Author: Daniel A. Lublin
Seldom is severance pay based on arithmetic. Courts do not follow any defined rules in calculating how much severance to pay to a particular employee. Neither does your ex-employer. Rather, a judge’s task is to consider all of the circumstances that either hinder or help a dismissed employee to find a new job. I am familiar with over 100 factors relevant to this determination. However, rarely will that many issues compete in any one case. More typically, there are four or five factors that are always more often considered than others:
- The time to replace a particular job is the single most important factor in your entitlement to severance pay, but it also is the most imprecise. A court will be particularly interested in how long it has, or ought to have, taken the employee to find a similar position, considering the relative skill, experience and training that employee possesses. Employees with greater credentials and industry-related sophistication are presumed to be able to re-employ more swiftly. However, rarely is this their reality. The former manager who held a specialized position will experience difficulty in replacing the status, prestige or pay that she previously enjoyed and will be awarded greater severance to compensate for the longer period of time that she went without pay.
- The length of employment. An employee’s entitlement to severance pay is proportionally related to the length of time that she had been employed, with a longer-term employee receiving more severance pay. For exceptionally long-term employees, finding a replacement job is more difficult because they have been out of the job market for longer and their skills or accreditations may have become obsolete. For this reason, shrewd employers frequently offer outplacement services as part of their initial offer of severance.
- Courts award more severance pay to older employees. A judge’s inclination to grant older employees greater severance is not based on sympathy or the fact that he or she is about the same age. Rather, it is based on statistical data demonstrating that older employees, especially those past their mid-fifties, face a more daunting task in replacing a lost job.
- Canadian courts are instructed to follow precedent. Judges must follow previous court decisions unless the facts are dissimilar. Wrongful dismissal trials are, therefore, based as much on the prevailing precedents as they are concerned with the facts of any given case.