If you have received a severance package, you may be wondering whether the offer is fair, whether you should sign it and whether you may be entitled to more.
Monkhouse Law’s employment lawyers review severance packages for employees and can help you understand what your employer is offering, what you may be giving up by signing and what options may be available to you.
Having your severance package reviewed does not mean you have decided to take legal action. It gives you information about your potential rights and entitlements so you can make a more informed decision about what to do next.
What does a severance package review include?
A severance package can contain more than an amount of salary or a certain number of weeks of pay.
When reviewing a severance package, an employment lawyer may consider:
- Your employment agreement and any termination clause;
- Your termination letter and severance offer;
- Your length of service;
- Your age, position and responsibilities;
- Your salary and other compensation;
- Bonuses or commissions;
- Benefits;
- Equity or stock compensation;
- Pension or retirement contributions;
- The circumstances surrounding your termination;
- Whether you may have common-law reasonable notice rights; and
- The terms of any release or agreement you are being asked to sign.
The goal is to understand both what your employer is offering and how that offer compares with your potential legal entitlements.
How do I know if my severance package is fair?
There is no single formula that determines whether every severance package is fair.
Ontario’s Employment Standards Act, 2000 establishes minimum termination requirements for many employees. Statutory severance pay is a separate entitlement with its own eligibility requirements.
Employees may also have rights arising from their employment contract or, in some circumstances, the common law.
This is why simply comparing an offer with the minimum amount required by the ESA may not answer whether the overall severance package reflects an employee’s potential entitlement.
For a broader explanation, see Am I Entitled to Severance Pay in Ontario?
Does my employment contract determine how much severance I receive?
Your employer may rely on a termination clause in your employment agreement when calculating your severance package.
However, the fact that a termination clause exists does not necessarily mean that it legally limits what an employee may be entitled to receive.
The wording of the agreement and whether the termination provision is enforceable can be important. If a termination clause is not enforceable, common-law reasonable notice may potentially apply.
This is one reason it is helpful to provide your employment agreement when having a severance package reviewed.
If you signed more than one employment agreement during your employment, those documents may also be relevant.
Learn more about common-law reasonable notice in Ontario.
Does a severance package include more than salary?
It can.
An employee’s total compensation may include more than base salary. Depending on the circumstances, a severance review may also need to consider:
- Bonuses;
- Commissions;
- Benefits;
- Equity or stock compensation;
- Vacation pay;
- Pension or retirement contributions;
- Vehicle or other allowances; and
- Other forms of regular compensation.
The severance agreement itself may also contain terms relating to confidentiality, non-disparagement, references, restrictive covenants or other obligations following termination.
For more information, read What You Need to Know About Severance Packages.
Can a severance package be negotiated?
Depending on the circumstances, there may be room to negotiate a severance package.
Negotiation does not necessarily mean only asking for more salary. There may also be questions about bonuses, commissions, benefits, equity compensation, references, legal fees or other terms in the agreement.
Whether there is a reason to negotiate depends on the employee’s individual situation.
In some cases, a review may identify concerns with the offer. In other cases, it may help confirm that the package is reasonable.
What if my employer is only offering the ESA minimums?
An employer may calculate a severance package based on the minimum entitlements required by Ontario’s Employment Standards Act, 2000, particularly where the employer is relying on a termination clause in an employment agreement.
However, ESA minimums do not necessarily represent every employee’s full potential entitlement following termination.
Depending on the employment contract and the employee’s circumstances, there may also be contractual or common-law entitlements to consider.
For more information about Ontario severance entitlements, read Severance Pay in Ontario: How Much Are You Entitled To?
What if my benefits are not included in the severance package?
Benefits can be an important part of a severance package, particularly for employees who rely on extended health, dental or other workplace coverage.
When reviewing a severance offer, it may be important to consider how long benefits will continue, what the employment agreement says about benefits following termination and whether the package properly reflects the employee’s potential entitlements.
Benefits are one reason a severance package should not necessarily be assessed based only on the amount of salary being offered.
What if my employer has not recognized my full length of service?
Length of service can be an important consideration when assessing termination entitlements.
Questions can arise where an employer has undergone a merger, acquisition, restructuring or change in ownership, or where an employee has signed a new employment agreement during their employment.
If the length of service shown in your termination documents does not reflect how long you believe you have worked for the employer or its predecessor, this may be something to raise during a severance package review.
What if I only worked for the employer for a short time?
A short period of employment does not necessarily mean there is nothing worth reviewing.
Length of service is important, but when common-law reasonable notice applies, other factors may also matter, including age, position, responsibilities and the availability of similar employment.
Other circumstances may sometimes be relevant as well, such as whether an employee left secure employment after being recruited to join the company.
For that reason, employees should not automatically assume that an offer is appropriate simply because they worked for the employer for only a year or two.
What if my employer has given me a deadline to sign?
Severance packages often include a deadline for accepting the employer’s offer.
An employer’s deadline for accepting a particular offer is not necessarily the same as a legal deadline affecting all of your rights.
If you need more time to understand the package or obtain legal advice, you can ask your employer for an extension.
It is also important to understand any release you are being asked to sign. A release may require you to give up certain legal claims in exchange for the compensation or other terms being offered.
For more information, read Do You Have to Sign a Severance Agreement Right Away in Ontario?
What documents should I provide for a severance package review?
If possible, have the following documents available:
- Your termination letter;
- Your severance package or offer;
- Any release you have been asked to sign;
- Your employment agreement or agreements;
- Recent pay information;
- Bonus or commission plans;
- Equity or stock compensation documents, if applicable;
- Benefits information; and
- Any other documents specifically referred to in your termination package.
If you do not have every document, you can still seek advice. For example, if your employer is relying on an employment agreement that you no longer have, you may be able to request a copy.
Do I need a lawyer to review my severance package?
If you have never dealt with an employment lawyer before, you may wonder whether getting legal advice will make the situation more complicated or turn it into a dispute.
Having a severance package reviewed does not mean you have decided to sue your employer or take legal action.
A lawyer can explain the offer, review the relevant documents, identify what you may be giving up by signing a release and help you understand whether there are issues you may want to consider before making a decision.
Sometimes a review may identify a reason to negotiate. In other situations, it may help give you confidence that the offer is reasonable.
Getting legal advice gives you information about your options. You still decide what you want to do next.
Have your severance package reviewed by Monkhouse Law
If you have been terminated and are unsure whether your severance package reflects your potential legal entitlements, Monkhouse Law’s employment lawyers can review your employment agreement, termination documents and the circumstances of your termination and explain your options.
Contact Monkhouse Law Employment Lawyers for a free 30-minute phone consultation to have your severance package reviewed.