Clients call Goldstein Law Firm on a daily basis after being terminated from their employment. One of the common questions we receive from people is – if we do not accept the initial severance offer and alternatively enter into a negotiation or litigation against our former employer for wrongful dismissal, will we receive any funds during the proceedings?
Terminated employees are typically desperate for pay to bridge the time while they are unemployed; as such, people are often hesitant to reject the initial offer in fear that they will not receive any funds until a settlement is reached. This is a popular misconception. Irrespective of whether the employee agrees to the initial severance offer, the employer is required to pay the employees’ statutory entitlements in accordance with the Employment Standards Act (“ESA”), which includes up to 8 weeks of termination pay and, if the specific formula as governed by the ESA is satisfied, then one-week per year worked in severance pay; accordingly, if you have been employed for a substantial number of years prior to termination, your statutory entitlements can be significant.
After your statutory entitlements are fully paid by the employer, if the wrongful dismissal case is not yet resolved, employees that are terminated without cause are eligible to receive Employment Insurance (EI) benefits, subject to accumulating sufficient insurable hours prior to the termination. EI is another form of income replacement to bridge the gap following a termination. Should a settlement for wrongful dismissal be reached following the receipt of EI Benefits, Service Canada may calculate an EI repayment, which would require a portion of the severance package to be deducted based on the amount of EI received during the notice period.
Nevertheless, to summarize, employees are entitled to payments following a termination without cause, whether or not the original offer of severance is accepted. Such obligations are mandated through employment legislation in Ontario, which provides income support to terminated employees. Accordingly, the biggest risk to an employee is accepting an initial severance offer than falls well below their legal entitlements, thereby leaving potentially thousands of dollars on the table only because they are ill-informed. As such, it is imperative that you consult with an experienced employment lawyer following the termination of employment to understand your legal rights.