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Worth the Wait- Why You Shouldn’t Sign Off On An Unfair Severance Package
Lay-offs can be devastating for employees. Many employees, faced with the sudden prospect of having their income greatly diminished many laid-off employees, sign off on inadequate severance packages and a release in order to get a smaller amount of money sooner rather than more money later.
This is often a very bad mistake.
While some employees who sign severance packages still have a potential legal remedy (See: http://www.monkhouselaw.com/undo-severance-packages/), you are very likely to receive much less than if you consult with an employment lawyer from the start.
The best way to maximize your severance package and also to get it quicker is to be represented by an employment lawyer, who can make sure that you get more, whether you need that money in two weeks, two months, or two years.
One of the major ways companies save money on laid-off employees is by providing them with a notice period which is lower than what they would be entitled to at common law. At common law, four weeks per year of service is the “rule of thumb”, but other factors can elongate the notice period (See: http://www.monkhouselaw.com/notice-period/).
The severance package will typically include wording such as “___ weeks notice in accordance with the Employment Standards Act, 2000”, making it seem fair. The problem with this is that the Employment Standards Act is only a guideline to ensure that minimum standards are met, and is not useful in calculating an appropriate notice period.
The appropriate notice period must take into account the contract signed, and the biographical details of the employee.
Recent case law shows that many employees are being offered less notice than what they are entitled to at law.
In the case of Kotecha v. Affinia Canada ULC,  O.J. No. 3360, the Plaintiff worked for an auto parts manufacturer for 20 years. He was terminated without cause and was only offered 2 months working notice, as well as 4 months’ severance pay, despite his lengthy tenure. The Plaintiff sued the Defendant for wrongful dismissal and the court found in his favour, stating that 22 months’ notice would be appropriate.
In the case of Nelson v. Champion Feed Services Inc.,  A.J. No. 753; 2010 ABQB 409, the Plaintiff had worked for the Defendant for 25 years as a Supervisor. At the time of his without-cause termination, he was paid 58 days severance. After going before a judge, the Plaintiff was awarded 15 months’ notice.
What stops individuals from seeking legal advice? Many fear that it will be too costly, that they will end up with “less” than they started with, or that they will take their money too late to be of assistance for them.
These beliefs are unfounded. Rarely will an employer retract an offer which is unfair, as they are hoping that the employee will take it. Moreover, employers are typically more eager to settle and negotiate a severance package than they are to go all the way to trial.
In terms of the costs associated with litigation, we at Monkhouse Law, in matters of wrongful dismissal, with the exception of the in-person consultation fee, offer a fee deferral until a settlement is reached. We understand the financial constraints which accompany unemployment. Many firms will also guarantee that you will not end up with less than your initial offer, meaning there is little downside risk of litigation.
Furthermore, even if you obtain legal representation, the choice to go forward with a trial or to refuse an offer is yours. A lawyer can assist you and offer advice, but you hold the cards. If you want to get the best deal possible, settle quickly, or work towards any other deadline then your lawyer can assist you towards that goal.
Advice for Employers
It is important to ensure that laid off employees or those terminated without cause are provided with adequate severance and the opportunity to seek legal advice early in order to minimize potential legal costs later down the road.
If you have concerns regarding whether a severance package is fair or a release is valid, we at Monkhouse Law would be happy to review these documents and provide legal advice.
Advice for Employees
If you are confronted with a severance package which seems less than adequate, it is important to seek legal advice, which is tax-deductible when it pertains to employment matters. A lawyer can evaluate the package and provide you with advice as to what you would be entitled to.