Common Law Severance

With some exceptions, Canadian employers are permitted to terminate an employment relationship at any time without cause, provided the employee is given proper notice, or pay in lieu of such notice.

Statutory severance

The minimum payment or notice that an employer must provide in the event of a termination without cause, is set out in employment standards legislation. In British Columbia, the applicable legislation for most employees, is the Employment Standards Act (British Columbia).

For the minimum severance obligations set out in the Employment Standards Act (British Columbia) to apply, it must be clearly stated in the employment contract between the employer and the employee. If there is no employment contract, or the employment contract does not have a termination provision, or the termination provision is ambiguous, an employer must give the employee notice or payment in lieu of notice, in accordance with what the courts have decided as being reasonable. This is called reasonable notice or common law severance.

Common Law severance

The amount of reasonable notice that an employer is required to give depends on the facts of each case and the following factors are key:

• The employee’s age
• How long the employee has worked for the employer
• The employee’s position, including salary
• Availability of similar employment

Generally, older employees, or employees who have worked for a longer period of time, will be entitled to more notice. However, one must also consider the nature of the position and the availability of similar employment. For example, a younger employee who has only worked for a short period of time, could still be entitled to a lengthy notice period if that employee does a very specialized job that would make it hard for the employee to obtain comparable alternative employment.

Structuring the severance

Common law severance can be structured in a number of ways such as working notice, pay in lieu of notice, salary continuance, or a combination of these options.

Employers should seek legal advice when structuring severance packages as the courts are very strict about employee entitlements. For example, when an employee is given pay in lieu of notice, the employee is also entitled to any other benefits that he or she would normally have received during the period corresponding to the notice period.

With some exceptions, Canadian employers are permitted to terminate an employment relationship at any time without cause, provided the employee is given proper notice, or pay in lieu of such notice.

 

For more information, contact Heather Hettiarachchi at heatherhettiarachchi@cbelaw.com or 604.273.6411.