No, you generally do not have to sign a severance agreement immediately simply because your employer has given you a deadline. If you have been terminated and presented with a severance package, you should understand what you are being offered and what rights you may be giving up before signing.
Employers often include a deadline for accepting a severance offer. However, an employer’s deadline should not be confused with the legal deadlines that may apply to an employee’s rights or potential legal claim.
A severance package may also include a release requiring you to give up the right to bring certain claims against your former employer. Once an agreement and release are signed, it can be difficult to undo them.
For these reasons, employees who are unsure whether a severance offer reflects their legal entitlements may want to have the package reviewed before signing.
How long do you have to sign a severance agreement in Ontario?
There is no single standard period that applies to every severance agreement in Ontario.
An employer may give an employee several days, a week, or another period to accept an offer. The deadline stated in the severance package is generally a deadline set by the employer for accepting that particular offer; it is not necessarily the same as a legal limitation period for pursuing rights arising from the termination.
If you need additional time to understand the agreement or obtain legal advice, you can ask the employer to extend the deadline.
Employees should also be careful about relying on information online about fixed periods such as 7 days or 21 days. Rules discussed on American websites may arise from U.S. law and should not automatically be assumed to apply to an Ontario termination.
What happens if you don’t sign a severance agreement by the deadline?
Missing an employer’s deadline does not necessarily mean that you suddenly lose all of your legal entitlements.
An employer may take the position that its enhanced severance offer has expired or may change or withdraw an offer that has not been accepted. However, an employer-imposed deadline does not by itself eliminate minimum entitlements that an employee is owed under Ontario employment standards legislation.
The Ontario Employment Standards Act, 2000 establishes minimum termination and severance rights for qualifying employees. Those statutory requirements are separate from any additional compensation an employer may offer in exchange for signing a release.
Depending on the employee’s circumstances, there may also be contractual or common-law rights beyond the ESA minimums. The Ontario government’s guide to severance pay explains the statutory requirements and notes that employees may have greater rights than the minimum standards provided by the ESA.
For more information about potential entitlement, see Am I Entitled to Severance Pay?
Can you ask for more time to review a severance package?
Yes. If your employer has given you a short deadline, you can ask for additional time to review the offer and obtain legal advice.
For example, an employee who receives a lengthy termination agreement on a Friday and is told to sign it by Monday may want to request additional time rather than signing an agreement they do not fully understand.
An employment lawyer can review the proposed package and, where appropriate, communicate with the employer regarding the offer or request additional time to respond.
Do you have to sign a release to receive severance pay?
This requires an important distinction.
Employers frequently offer compensation beyond what they say they are legally required to provide on the condition that the employee signs a release.
A release generally requires the employee to give up specified legal claims against the employer in exchange for the compensation or other terms contained in the agreement.
However, an employer cannot use a release to contract out of minimum standards required by Ontario’s Employment Standards Act, 2000. Statutory termination and severance obligations apply according to the requirements of the ESA.
That does not mean every employee qualifies for statutory severance pay. Ontario’s statutory severance rules have specific eligibility requirements, including length of employment and employer payroll or mass-termination conditions.
You can learn more about Ontario severance entitlements in our guide to severance pay in Ontario.
What are you agreeing to when you sign a severance agreement?
The amount of money offered is only one part of a severance agreement.
Depending on the agreement, an employee may be asked to accept terms concerning:
- A release of legal claims;
- Confidentiality;
- Non-disparagement;
- Benefits;
- Bonuses or commissions;
- Equity or stock compensation;
- Pension or retirement benefits;
- References;
- Restrictive covenants; and
- Other obligations following termination.
Before signing, employees should understand both what they are receiving and what they are agreeing to give up.
This is particularly important where compensation includes more than base salary.
Can you negotiate a severance package before signing?
A severance offer does not necessarily represent the maximum amount or best terms available to an employee.
Whether there is a basis to seek more will depend on the employee’s circumstances, including their employment contract, length of service, age, position, compensation structure and other factors relevant to their termination.
Negotiations can also involve more than salary. Bonuses, commissions, benefits, equity compensation and other components of an employee’s compensation may need to be considered.
Read more about severance packages in Ontario, what they may include and how they may be negotiated.
What should you check before signing a severance agreement?
Before accepting an offer, consider questions such as:
- Does the package provide at least the minimum termination and, where applicable, severance entitlements required by the ESA?
- Could you have additional rights under your employment contract or common law?
- Have bonuses, commissions, benefits, equity or other compensation been considered?
- What claims are covered by the release?
- Are there confidentiality, non-disparagement or other continuing obligations?
- Does the agreement affect benefits or other important coverage?
- Is the employer asking you to sign before you have had a reasonable opportunity to review the agreement?
There is no single formula that determines whether every severance package is fair. The circumstances of the employee and the wording of the employment contract and termination documents can all matter.
If you want to understand how severance may be determined, visit our Ontario Severance Pay Calculator or read What Is a Fair Severance Package?
Should you have a lawyer review a severance package before signing?
If you do not understand the agreement, are unsure whether the offer reflects your legal entitlements, or believe you may be entitled to more, an employment lawyer can review the package before you sign it.
Once you sign a severance agreement and release, you may be giving up important rights in exchange for the employer’s offer.
Monkhouse Law’s employment lawyers advise employees on termination and severance packages, including whether an offer reflects their potential statutory, contractual and common-law entitlements.
If you have recently been terminated and have been given a deadline to sign a severance agreement, take the time to understand the offer and your legal options before signing.
Contact Monkhouse Law Employment Lawyers for a free 30-minute phone consultation to learn about your rights and potential entitlements.