Receiving a severance package can be overwhelming, especially when it arrives at the same time as an unexpected termination. You may be given an amount of money, several documents to review and a deadline to make a decision, all while trying to process the loss of your job.
If you have never dealt with a termination before, it is understandable to wonder whether the offer is fair, whether you should sign it and whether you really need to speak with a lawyer.
Before making a decision, it can help to understand how your severance package was determined, what may be open to discussion and what you are agreeing to if you sign.
Here are five things to consider when reviewing a severance package:
1. Your severance may not be as simple as a formula
It is easy to assume that severance is calculated using a straightforward formula based on your salary and how long you worked for the company. You may have even used an online severance calculator to get an idea of what you could receive.
A calculator can be a helpful starting point, but there is not one simple formula that determines what every employee should receive.
In Ontario, minimum termination and severance entitlements are set out in the Employment Standards Act, 2000. However, some employees may have rights beyond these minimum standards under their employment contract or the common law.
How long you worked for the company matters, but so can your age, the type of work you did, your employment contract and how difficult it may be to find similar work.
This means two employees who earned similar salaries and worked for their employers for the same amount of time may not necessarily have the same potential entitlement.
Monkhouse Law’s Ontario Severance Pay Calculator can provide an estimate, while an individual assessment can take a closer look at the circumstances of your employment and termination.
2. The severance package you received may not be the final offer
When an employer presents you with a severance package, it can feel as though the amount has already been decided and there is nothing left to discuss.
Depending on the circumstances, however, there may be room to negotiate the amount being offered or other terms in the package.
Negotiating a severance package is also not necessarily just about asking for more salary. Depending on your compensation and the terms of the agreement, there may be other things to consider, such as:
- Bonuses or incentive compensation;
- Commissions;
- Benefits;
- Equity or stock compensation;
- Pension or retirement contributions;
- References;
- Legal fees; and
- Confidentiality, non-solicitation or other terms in the agreement.
This does not mean that every severance offer should be challenged. An employer’s offer may be reasonable. The important thing is understanding what is being offered and whether there may be something worth discussing before you accept it.
For more information, read What You Need to Know About Severance Packages.
3. Your employment contract may not necessarily determine what you receive
If your employment contract says what you will receive when your employment ends, it is natural to assume that is the end of the matter.
Your employer may even refer to a termination clause in your employment agreement when explaining how your severance package was calculated.
However, the wording of a termination clause matters, and not every termination clause will necessarily limit an employee’s entitlement.
Whether a clause is legally enforceable can require a careful review of the employment agreement and the law that applies to it. If a termination clause does not legally limit an employee’s entitlement, the employee may potentially have rights to common-law reasonable notice.
If you have signed more than one employment agreement during your time with the company, those documents may also be important.
For more information, read about common-law reasonable notice in Ontario.
4. Working somewhere for a short time does not necessarily mean there is nothing worth reviewing
If you only worked for your employer for a year or two, you may wonder whether it is even worth questioning the severance package you received.
Length of service matters, but it is not necessarily the only consideration when determining an employee’s potential entitlement at common law.
Your age, position, responsibilities and the availability of similar employment may also be relevant. In some situations, other circumstances can matter too, such as whether you left secure employment after being recruited to join the company.
Your compensation may also involve more than your salary. Bonuses, commissions, benefits, equity or other forms of compensation may need to be considered when reviewing an offer.
For these reasons, it can be a mistake to assume that there is nothing worth reviewing simply because you were not with the employer for very long.
For a broader explanation, see Am I Entitled to Severance Pay in Ontario?
5. Having a lawyer review your severance package does not mean you are starting a legal fight
If you have never spoken with an employment lawyer before, getting a lawyer involved may sound intimidating. You may not want to sue your employer or turn your termination into a legal dispute. You may simply want to put the experience behind you and move forward.
Having a severance package reviewed does not mean you have decided to take legal action.
An employment lawyer can help you understand what your employer is offering, review your employment contract and termination documents, explain what you may be giving up by signing a release and identify issues you may not have known to look for.
Sometimes a review may identify a reason to negotiate the offer. In other situations, it may help an employee understand that the offer is reasonable.
Getting legal advice gives you information about your options. You still decide what you want to do next.
What if your employer has given you a deadline to sign?
It is common for a severance package to include a deadline for accepting the employer’s offer. When you have just lost your job, that deadline can make an already stressful situation feel even more urgent.
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 additional time to understand the package or obtain legal advice, you can ask your employer for an extension.
It is also important to understand what you are being asked to sign. Many severance packages include a release under which the employee agrees 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?
Making a decision about your severance package
You do not need to become an expert in employment law to make an informed decision about your severance package.
What is important is understanding what your employer is offering, what you are being asked to sign and whether there are aspects of your employment or termination that you may not have considered.
If you 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.
Having your severance package reviewed does not commit you to taking legal action. It can simply help you understand your options and make a more informed decision about what to do next.
Contact Monkhouse Law Employment Lawyers for a free 30-minute phone consultation about your situation.