If you have been recently dismissed from your job without cause, you may be entitled to compensation in the form of common law severance pay. Common law severance pay is applied through various personal factors within the employment duration and is not as limited and restricted as the Employment Standards Act severance pay. The Employment Standards Act (ESA) severance pay is a regulated payment for workers who have been severed and are now entitled to further compensation, with restrictions outlined in section 64 of the ESA, pictured below.
The distinction between ESA severance pay and common law severance pay is that the entitlement to compensation is largely focused on personal employment factors. Unlike the ESA severance pay, common law severance pay is not as restricted and is not statutorily regulated, but instead the amount of compensation which a dismissed employee would be entitled to is dependent on various factors.
Why does the differentiation between common law severance and ESA matter?
Ensuring you receive the proper compensation you are entitled to following a dismissal from employment, is an important matter. It is important to understand the implications when accepting a termination package, and if there is no term or clause within your employment contract that states severance, should follow the ESA minimum amount you are entitled to under common law severance.
Common law severance is determined by various factors, unlike the ESA standard, these factors consist of:
- Length of service
- Age
- Position and responsibilities of employment
- Availability of similar employment opportunities
Due to common law severance being determined through these various personal factors, compensation which the dismissed employee is entitled to can be significantly more than what would be offered under ESA minimum standards.
Common law severance does not only apply to dismissal pay but has also been referred to as reasonable notice. Similar to severance pay, employers are required to consider the various factors outlined above when planning to dismiss an employee and apply these factors to the notice of termination they give to said employee. Without a contractual obligation to follow ESA minimum standards, whether outlined as a clause in the employment contract or another valid agreement between employer and employee, reasonable notice becomes the standard and is regulated by the factors discussed above and affirmed in the case of Bardal v. Globe and Mail Ltd.
Business law
Don’t just start a business. Build one that lasts.
Incorporation, contracts and advice on flat fees. Plain language, no billable-hour surprises.
The courts reference these factors to ensure that the reasonable notice and severance pay are in accordance with what the dismissed employee should be entitled to. Consulting a lawyer for independent legal advice after receiving a notice of termination and a severance package ensures that the dismissed employee is receiving adequate compensation and the proper period of notice. Under common law, each case is fact-specific and through consultation of legal advice dismissed employee can be assured they are receiving the compensation they are entitled to and that the dismissal process by the employer was properly administered.
Common law severance and implications for employers
It is essential that employers follow the guidelines set forth by the courts in the case of Bardal and apply the necessary factors when administering common law severance. If employers choose not to evaluate and properly apply the various factors in the dismissal of an employee, they could face further litigation in the form of wrongful dismissal claims. Consulting independent legal advice ensures that employers are reducing risk through determining whether they can enforce severance under ESA statutory requirements, or whether they must follow common law severance procedure and refrain from offering an inadequate severance package.
Can employees in the reasonable notice period still access benefits?
While dismissed employees who are statutorily limited by ESA guidlines can claim benefits during there statutory notice period, employees who are dismissed under common law severance do not have the same rights to claim benefits unless otherwise stipulated within their employment contract.
When are employers required to give notice of termination?
Employers are required to issue a given notice of termination after three months of employment to their employee, if termination occurs before this three month period employers can dismiss said employee without reason as long as they abide by human rights law.
Do I need legal assistance for common law severance?
While it is not necessary to consult a lawyer while going through common law severance, it is highly recommended, as employers may tend to offer a lower severance package than what the courts would grant. Consulting a lawyer ensures your entitlements are properly assessed and can potentially increase your period of notice and compensation.
As an employer, consulting a lawyer before administering common law severance reduces the risk of facing a wrongful dismissal claim and further litigation while determining what the dismissed employee is truly entitled to.