BC Severance Law

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An Introduction to BC Severance Law

Employees

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.

Severance Entitlements

BC employment law provides that employees terminated against their will and through no fault of their own must be provided with an adequate notice period ahead of the termination (or payment in place of such a notice period), allowing them to earn wages for some time while they search for new employment.

An employee’s entitlement to severance exists independently of any severance offer provided by an employer. The BC Employment Standards Act (ESA) outlines the minimum amount of severance most employees in BC outside of unionized workers are owed. Employees entitled to severance under the ESA cannot contract out of their minimum severance entitlements, regardless of what their employment agreement may state.

The general formula in the ESA is as follows: 1 weeks’ pay is owed after 3 months of service; 2 weeks’ pay after 12 months of service; 3 weeks’ pay after 3 years of service; and 1 additional week of pay for each additional year of service (maximum 8 weeks’ pay total).

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

Employers will often provide a severance package that outlines the minimum sum owed under the ESA and offers severance pay representing a nominal improvement over this minimum sum. Most employees are entitled to a far greater sum under the common law. Severance packages are also often accompanied by a tight timeline for acceptance, which is nothing more than a pressure tactic. Unfortunately, if an employee accepts their employer’s severance package – even a low-ball offer paired with a pressure tactic like a tight timeline – it can severely limit their ability to seek further sums later on.

It is for the above reason that we recommend speaking with an employment lawyer while reviewing – and certainly before signing – a severance 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.
Basic Severance Calculator (vLex Canada Open)

Resources:
(A Helpful Introduction to Your Rights, Click on Links Below)

BC Employment Standards Act Guide (Government of British Columbia)

Basic Severance Calculator (vLex Canada Open)

Employers

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.