Going forward, most dismissed employees should be paid severance on the basis of overall estimated earnings, not just base salary for the entire notice period. Of course all accrued amounts are owed to the employee, subject to the terms of the employer compensation plan. Commissions and Variable Pay: For dismissed employees with fluctuating pay, the test is what the employee would have reasonably earned over the severance period.
If there is wording in an employment contract or agreement that deals with the bonus, this will be something that needs to be properly assessed and considered. There may be wording in the original employment contract that overrides this entitlement, but it is often worth trying.
If the employee has been getting the bonus every year and can show that he or she would have continued to get a bonus if employment had continued over the severance period, the bonus should be payable. Many employers are quite reluctant to include the prospective bonus as part of the severance package. The period of time for which the employee is being compensated is generally called the notice period or severance period.īonus: Dismissed employees should usually be compensated for accrued bonus for the current year (if there has usually been an annual bonus), as well as bonus for the severance period. This is the area on which appropriate legal advice should generally be obtained. This is all aimed at ensuring that the employee is compensated as required by Ontario common law, which itself, can vary wildly for each employee. Beyond the employment standards amount, employees can negotiate the length of time, the trigger for mitigation, the payment schedule or other terms.
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If you are Federally regulated employee (someone who works in a bank, telecommunications company, tv network etc.,) the Canada Labour Code would apply instead of the provincial legislation. For example, in Ontario, the severance package must provide for notice pay under the Ontario Employment Standards Act and severance pay, if applicable. The severance must, at a minimum, include compensation for the relevant provincial employment standards amount. In most cases, this is the most important part of the severance package and in many cases, different components are negotiable. Employers can choose to pay over time, with or without some kind of claw back (or “mitigation”) clause, or in one or more lump sums. Severance Pay or Salary Continuation: It goes without saying that the most important component is usually the severance itself.
Here are some of the key things to look for as part of a “reasonable” severance package. If you signed an employment contract or offer letter when you first started, that is probably one of the first things a lawyer will need to review. Most other employees can usually expect severance arrangements based on “reasonable notice.” The actual definition of “ wrongful dismissal” in Canada is simply a failure to provide that reasonable severance package. This may not be the case if the employee signed an enforceable employment contract that contains a termination clause, though sometimes these contracts can be challenged. Canadian employees who are dismissed “without cause” are usually entitled to a reasonable severance package.
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