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Executive Severance Pay

As we have commented on various posts, employees that are terminated without cause from their employment are entitled to a severance package in accordance with the Employment Standards Act (ESA) in Ontario and the common law. Those employees that are terminated for cause from their employment may also be entitled to severance pay so long as the ‘misconduct’ that was used to justify the dismissal does not rise to the level of ‘just cause’ as determined by Court precedent.

The calculation of severance pay is dependent on each specific circumstance.  For certain, an employee in Ontario is entitled to the minimum amounts of notice of termination, or payment in lieu of notice of termination, in accordance with the ESA (provincial employment standards legislation) as described in more detail here and here.  To reiterate, the ESA sets out the minimum rights of an employee upon termination.  There is a presumption that an employee is also entitled to reasonable notice of termination or payment in lieu thereof, in accordance with the principals enunciated by the common law in Ontario.

The common law refers to judge-made law and is comprised of the body of precedent cases that have been heard and ruled on in this province. Judges are required to follow-up and/or be persuaded by similar precedent cases when rendering judgments. Accordingly, over-time, various principals have been established via Court precedent to determine the quantum of severance pay an employee is entitled to upon termination of employment.

The well-documents factors include, but are not limited to the following:

  1. The Terms of An Employment Contract or Offer of Employment

Many cases (precedents) have touched on termination clauses in employment agreements.  In order to reduce the severance pay owing to an employee upon termination in Ontario, an employer can draft a clear and unambiguous termination provision, which limits an employees’ rights to severance pay upon termination to the statutory minimum (thereby rebutting the presumption of entitlement to common law or reasonable notice).

If you have been terminated from your employment, it is of paramount importance that your employment contract is reviewed to determine whether the precise wording of the termination provision in your employment contract would be enforceable by a Court or not.  Specific language around statutory notice, benefits continuation, and otherwise, must be included in these clauses in order for them to be enforceable, otherwise, a Court will award the employee reasonable notice, which is often greatly enhanced over and above the statutory minimum.

2.  Age

Typically, the more advanced the age of an employee, the more difficult it will be to re-train for another career or find another job in a timely manner.  Accordingly, employees of advanced age are typically awarded more severance pay that younger employees that have brighter job prospects.

3. Seniority in the Company

Executives are typically entitled to enhanced severance pay periods as compared to minimum wage or lower income workers as fewer comparable jobs are available to executive. As such, the severance package should be designed to bridge the employee in between employment.  For an executive, the severance negotiation can come down to salary, benefits, equity compensation, pension payouts, and other forms of compensation.

Often, employers will seek to have an executive sign off on a severance offer without it being reviewed by an employment lawyer. It is important to ensure that your rights and entitlements are protected; as such, contact an employment lawyer in Ontario today for a free severance package review.


Senior Executive Severance Packages

Severance packages for senior executives can often amount to several hundred thousand dollars in entitlements. Accordingly, it is imperative that executives are attuned to the employment law issues that are prevalent in severance packages in Ontario.

A wrongful dismissal occurs when an employee has been terminated without cause from their employment and has not been provided with a reasonable severance package in the circumstances. The basic principle in awarding damages from wrongful dismissal is that the terminated employee is entitled to compensation for all losses arising from the employer’s breach of contract in failing to give proper notice of termination. The damages should place the employee in the same position they would have been had they remained employed.

Accordingly, damages for wrongful dismissal (or severance packages) may include an amount for bonus or incentive compensation that the employee would have received had he/she continued employment during the notice period. This is more typically the case where the bonus is an integral part of compensation. As few as two consecutive discretionary bonus payments have been found to be enough to constitute an integral part of compensation. In Bain v. UBS Securities, the Court considered the following factors in determining whether a bonus payment was an integral component of compensation:

(a) Whether the bonus was received each year;
(b) Whether the bonus was required to stay competitive with other employers;
(c) Were bonuses historically awarded and did the company ever exercise its discretion;
(d) Did the bonus constitute a significant portion of the employees overall compensation.

If you are a senior executive that has been terminated from your employment in Ontario and have been offered a severance package, it is imperative to ensure that the severance accounts for all forms of compensation during the notice period, including bonus entitlements. For a free severance package review, contact the Goldstein Law Firm today!

Temporary Layoffs in Ontario

Temporary laying off an employee in Ontario often occurs in the context of seasonal businesses that required a reduced headcount during slow times of year or businesses that are in general decline. Rather than paying our full severance obligations to an employee, as required on the termination of employment, as discussed here and here, a temporary layoff affords the employer the opportunity to take an employee off of payroll for a defined period of time.

In employment law in Ontario, termination and a layoff have two very distinct meanings. A termination is a complete end to an employment agreement, which, if implemented on a without cause basis, gives rise to severance obligations. A layoff, on the other hand, is when an employer temporarily cuts off an employees employment, with the expectation that they will return back to work within a defined time period. Should the layoff exceed the maximum amount of time permitted to layoff an employee in accordance with the employment standards legislation in the province, the layoff will transform into a termination.

Under the Employment Standards Act in Ontario, employers are permitted to temporarily layoff an employee for a period of up to 13 weeks in a 20-week period. There are also rights to extend the layoffs under certain conditions. Under the Employment Standards Act, section 56 governs the layoff of employees working in Ontario.

A key issue with layoffs that an employer must be aware of is that despite the right to issue a temporary layoff as contained in Section 56 of the Employment Standards Act, an employer does not have the unilateral right to temporarily lay off an employee without a contractual right to do so. In other words, an employment agreement must be signed between the employer and employee that expressly authorizes a temporary layoff. Absent an agreement authorizing the layoff, the employer is not permitted to layoff the employee for any period of time. As such, the layoff will constitute a constructive dismissal at law, if the employer does not agree to bring the employee back to work immediately.

If you are an employee that has been temporarily laid off in Ontario, it is best to consult with an employment lawyer to determine whether the employer has complied with their obligations. It is imperative that you seek legal advice before agreeing to a layoff to ensure that you understand your legal rights.

Executive Employment Law

Goldstein Law is an employment law firm with experience in assisting executives of large corporations in negotiating valuable severance packages in the event of a termination of employment. We receive inquiries from employees quite often alleging that they have been wrongfully dismissed from their employment, merely because they were terminated.

Under the Employment Standards Act in Ontario and the common law, employers are at liberty to terminate an employee without cause at any time for any reason whatsoever, so long as it is not a discriminatory reason. In the event of termination on account of discriminatory ground, which are outlined as prohibited grounds of discrimination in the Ontario Human Rights Code, a few examples of which, including termination due to disability, pregnancy, ethnicity, gender, etc. Absent a discriminatory ground for the termination of employment, and assuming a legitimate business purpose for ending the employment relationship, the employer has certain obligations under the Employment Standards Act and common law that must be abided by.

If the employers’ obligations are fully satisfied, which will include the payment of the minimum amounts of termination pay as prescribed by the Employment Standards Act (and severance pay if certain criteria are satisfied), and advanced notice of termination or payment in lieu thereof in accordance with the common law (absent a fully enforceable termination clause in the employment agreement which can serve to nullify the terminated employees rights to an enhanced severance)

Accordingly, if you have been terminated from your employment without cause in Ontario, please call an employment lawyer today to discuss your legal rights and to review your severance package for free.