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Should I Accept This Severance Package?

March 19, 2017

Author: Dylan Snowdon

Should I Accept This Severance Package?

When your employment is terminated, and you are considering whether or not to accept a payment being offered in lieu of notice, there are some key elements you should think about.

First, you should review your written employment contact or offer letter if you have one.  Often, Canadian employees do not have an employment contract with a termination clause specifying the amount of working notice or payment they will receive when their employment is ended.  If you do, the contract should be reviewed by an employment lawyer to determine whether it is legal and enforceable or not.  If the termination clause is enforceable, then the only question is whether your former employer has paid the correct amount.

If you do not have a written termination clause, then the amount of notice (or pay in lieu) that must be provided is determined by the common law.  A “reasonable” notice period is assessed on a case by case basis and accounts for your length of employment, age, position, education, experience, market conditions, and other factors.  Depending on the circumstances, notice periods usually range from 2 weeks to 2 months per year of service.  Your employment lawyer will be able to provide you with a review of court decisions in similar circumstances to provide an estimate of what a court would determine as the reasonable notice period.

Comparing a professional opinion with the severance payment you’ve been offered will be a key step in deciding whether or not to accept a payment offer.  If you refuse the offer, you can negotiate for an increased payment or different terms by yourself or with your lawyer’s help.  Negotiating a reasonable settlement with your former employer, if possible, is always preferable to litigation.  But if your former employer refuses to negotiate reasonably, making a claim to the court can be your best option to encourage further negotiations and ultimately have the matter decided. Litigation can be an expensive and risky proposition however, so you will want to proceed cautiously and strategically.

A negotiated settlement is preferable because litigation causes you to face delay, legal expenses, and the risk of a court making a decision that is less than what you might expect.  A critical factor in determining whether or not to accept a termination offer is your prospects for new employment. If you are able to acquire replacement employment you will reduce the losses arising from the termination, potentially making an offer more attractive for acceptance. Also, it may be in your best interest to accept a payment less than your legal entitlements in order to avoid the delay, cost, and risk of litigation.

If you have been let go from your job, we recommend you consult with us to ensure you understand your rights and options.  To make sure time with your employment lawyer is efficient, collect all of your records including any offers of employment, employment contracts, letters, pay and benefit records, and the termination letter to bring to your meeting.  Employment lawyer fees are tax deductible, so be sure to keep your receipts to claim on your next tax return.

We publish these commentary pieces to provide helpful, but only general legal information to the public. These posts do not constitute legal advice and cannot be relied upon as such. If you have any questions about our posts or require legal advice, please contact us.