severance payments stop or decrease when you get a job elsewhere. You can negotiate the details of such provision for retraining or outplacement.
- References: A good severance package should include an offer to provide at a neutral reference letter. In addition, the package summary should make a specific statement that any future requests for a reference from a potential employer will be replied to in keeping with the reference letter provided as part of the severance package.
- Other Professional Fees You May Incur: Effort should be made to have your former employer contribute towards your professional fees (e.g. lawyer costs, financial advisor cost, accountant, or other professionals. This is normally done as a single agreed-to payment to cover all of the above.
- Being Able to Compete: Again, this will depend on what may be in any employment contract you may have signed. But either way, employers will try to make sure you don’t go somewhere where you can use the secrets you learned from them or about them with a competitor. When it comes to a non-competition clause, you want as much freedom as possible. But a non-solicitation clause or requirement is harder to eliminate or water-down as they don’t want you taking over their clients. And of course, if you were high enough in the company (manager and above), they’ll want to make sure you don’t go after their other employees to put on your future team.
- And Then Your Perks: Did you have a health club membership, or a company cell phone for your personal use as well, or had your professional dues paid for, covered private annual physical examinations, company discounts, etc.? A good package should cover some or all of these things. But as always, be prepared to trade some of them for other things you want more. *
* Note: All this means, that timing and approach to these negotiations is very important.
- Alternative Damages: Wrongful dismissal damages (payments) are fully taxable as income. However, if the employer acted in a way which violated human rights legislation or participated in ‘bad faith’ conduct, then the payments can turn into “general damages” which are non-taxable. However, please note, this is not easy to prove, especially without a lawsuit or human rights complaint.
Note: The above list is not exhaustive. There may be more things to consider and often some of the above can be waived by the employee in his or her pursuit of a settlement, depending on their specific circumstances. As Kenneth A. Krupat suggests, “In most cases, particularly when a number of different items are listed, employees should make the tax-deductible investment of obtaining proper legal advice from a qualified employment lawyer.”
Why Accord vs. A Lawyer?
Let me, at the outset, state clearly that we are not lawyers. Our strength is in our ability to mediate a fair agreement between two parties – an agreement that both of them are prepared to sign and live by. That’s why we recommend that you take your pre-signed agreement and run it by your own lawyer, or one we can recommend to you.
So, why use us?
Before I list a few reasons, let me make sure you are aware of the following:
- There is no set formula for exact severance pay calculation, no matter what some lawyers or some websites with their calculators may tell you. Those calculators do not take everything into account and at best give you a rough average. The more helpful ones would also tell you that the “answer” is a fairly wide range.
- Negotiating this kind of settlement given all the emotion it gives rise to is best done by someone who is more removed from the situation and acting on your behalf – someone with negotiating experience, knowledge, tact, and skill that can be employed for your benefit.
- Timing is most important as is knowing how to group items sought and when to trade one item for something more desired.
So, why Accord vs. a Lawyer?
First, for the above three points.
Second, it will cost you a lot less.
Third, we at Accord care about people. We are committed to making this process as easy as possible on you, because we know that the stakes are high and the implications can be tremendous in the future.
Fourth, we’ve negotiated and mediated hundreds of different kinds of agreements for organizations, individuals, and couples.
Fifth, we listen. We work hard to determine what is critical to each party and then work hard to get the relief on that item that is acceptable to both.
Sixth, our decades of involvement in helping others will serve all our clients well. We understand life. We understand what can go wrong. We understand what it takes to make the best of a very difficult situation.
Seventh, we will help you get the advice of a lawyer if need be.
What are our fees and what’s the process?
Accord charges by the hour based on what time is required to work directly on your case. The current low fee is $130 Canadian plus HST per hour. (Compare that with up to $400 or more that a lawyer may cost you.)
Negotiating a severance package for you involves:
— finding out what happened and what you were offered
— reviewing the package
— making recommendations as to what else, if anything, can or should be pursued
— getting you to sign a “letter of representation” that can be shown to the employer
— contacting the employer or his/her representative on your behalf
— commencing the negotiations
— keeping you fully informed and getting your decision at each stage of the discussions
We use a combination of emails, telephone calls, and if necessary, in person meetings, to get this done. We do not charge for travel time, but if there are out of pocket expenses, they are billed for and receipts are provided where available.
The negotiator is always working towards minimizing the differences or gaps between what you need to get and will settle for and what the employer is offering until a final settlement is reached. Where necessary when the employer is not cooperating, Accord recommends that the case be turned over to your lawyer.
Find out more about possibly improving your severance package in Canada!