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Assessing Severance Pay

Prepared by Kenneth Armstrong KC

· Employment

Did you know that Employment Standards Act standards for notice of termination without cause or pay in lieu of that notice (commonly called severance pay) are only the bare minimum?

As a basic principle, employees cannot be dismissed without just cause or reasonable notice. So long as you’ve been at the same job for at least 3 months, the Employment Standards Act sets out a minimum notice of termination (or severance pay) based on length of service, to a maximum of 8 weeks, as follows:

(i) one week's notice after 3 consecutive months of employment;
(ii) 2 weeks' notice after 12 consecutive months of employment;
(iii) 3 weeks' notice after 3 consecutive years of employment, plus one additional week for each additional year of employment, to a maximum of 8 weeks' notice;

These Employment Standards Act minimums are only binding on complaints heard by the Employment Standards Board.

Sometimes your employment agreement will have an express term governing notice of termination; so long as that is not worse than Employment Standards Act minimums, the courts will uphold those terms.

Many employment agreements aren’t in writing, and many employment agreements don’t have terms
governing notice of termination or severance pay. In those cases the courts have held there is an implied term in the employment agreement to provide reasonable notice of termination (unless there’s just cause), and that reasonable notice can be much more than the Employment Standards Act provides. Employers can give severance pay instead.

Factors such as your age, length of service, the nature of your employment, and the availability of alternate employment all may all impact the amount of severance pay you're entitled to receive, although length of service is the biggest factor. The upper limit is 24 months notice or pay in lieu of notice, which is typically reserved for life long employees of a company well over age 50 in a senior position at the firm.


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