What is a Severance Package?

Severance packages typically arise in two different situations.  Figuring out what situation you are in is very important.

First, an employee may receive a severance package from an employer after the employer has already communicated its decision to terminate that worker’s employment.   When your friend asks you whether or not you received a severance package and how much you got, after trying to console you about being fired from your job, you are typically in the first situation.

Second, an employee may receive a severance package or a “buy out” from an employer who wants to terminate the employee’s employment but is reluctant to do so without being assured that the employee will not sue it for wrongful dismissal, file an unjust dismissal complaint against it, file a human rights complaint against it, or take legal action against it more generally.  When your friend asks you whether or not you would be willing to leave your employment on the basis of what your employer has offered, you are typically in the second situation.

Whether forced upon or offered to an employee, a severance package typically consists of several terms and conditions focused on releasing an employer from future liability. The employer banks on the employee signing off on the package and releasing it from future liability, in exchange for the employee receiving compensation in one or more of the following forms: termination pay, severance pay, reasonable notice as a lump sum payment, reasonable notice as salary continuation, bonus- or commission-related compensation, pension contributions, and benefit continuation.

It is impossible to capture the full range of emotions that workers feel when they have received severance packages.  Severance packages can confirm an employee’s worst fears and mark the end of employment that the employee cherished, or they can feel like winning the lottery.  What a severance package will mean to you, in your particular situation, will often depend on whether or not you wanted to leave your job, whether or not you have a new job already in the works, what terms the employer has attempted to impose upon you, and how much your employer has offered you.

Regardless of what you feeling when you a severance package is presented to you, it is often helpful to try and see the severance package as an opportunity for you to negotiate with your employer from a position of strength, better protect your interests, and secure greater compensation than what has been offered.

What should I do if I have been presented with a Severance Package?

Whether you are in the throes of despair or in the midst of elation, you should refrain from accepting, signing, or rejecting a severance package until you have had a chance to come up from your emotional low or come down from your emotional high, and get legal advice that you can trust.

As much as your friend may be a great support and sounding board, this is not the time to get legal advice from someone who doesn’t review severance packages for a living.  Nor is it the time for quick uninformed decision making based on your employer’s assurances that you’re getting a great deal.  There are literally dozens of factors that may make the difference between an excellent severance package and a severance package that will haunt you for the rest of your life.  Before accepting, signing, or rejecting any severance package, employees should get legal advice to ensure that they know which factors are important in their particular situation.  The consequences of making the wrong decision can be catastrophic both financially and emotionally. This is the time to think about how much power you might be able to wield with a view to improving your severance package, and think about the strategy that you might want to use going forward.

What type of lawyer should I meet with and how much should I pay?

In order to figure out whether or not to accept, sign, reject, or make a counter offer in response to a severance package, you need information that you can trust from an experienced employment, human rights, and/or labour lawyer who is knowledgeable about the factors that might impact the reasonableness of a severance package and committed to representing employees and other workers.

In the simplest of situations, reference to: 1) the terms of the relevant employment contract, 2) the notice and severance provisions in the Employment Standards Act, 2000, S.O. 2000, c. 41, and 3) factors such as the length of service of an employee, age of an employee, nature of the work the employee performed, and availability of similar employment – often referred to as the Bardal factors in the frequently referenced wrongful dismissal judgment in Bardal v Globe & Mail Ltd., 1960 CanLII 294 – can be sufficient to assess the adequacy of a severance package.  And make no mistake about it there is no shortage of lawyers who offer free 30-minute severance package reviews to employees, are capable of weighing these factors, and are capable of providing employees with adequate legal advice on that basis.  Their ads are often among those that pop up at the top of the page when you do a google search.

At Franklin Law, we care about access to justice.  We understand that legal advice that is free is not necessarily worse than legal advice that is paid for. We also understand that not all employees are in a position to pay our consultation fees, which range from $200.00 to $300.00 for up to an hour of legal advice.  As such, if you are an employee who is in a financial bind and you are faced with what appears to be a straightforward and seemingly simple severance package, we wholeheartedly encourage you to engage the services of not one but at least two or even three lawyers who offer free severance package reviews.  Once you get advice from all of them, we suggest that you compare the advice that each of them gave you.  If the advice that they gave you seems fairly consistent, then you may want to take their advice into account in figuring out whether or not to accept, sign, reject, or make a counter offer in response to the severance package.

But what should you do if you know that you can’t even begin to describe the circumstances leading up to, and surrounding the termination of your employment, in a 30 minute telephone call?  What should you do when your employment experience has included lengthy and frequent periods of discrimination, harassment, or even worse reprisal? What should you do when the circumstances that gave rise to your severance package include complex issues of employment law and human rights law, or complex issues of labour law and human rights law?  What should you do when your employer says that it is “playing nice” now but if you try to seek more compensation, or don’t agree to its terms, it will simply pay you the absolute minimum, or worse, fire you on the spot for cause and give you absolutely nothing?   In complex situations like these, you need to seek advice from lawyers who are experienced in all aspects of employment, human rights, labour, and health and safety law and are committed to representing employees’ and other workers’ interests without compromise.  In complex situations like these, the stakes are so high that the short-term financial burden of paying for a consultation with lawyers that you can trust is far outweighed by the long-term consequences of making a mistake.

Determining the appropriateness of a particular severance package and figuring out the best approach to best protect an employee’s interests in complex situations like those described above, requires legal training and “hands on” experience that most employees and many lawyers simply do not have, and it also requires time and a lot of attention to detail.  Because Franklin Law’s practice involves representing employees who have been wrongfully dismissed, unjustly dismissed, discriminated against, and harassed, all of our lawyers are well positioned to provide you with timely and trustworthy advice about severance packages, and represent you in negotiations with your employer if you are not getting a fair deal.  And if your employer acts unreasonably, we are willing and able to represent you in, and hold your employment accountable through, a legal action against your employer in court, at a human rights tribunal, before an adjudicator, or before an arbitrator.

Find out more about Franklin Law’s Employment, Human Rights, and Labour Lawyers

If you would like to consult with Franklin Law about a severance package or if you just want to know a bit more about Franklin Law’s longstanding commitment to helping employees and other workers fight injustice at work, please call us at 416-572-8525, email us at consultation@franklinlaw.ca, or visit our website at www.franklinlaw.ca.