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Mistakes to Avoid When Providing a Severance

Whitten and Lublin | Jun 08, 2018

It is important to avoid mistakes when administering a severance, as it may lead to further damages or compensation if challenged. When dismissing an employee for anything other than misconduct, employers owe at a minimum the statutory notice period or payment equivalent to earnings that would have been paid during the length of the notice period. However, employers may owe more than what is mandatory by applicable legislation. This is because legislation provides the employee minimal guarantees, whereas the courts have determined that employees may be owed a longer notice than what is written under applicable employment legislation. This is known as common law notice, which is an estimate of how long it would take an employee to find comparable employment.

How to determine whether an employee is owed common law notice?

If an employee is subject to a termination clause, then they would be owed severance according to the clause, providing that it offers at least as much as the statutory minimum under applicable legislation. It is also important to ensure such clauses are valid, as termination clauses have become subject to increased scrutiny by the courts over the past few years. Determining whether a termination clause is valid could be technical, so it is advisable to consult an employment lawyer if considerable time has passed since the clause was drafted. If the clause is found invalid, this could cost an employer in litigation and increased severance at common law.

If the employee is not subject to a termination clause, then they may be owed more notice or payment in lieu than provided under applicable legislation. For employees occupying lower skilled/entry level positions, statutory minimum notice would likely be sufficient. For employees occupying higher skilled or more senior roles, the common law would entitle these employees to significantly more notice, as it would take longer to find a comparable position. Factors such as length of tenure, age, position, skillset, and labour market conditions are some factors that will be considered when determining common law notice. Consult an employment lawyer to provide an accurate estimate, thus avoiding costly legal battles and lengthy litigation.

Benefits and Vacation Continuation

When administering notice pay, it is important not only to include the remaining vacation an employee has yet to take, but also the accrual of vacation over the notice period. Further, all benefits that an employee is entitled to must also continue during the notice. Failing to do so would mean an employer is running afoul of applicable legislation, which could be costly. Benefits must include any additional perks offered by the employer that go beyond mandatory benefits such as Canada Pension Plan and EI contributions. This may include drug and dental plan continuation, private pension plan contributions and so forth.

Overall, it is important to avoid the above pitfalls, as this could save time and money. It is always advisable to consult an employment lawyer if there are any uncertainties.

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