How do I know if a severance package is fair?

How do I know if a severance package is fair?

Losing your job can be one of the most stressful experiences you will ever face.  One of the biggest sources of stress, obviously, is money.

When you’re told you can’t rely on continuing paycheques any more, and are asked to agree to a final payment by a deadline, that can make things even more stressful.

But how can you tell if the termination package you’re being offered is fair?  What sorts of things should you be thinking about when you’re deciding whether to accept a package, or maybe ask for more?

This is an important decision.  If you accept a settlement package, the employer will ask you to sign a “release,” which means that you won’t be able to go after money later – even if, at law, you would have been entitled to much more!

In this blog article, we talk about some of the things you need to know before you consider accepting a termination package.

Don’t sign anything before you talk to a lawyer – and sometimes that means asking for an extension of a deadline to sign.

This is, hands down, the first and most important thing to know: before you sign or agree to anything, see an employment and labour lawyer.  Don’t let the employer advise you on how generous the package is; get advice for you from an experienced lawyer who’s looking out for your interests and no one else’s.

Sometimes, employers will try to force you to sign something within a deadline. Happily, however, most employers will give you a reasonable extension of time if you need the time to get legal advice.

To be clear: you should see a lawyer even if you’re reading this article and doing your own research from reliable sources like this one.  No information on the internet is a substitute for real legal advice from an actual lawyer who knows all the relevant facts of your case!  Your termination can mean thousands of dollars.  This is not something that you want to leave to Google research.

Were you fired for cause, or is the employer saying you did something wrong?

If an employer has a really good case that you deserved at law to be fired, or for “just cause,” then you may not be owed any notice or severance at all – and, if you settle, it may be heavily discounted because of your alleged misconduct.

On this particular issue, however, the law is really on your side as the employee. It’s usually pretty hard for an employer to argue that an employee should be fired for cause.  Usually, for just cause to be upheld, the law requires warning from the employer about unacceptable conduct, and requires the employer to help the employee improve his or her performance.

What does your employment contract say?

One of the first things an employment and labour lawyer will ask you about your termination is whether you signed an employment contract. If you did, he or she will want to see it. This is because the employment contract will often set out what you’re entitled to if you are terminated “without cause.”  Sometimes, the employment contract will state that you’re owed nothing more than the minimum amount provided by employment standards legislation, such as the Employment Standards Act in BC or, for federally regulated employees, the Canada Labour Code.  Other times, the contract will lay out a formula of notice or pay in lieu of notice depending on how long you’ve been with the company.

If nothing is mentioned at all in your employment contract, then you’d be owed common law reasonable notice.  If this is the case, then you could be owed months’ of pay in lieu of notice, depending on things like how long you’ve worked for the company, your age, and your position and salary.

Your contract might also be a fixed period contract where the end date of your employment has been spelled out. If that’s the case, then you might not be owed anything at all – or, if that date was sometime in the future and you were let go before that, you might be owed all of your salary up until that end date.  It really depends on the wording of your contract.

Mitigation

If you don’t settle soon after you lose your job, then the employers and their lawyers will almost certainly start asking you and your lawyer about whether you’ve been looking for another job, and whether you were able to get another job.

Why?  Two reasons.  First, if you haven’t been looking for another job at all, then this could greatly reduce the damages you could get at trial.

Second, if you get a new job quickly after you’ve been fired, then any money you get at the new job will be deducted from the damages you can claim for your wrongful dismissal.

We talk about mitigation in more detail here, and have a video you can watch here.

DISCLAIMER: The content of this article, and this website generally, is not intended as legal advice and cannot be relied upon as legal advice.  To provide legal advice on your problem, a lawyer must first understand your specific situation.

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