Toronto Employment and Labour Law Blog: Fired? Negotiating Severance: 10 Keys to Success

#2 MINIMUM ENTITLEMENT

 Every employee is entitled to receive the minimum notice and severance which is set out in the Employment Standards Act. The amount of your entitlement depends and the length of your employment. Employers must provide the amount set out in the Act. If they do not they are in serious violation of the legislation and can be fined for noncompliance.  

If you have signed an employment contract that provides for your entitlement on termination without cause you will, in most cases, be held to the terms of that contract. Whatever the amount set out in the contract amounts to it must be no less than what you would receive under the legislation.

 If you did not sign an employment contract the common law will apply to the termination of your employment. Your entitlement to compensation will be based upon (a) your years of service. (b) your age, and in some cases (c) the level of your responsibilities and (d) the market for your re-employment. The longer your employment, the older you are at the time of termination the greater your entitlement to notice and severance.

In most cases, you cannot "double dip". That means that once you have found reemployment the notice, severance and benefits stop as they have now been replaced. In most cases, you must make reasonable efforts seek out to find reemployment.

 In order to motivate you to look for new employment, many corporate employers will provide salary on a month to month basis to a maximum of so many months depending on your age and years of service. For example, if the offer is 12 month salary and benefits paid month to month 50% of the balance of the 12 month term will be paid to you if you find reemployment before the end of that term. So that even if you are reemployed you receive 50% of the remaining term as a thank you from your employer for finding reemployment rather than waiting for the full term to run out.

 Most employers that keep terminated employees on payroll for a number of months do so on the understanding that the employee is making reasonable efforts to find a job. If the employer finds that the employee is not making reasonable efforts to find a new job the employer can stop payment on the basis that the former employee is not complying with their duty that forms part of the termination agreement. For example, vacationing in Florida for 6 months during the notice period is a bad idea. Once the employer is informed there will be no further payments. Even more, the employer may be entitled to a return of some or all of the money already paid. This is called the employee's duty to mitigate their damages. Of course, there is no such duty if the employer pays on a lump sum basis. It usually takes a skilled employment lawyer to convert a month to month severance package that requires mitigation of a lump sum payout.

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