Severance Pay Ontario Be Included in a Contract
Whether you see it coming or not, losing your job is a harrowing experience. You’re left scrambling to figure out where you’ll work next and how you’ll cover your expenses until then. One question that often comes up is whether or not a bonus should be included in your severance pay package. Employment lawyer Lior Samfiru, national co-managing partner at Toronto-based employment law firm Samfiru Tumarkin LLP, breaks down how this works in this Season 3 episode of the Employment Law Show.
It’s important to note that severance pay is distinct from, and in addition to, the termination pay an employer must give to its employees upon their departure from a company. In Ontario, the Employment Standards Act, 2000 (ESA) sets out a minimum amount of severance pay Ontario that employers must offer their employees. That amount is one week’s pay for every completed year of employment, up to a maximum of 26 weeks. This is a statutory obligation that applies to all non-unionized employers in Ontario regardless of what’s written in their employment contracts.
However, a severance package is also based on common law considerations, which can result in more generous compensation for employees who’ve been terminated without cause. The length of time an employee has worked for the employer is a key factor, as is their age. It’s also possible that the employer has benefits plans or policies in place that may supplement or exceed the statutory minimums.
Can Severance Pay Ontario Be Included in a Contract?
The ESA also stipulates that an employer must provide its employees with working notice of their intended firing, unless they have good cause to dismiss the worker immediately. “Cause” is a high standard that the Ministry of Labour and courts generally require employers to meet before they can fire an employee and not pay them any severance or termination pay. Moreover, even when an employer does have good reason to terminate a non-unionized employee’s employment, they must still offer them a reasonable severance package in lieu of working notice.
When drafting their employment contracts, companies should take the opportunity to include clear and unambiguous language about how bonuses are treated post-termination. That will ensure that, if a bonus is due to be paid out when an employee is laid off, the company’s severance package will reflect this. This will help to prevent confusion and uncertainty, which can lead to financial hardship for laid-off employees. It’s also important to ensure that any severance packages are carefully reviewed by an experienced lawyer to protect the interests of employees who are facing this difficult financial situation.
An experienced attorney can help ensure that the severance package meets or exceeds the minimum legal requirements. This can be done by reviewing all applicable policies and comparing them to the relevant statutory requirements. Then, the severance package should be revised accordingly. This will make it less likely that the severance package could be challenged by a former employee in court. It’s important for all employers to consider these issues in order to ensure that their severance and termination pay practices are in compliance with the law.