Accounting for Law
Employment & Labour

Q&A: Ontario severance packages and termination of employment

By Paul Willetts

Q&A is a recurring series on the Vey Willetts LLP blog. The aim is to provide quick answers to questions we commonly encounter in our day-to-day practice of employment law. In this edition, we focus on how to navigate the loss of a job and ensure that you receive a fair severance package.

Q. I've been offered a severance package, should I accept it?

A. Before you accept a severance package, it is important to fully understand the details of the offer. Generally speaking, once you accept a severance offer (and a sign a release agreement to this effect), you will be held to its terms. 

It is a good idea to take some time to consider the offer before accepting it. Take the offer home with you and do not sign anything until you have had an opportunity to get the offer reviewed by an experienced employment lawyer. You may also want to ask your employer for a copy of any employment agreements they have on file for you, as there may be language in your contract that sets out your entitlements upon termination.

An employment lawyer will be able to explain to you whether the offer you have received is fair, or whether there is room to negotiate for an improved offer. As part of this discussion, you will also have the opportunity to decide whether it makes sense for you, in your specific circumstances, to try and negotiate for more, or whether you are prepared to accept the offer and move on. The key is that you shouldn't make a snap decision before having a full understanding of your legal rights in this regard.

Losing a job can be stressful and emotional. Click here for some suggestions on how to successfully navigate through this. 

Q. My employer wants me to sign a release agreement, what should I do?

A. Before you sign a release agreement it is very important to understand what you are being asked to give up, and what you are receiving in exchange for this. As such, you should not sign a release until you have had your severance offer reviewed and determined that it is reasonable.

In addition, it is worthwhile to have an employment lawyer review the release in question to make sure it is appropriate and does not unnecessarily restrict you. Release agreements are generally designed to limit employer liability and ensure confidentiality. That said, they may also include tax indemnification requirements, non-disparagement obligations and agreements to continue to aid your former employer in ongoing litigation. As such, you should fully understand what your particular release requires of you and, if necessary, look to negotiate changes to its terms before signing.

Q. Is my severance offer fair?

A. The answer to this question will depend on a number of factors such as your age, how long you have worked for your employer, the type of role you occupied and how hard it will likely be for you to find comparable employment. Other factors that can impact your severance entitlement are whether you have a written employment agreement and whether your employer induced you to join their business in the first place.

Use our severance calculator to get a general sense of whether your severance offer falls within a reasonable range.

Q. I have a written employment contract, will that impact my severance entitlement?

A. If you have a written employment agreement it is possible that it contains language (often under the sub-heading of termination of employment) which sets out the full extent of your entitlements in the event that you are fired. That said, we often see situations where employers have included language in a written contract to reduce or limit an employee's entitlement to severance yet fail to do so in a legally permissible manner. There are a number of reasons for this, in light of the current case law in Ontario.

As such, if you have a written employment agreement that includes a termination provision, take this, along with your proposed severance offer, and meet with an employment lawyer. An employment lawyer will be able to quickly advise you whether the contract sets out the full extent of your severance entitlement, or whether there are additional payments you can seek.

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