Back to blog

Five Factors That Will Affect Your Severance Package

Five Factors That Will Affect Your Severance Package

In Canada, every employment relationship is defined by an employment contract. Sometimes these contracts are written out, however, many employment contracts are implied. Simply put, an implied employment contract are the terms, conditions, and expectations defining the relationship between an employee and an employer.

If a non-unionized employee does not have a written employment contract, an important term of that contract will be that the employer must provide reasonable notice of the end of the worker’s employment. In normal circumstances, reasonable notice is designed to allow the employee sufficient time and resources to secure a comparable job elsewhere. When providing notice, the employer can either provide a working notice, where the employee is provided with notice that his or her employment will be coming to an end and is expected to work up until that date, or pay in lieu of notice, where the employer relieves the employee of his or her duties and pays out the notice period.

Nobody, including the employee, the employer or their lawyers, will know exactly how much notice will be required to allow a dismissed employee to secure comparable employment. For this reason, if an employer is not claiming just cause for dismissal, there are 5 main factors which affect the notice period or severance an employee is entitled to.

1. Is There a Written Employment Contract?

The first and arguably the most important factor in determining a notice period will be whether there is a written employment contract. Because the notice of termination is an implied contractual term, employers and employees can modify this by making it a written contractual term. This means that provided the written employment contract does not go against employment standards, the Human Rights Code or other employment laws, in most circumstances it can define or limit what an employee is entitled to receive upon termination.

2. The Employee’s Age

Research has long shown that employees in the twilight of their career have more difficulty in securing comparable employment than other age groups. There are several reasons for this. Employees in their 50′s and 60′s, for example, may have higher salary expectations. Potential employers may also be concerned about imminent retirement, or that there may be increased demands for pension, benefits, and vacation. For whatever reason, employers are often reluctant to take on aged hires and courts have recognized this fact by according lengthier notice periods for employees over the age of 50.

3. The Employee’s Tenure

The third factor in considering an appropriate notice of termination is the length of time that the employee has worked for the employer. With time, employees of long tenure will develop skills specialized to their place of employment. Further, resumes become outdated, interview practices become rusty and these employees may be neglecting new networking tools such as LinkedIn or Twitter. For these reasons, Canadian courts have recognized that an employee’s tenure is a very important factor in considering damages for wrongful dismissal.

severance packages pa

4. The Character of Employment

A fourth relevant consideration is the employee’s position and responsibilities. The logic is that employees in management-type roles will have more difficulty finding employment with comparable responsibilities than employees with lesser responsibilities. This factor is increasingly being criticized, however, and there is an ongoing debate in the legal community as to whether it is still appropriate. Regardless, at least for the time being the character of employment continues to be a relevant factor in the Province of British Columbia.

5. “Employability”

Finally, Canadian courts consider the dismissed person’s “employability”. This catch-all takes into consideration the employee’s education, demand for their skills or trades, the local economy and a host of other factors. In this criteria, one needs to only think of a hardworking and loyal employee, but without a grade 12 education, who slowly climbs the ranks within his company only to be terminated. The probability that this same employee will be able to replicate those achievements with a different employer in today’s economy would be challenging, to say the least. One may also think of someone who is extremely specialized but where few opportunities for employment exist in that area of the province. If that employee loses his job, the chances of finding comparable work in that same area could be limited.

In assessing damages for wrongful dismissal, lawyers and judges will consider all of these factors and will apply them to the facts of each case. Unfortunately, due to the many variables that must be considered, there is no hard and fast rule for deciding how much an employee is entitled to receive for their wrongful dismissal. However, in many cases, employee compensation for termination of employment can be equal to several months’ wages.

If you have further questions, please contact us at Doak Shirreff lawyers. We have your best interests in mind and would be happy to help.