Severance Package Lawyers Calgary

What is severance?

When an employer terminates an employment contract they will often offer the employee a severance package. Generally speaking, the severance package involves a lump sum payment or salary and benefit continuation for a fixed period of time. The offer of severance will often contain a release that the employee must sign before receiving the severance package. The signing of the release prevents the employee from later suing their employer for an unfair severance package.

Why do employers offer severance packages?

At common law, employees are entitled to reasonable notice of termination. The severance package serves as a payment provided to the employee instead of providing notice termination.

Notice termination involves the employee continuing to work at their job during the notice period; as opposed to simply receiving the pay they otherwise would have received had they continued to work during the notice period. In most cases, employers choose to not have the employee continue to come into work, instead choosing to provide a severance package.

What is a fair severance package?

The fairness of a severance package is determined with reference to each particular case and based on a variety of factors, including the character of employment, the length of service, age of the employee, and the availability of similar employment. The facts of a specific case are normally compared to prior judicial decisions across Canada with similar facts to determine the appropriate amount of reasonable notice.

An employee who has a potential human rights or other statutory claim may be entitled to an increase of the amount of severance they are entitled to receive upon termination. Damages for these types of claims may be allocated differently upon receipt such that taxes may not need to be paid on these specific categories of funds.

A severance package should potentially take into account commissions or bonuses the employee is entitled to receive that are due and owing or would be received had the employee worked during the notice period. Similarly, car allowances and stock options may receive similar treatment.

Severance packages can be fixed or limited by the terms of the employment agreement, but language in an employment contract limiting reasonable notice must be clear and unambiguous to be enforceable. Many clauses which appear to limit or restrict an employee’s notice entitlement have been found to be insufficiently clear to restrict the notice entitlement.

There are many considerations to review in determining whether your severance package is fair. Legal counsel can assist in determining what your entitlement may be when you have received a severance package and release.

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