Toronto Employment Lawyer Negotiating Termination Packages for Employees

Termination is an extremely trying and often unexpected experience for an employee. Typically, the employer informs the employee of their termination and presents them with a termination package to review and sign in quick succession. When this occurs, employees are generally experiencing distress and cannot properly consider and assess the terms presented to them. While an employer must allow an employee time to review any termination package offered before signing, there is often express or implied pressure to execute the documents quickly, placing an additional burden on the employee.

At Haynes Law Firm in Toronto, our employment law team works with terminated employees to ensure they receive maximum compensation and all eligible benefits from their employers. In many cases, an employer’s initial termination package covers just the minimum statutory requirements while overlooking or shortchanging common law notice periods to which an employee may be entitled. Employers may not address factors such as an extension of medical benefits during the notice period or non-salary compensation, such as bonuses, commission, and overtime pay. At Haynes Law Firm we review the employee’s employment history in detail to understand their full entitlements and commonly engage in negotiations directly with the employer on the employee’s behalf.

Reasonable Notice of Termination or Pay in Lieu of Notice

Employees are entitled to a minimum notice period, based on the duration of employment, under Ontario’s Employment Standards Act. The amount of notice under the statute is minimal, ranging from one week (after three months of employment) to eight weeks (after eight years or more of employment). The full range of minimum entitlements, based on the length of service, are as follows:

While employers are required to provide the minimum statutory amount of notice, or as is the more common practice, pay in place of notice, there is also the common law to consider.

Over the years, case law has established additional notice requirements commonly applied in a termination. By considering several factors first set out in 1960, in a decision called Bardal v. Globe & Mail Ltd., courts often impose additional notice to an employee who has been terminated without cause. These factors include:

• The employee’s age at the time of termination;
• The character of the employment;
• The duration of employment; and
• The ability or likelihood of the employee finding similar employment elsewhere, considering the employee’s skills, experience, and qualifications.

The common law notice requirements are often added to an employee’s damages award if they bring a successful case for wrongful dismissal. Therefore, employers will sometimes include pay instead of notice beyond the statutory minimums in the termination package to avoid a costly wrongful dismissal claim. However, if they do not, it should be identified and rectified before signing the release form.

Severance Pay Entitlements in Ontario

Employees in Ontario may also be entitled to severance pay, which is distinct from termination pay. While termination pay is paid to an employee to compensate them for the notice they should have received but didn’t, severance pay is intended to assist an employee with bridging the gap between ending their current employment and securing a new role. Unlike termination pay, severance pay is not a broad-sweeping entitlement and is much more limited in its application. An employee may be entitled to severance pay if their employment is severed and:

1. They were employed for more than 5 years with their employer; and
2. The employer has a global payroll totalling at least $2.5 million; or
3. The employer has terminated 50 or more employees at the same location within a 6-month period.

While severance pay is limited to those who qualify based on the above criteria, it is an important consideration upon termination for those who may be entitled. Severance pay entitlements equal one week’s pay per year of service up to a maximum of 26 weeks. If you qualify, failure to enforce your full severance entitlement can be a costly mistake.

Bonuses, Benefits, and Commission Entitlements Upon Termination

In addition to termination pay and severance pay, employees may also be entitled to further compensation for bonuses, medical benefits, and commission during the applicable notice period.

Benefits After Termination

Employees are entitled to remain enrolled in their employer’s benefits plan, including long-term and short-term disability coverage, for the duration of the notice period as per the Employment Standards Act. Benefits, in this context, can include:

• Medical and dental benefits;
• Short-term and long-term disability coverage;
• Vacation pay;
• Pension and RRSP contributions;
• Car allowances;
• Professional membership dues; and
• Life insurance coverage.

In some cases, an employer may prematurely cancel a terminated employee’s coverage with the third-party provider, rendering the employee unable to collect benefits if the need arises during the notice period. If this occurs, the employer will be responsible for covering the cost of the benefit for the duration of the employee’s entitlement.

Bonuses and Commission After Termination

Employees who earn non-salaried compensation, such as bonuses or commission, are entitled to receive this compensation during the reasonable notice period unless their contract specifies otherwise. If a term limits the employee’s right to bonuses or commission after termination, reviewing this language with a lawyer prior to accepting the termination package is important.

In many cases, termination contracts attempt to limit bonuses or commissions to ‘active’ employees to avoid payment during the notice period. However, courts have demonstrated a willingness to consider an employee ‘active’ during the notice period and therefore entitled to this income. Before accepting a termination package that attempts to limit or remove entitlement to non-salary compensation, it is essential to review the package and the employment contract with an experienced employment lawyer.

At Haynes Law Firm, our team is exceptionally skilled at identifying language which unfairly limits our clients’ right to non-salary compensation. We negotiate on behalf of our clients to ensure they receive the maximum compensation they are entitled to for the entirety of the notice period.

Employment Contracts as They Relate to Termination Packages

While an employer cannot contract out of its obligation to pay the statutory minimum notice under the Employment Standards Act, other compensation may be legally excluded in the contract’s termination clause. Even if your employment contract contains such a clause, it is vital to have your employment lawyer review the agreement before signing your release, to ensure the termination clause is valid. Many clauses are considered invalid and unenforceable due to ambiguous language or other errors. So, the mere existence of a termination clause does not necessarily mean your entitlements are limited. If the clause appears invalid, this will factor into ongoing negotiations between you and your employer.

To Receive Maximum Compensation and All Benefit Entitlements Upon Termination, Contact Haynes Law Firm in Toronto

At Haynes Law Firm, we work with employees to ensure they receive maximum compensation upon termination. Too often, employees feel pressured to accept a termination or severance package quickly, without conducting a proper review before signing. We ensure our employee clients leave nothing on the table when negotiating the terms of their dismissal, so they have the resources they need while they seek new employment. To discuss how the employment law team at Haynes Law Firm can assist you with ensuring a fair compensation package upon termination, please contact us online, or by phone at 416-593-2731.