BC Severance Law
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An Introduction to BC Severance Law
Do not accept a termination package or severance offer without speaking to a professional first.
The basics of BC severance law really should be taught in secondary schools; such instruction would be practical, given that almost all of us are employees at some point, and might help reduce the number of workers settling for a fraction of what they are properly entitled to upon termination of their employment. Though brief, we hope that the information provided here will help you better understand your options if you are terminated with or without a severance offer.
It is critical that employees understand that their severance entitlement under the ESA only represents a minimum amount and does not account for the greater severance sums most employees are entitled to under the common law. Compare, for instance, the maximum 8 weeks’ pay outlined in the ESA with the maximum severance entitlement under the common law, which is generally 24 months.
Note that though an employer cannot reduce an employee’s severance entitlement below the minimum amount outlined in the ESA, common law severance entitlements can be limited to this minimum amount using terms that are often included in employment contracts. As these terms need to be precisely drafted in order to be valid, we recommend contacting an employment lawyer if your severance entitlement has been reduced by your employment agreement.
The Severance Package / Offer
How Much Severance am I Owed?
In Canada, courts assess common law severance by determining a “reasonable notice” period and then looking at wages and benefits an employee would have earned working over the course of that notice period. The assessment process is an art more than a science, with factors considered by judges summarized in the following passage from the seminal 1960 Bardal v. Globe & Mail Ltd. decision:
The reasonableness of the notice must be decided with reference to each particular case, having regard to the:
– character of the employment,
– the length of service of the servant,
– the age of the servant,
– and the availability of similar employment, having regard to the experience, training and qualifications of the servant.
(A Helpful Introduction to Your Rights, Click on Links Below)
Employers can best manage their employment relationships and associated severance liabilities through carefully drafted employment agreements. Well drafted employment agreements can provide both employers and employees certainty and clarity with respect to the end of the employment relationship, reducing the likelihood of misunderstandings, confrontations, and potentially litigation.
Severance is typically addressed in the termination clause of an employment agreement. Any clause seeking to limit an employee’s common law severance entitlements needs to be clear and very carefully drafted. Any ambiguity will be interpreted against the employer, and a void portion of a termination clause could render the whole termination clause or even the whole employment agreement void.
As noted above in the “Employees” section, the vast majority of employees must receive at least the minimum severance stipulated in the ESA unless they quit, resign, are fired for cause, or the contract is “frustrated” (click here for a brief discussion on the contractual doctrine of frustration). Even if one of these exemptions may apply, it can be very difficult to establish just cause for termination or that the contract was frustrated. For this reason, we strongly recommend you speak with an employment lawyer before you consider terminating any employee without providing them at least the minimum severance stipulated in the ESA.
Employers must carefully assess the risks associated with inadequate severance payments as a wrongfully dismissed employee will no longer be bound by the severance clause in their agreement, potentially entitling them to full common law severance, which is often considerably larger than the sum agreed upon in their employment agreement.