How Can Vulnerability Impact Severance Pay?
Severance pay, often referred to as a “severance package”, is an amount some employees may receive in addition to termination pay. It can include things like:
- commissions,
- bonuses,
- pension and RRSP contributions,
- health benefits,
- vacation pay, and
- other stipends and fringe benefits.
The amount of severance an employee receives is determined by the employment contract and common law.
An employee who is considered vulnerable could be entitled to more severance pay. Vulnerable employees include those who have a disability, are pregnant, or are of an older age.
Let’s look closer at how this type of vulnerability can impact severance pay.
Pregnancy as a Factor in Severance Pay
The Alberta Employment Standards Code (Section 52) prohibits the termination of an employee who is on maternity or parental leave. This means that a woman on maternity leave cannot be terminated. The single exception to this rule is when the business is shut down or suspended.
If an employer deems it necessary to terminate a woman on maternity leave, they must provide her with payment in lieu of notice (termination pay) along with any severance she is entitled to during the leave and termination notice period.
The length of your termination notice period is dependant on several factors, including:
- The length of your employment
- The position you held
- The current market to find a new job in the same field
- Your salary or wage
The Employment Standards Code defines reasonable termination notice periods as follows:
- 1 week – if you were employed for less than 2 years (but more than 90 days)
- 2 weeks – if you were employed for less than 4 years (but a minimum of 2)
- 4 weeks – if you were employed for less than 6 years (but a minimum of 4)
- 5 weeks, if you were employed for less than 8 years (but a minimum of 6)
- 6 weeks – if you were employed for less than 10 years (but a minimum of 8)
- 8 weeks – if you were employed for 10 years or more
So, if a woman is given payment in lieu of termination notice, she must receive her salary or wages for at least the minimum notice period as well as any severance she would receive during that notice period in addition to the length of her maternity leave.
This is the minimum entitlement according to the law. Because the length of termination notice is dependent on so many variables, it is highly recommended that employers seek legal counsel before terminating a woman on maternity leave to avoid wrongful dismissal charges.
Likewise, if you have been terminated during maternity leave or while you were pregnant, be sure to consult with an employment lawyer to ensure you receive everything you’re entitled to.
Disability as a Factor in Severance Pay
If you’ve been on disability for some time, the likelihood of your return to work becomes an important issue. If it’s highly unlikely that you’ll be able to return to work within a reasonable period of time, your employer can legally terminate your position. This is called a “frustration” of your employment contract. It means that the contract ended because of uncontrollable or unforeseen circumstances.
The employment laws of Alberta and common law in Canada allows for individual assessment of each case of termination. There are many factors involved in determining whether or not a termination is a wrongful dismissal.
Regardless of whether or not your termination was a wrongful dismissal, you are entitled to the minimum amount of termination pay and severance. See What Am I Entitled to During the Termination Notice Period? for more details about calculating these amounts.
When disability is a part of the picture, disability benefits must be considered, too. It is not uncommon for employment contracts to include wording that cuts off disability benefits at the time of termination, so be sure you clearly understand the implications of your employment contract.
By law, unless stated otherwise in the employment contract, all forms of compensation – including disability benefits – are to continue through the duration of the termination notice period. In other words, you should receive the same benefits during the termination notice period that you would if you were still working.
This means that if you become disabled during the termination notice period, you should still qualify for disability benefits even if you’re not physically working during that time.
If your employment contract does indicate discontinuation of disability benefits at the time of termination, it may be possible to negotiate an agreement with the employer that ensures you receive alternate coverage to compensate for the loss of disability benefits. This is sometimes referred to as “transitional coverage”.
For employees, have your employment contract reviewed by an employment lawyer. Even if you’re not currently disabled, you need to be sure you’d be covered if you do require disability benefits in the future.
If you’ve already been terminated, be sure to consult an employment lawyer before signing your release. The lawyers at Osuji & Smith will advise you on the full amount of severance you are entitled to.
For employers, always consult an employment lawyer before terminating an employee on disability to protect yourself from any wrongful dismissal claim.
Age as a Factor in Severance Pay
Age is a major factor in determining the reasonable termination notice period and in calculating severance pay. Age can also be considered a vulnerability. Because the reasonable notice period is partly dependent on the likelihood of finding a new job in the same field, an older employee is naturally at a disadvantage.
If your employer is requesting that you retire even though you have no desire to do so, this is a termination and could potentially qualify you for damages (and significant severance).
The older an employee is and the longer he or she has worked for the employer, the greater their entitlement.
As with the other vulnerabilities we’ve addressed in this post, both employees and employers are encouraged to have an employment lawyer review all employment contracts before signing.
You May Be Entitled to More Severance Pay if You’re Vulnerable
While the law outlines several specific factors to consider in determining severance amounts, there is no black-and-white checklist that applies equally in every situation. There are many variables and each situation is decided individually.
Most people think strictly of the length of employment when determining if they got a fair severance package. This is insufficient and often results in an employee receiving far less than they’re entitled to.
Human rights is another issue. Sadly, it’s not uncommon for vulnerable employees to be wrongfully terminated due to a violation of their human rights. For example, termination because of pregnancy, disability, or age.
In any case, it is always recommended to have your case reviewed by an employment lawyer to ensure you receive all the severance pay you’re entitled to.
