When employees are terminated without notice, they are typically provided with a termination letter outlining what the employer is offering in terms of a monetary payout. It can be incredibly stressful to experience a termination and have to make decisions regarding accepting or denying an offer. To further add stress, employers often state that the offer is only available for acceptance until a certain date and require you to sign a release in short notice. But how are you supposed to know if the termination package is good?
1. Terms and Conditions
Your employer is never permitted to establish a time limit for acceptance of a termination package or else deny you your statutory termination pay. Yet, this is something we see all the time in termination packages. At law, Ontario’s Employment Standards Act provides for certain minimum entitlements upon termination. Your employer is required to pay you at least the minimum entitlements prescribed by the Act. Your employer has no lawful authority to deny you these amounts for failure to accept their terms prior to a created deadline. Further, your employer cannot require you to sign a release prior to you receiving the minimum requirements. Your employer may create and impose certain conditions regarding any added incentives or bonuses they choose to offer you, but any such terms cannot affect your minimum statutory entitlements.
2. Sources of Pay
a) Employment contract
In considering whether your employer has offered you a termination package that you should accept, the employment contract is the first source to turn to. When you began your position, it is likely that you would have signed an employment contract that stated what the company was willing to offer you upon termination.
As employment lawyers, we review employment contracts to ensure that a) the termination package agrees with the employment contract and b) that the employment contract provides at least the minimum requirements as established by statute.
Where the employment contract provides for at least the statutory minimums in three areas (termination pay, severance and continuation of benefits), then the employment contract likely governs your entitlements and the concern is whether your termination offer is in line with those entitlements.
Where the employment contract provides for less than the statutory minimums in any of the three areas, then we consider the termination offer in light of what your likely common law entitlements are.
In Ontario, the Employment Standards Act creates statutory minimums that your employer must provide, albeit not all employment relationships may be covered. Generally, however, the statutory minimums refer to three benefit requirements: that you receive termination pay, severance pay if entitled, and that benefits continue for a certain period.
If any of these three benefits are offered in your termination package in a lesser amount than the statutory minimums, then your entire employment contract is considered invalid at law.
c) Common law
Under the common law, employees terminated without cause have a right to reasonable notice or pay in lieu thereof. Your entitlements under this regime will typically be superior to the minimum standards under the Employment Standards Act, and most employment contracts. Where there is no employment contract, or the contract is deemed invalid, employees can make a claim for pay in lieu of reasonable notice.
The amount of notice you are entitled to can vary greatly depending on several factors. When determining what reasonable notice is, the Court will consider factors such as your age, seniority, the position you occupy and availability of similar employment, among others. Reasonable notice at common law is based on precedent, meaning the previous decisions of other Courts under similar circumstances. For example, the Courts have generally considered that employees with long terms of service or that are nearing retirement age may be entitled to longer periods of reasonable notice. Similarly, where the employee occupies a position in a highly specialized field or where there is low likelihood that a comparable job will be available within a reasonable time, Courts have also considered that the notice period should be extended.
This contextual analysis can be difficult, but an employment lawyer can help you determine what may be considered reasonable notice in your specific circumstances given some of the factors outlined above, and advise you on how the termination package offered to you compares.
You are entitled to the minimum standards set out in the Employment Standards Act with regards to termination and severance pay regardless of whether you find a job immediately after being terminated or take no steps to find alternate employment. However, where you make a claim for reasonable notice or pay in lieu thereof, under the common law, the Court will consider whether you have attempted to mitigate your loses, meaning what steps you have taken in order to find another job or obtain another source of income. Failing to mitigate your damages can have a significant adverse effect for any claim of reasonable notice under the common law. For more information regarding mitigation, and how COVID-19 may affect your duty to mitigate, see our blog on the subject.