Severance pay: what am I entitled to? Part II

Posted by on February 11, 2009 in Jobs

Today is the 2nd part of a post on severance pay. Yesterday’s post on severance pay is found here. The usual disclaimers apply: this is a non-exhaustive informational post and not to be considered advice of any kind whatsoever. As usual, please consult a qualified legal expert if you have any severance related questions.

What happens if I am paid commission? How is severance calculated?

Again, I confine this information to Canada only. In Ontario, if you are an employee who does not have a “regular work week” (you do not work the same hours every week or not paidon a basis other than time which captures most employees paid on commission or mixed salary and commission), the “regular wage” used to calculate severance is the average wage earned in the 12 months preceding the date termination notice was given.

For example, assume you are a commissioned salesperson who made an average commission of $300/week in the 12 weeks prior to termination and you have worked at the company for 2 years. In Ontario, your minimal severance is 2 weeks notice or payment in lieu of notice. Therefore, your minimal statutory severance is 2 weeks of pay at $300/week. British Columbia works on the same system but the average is taken from the last 8 weeks of employment. Alberta uses the same period of time to calculate regular wages as Ontario.

The obvious issue with this system is that if a commissioned employee performs poorly, it is not only vulnerable to being terminated but the amount of severance paid could be quite low.

You indicate the statute is the minimal requirement. Can I get more?

Common law, or law made by the judicial, has given severance to litigants which exceed the statutory minimums. Over time, patterns of appropriate severance periods have developed which are guidelines on what employers generally give certain class of employees in order to avoid litigation.

On a very general basis, and barring special circumstances, upper middle management, professionals and employees with a fair amount of senoirity or older employees who have little chances of being rehired have been given by the courts severance of approximately 4 weeks of renumeration (pay and benefits) for every year of service up to a year (it is rare to get more than 1 year’s severance). Employers with large human resource departments or legal departments tend to give employees in these classes this range of severance since they know it will generally withstand judicial scrutiny.

The 4 weeks for every year of service tends to be on the upper end. Those in middle management and below tend to receive severvance somewhere between the statutory minimal and 4 weeks. If you are employed in an at-will jursidiction in the United States, and you are not a part of an exception to at-will employment regime, you may have to hire a lawyer to get you severance (again, this may be a factor in why the American downturn has been harsher thus far; employment laws are employer friendly and many employees are being left to fend for themselves).

In special cases, one may get more. Special cases would include human rights issues (you are targetted for termination due to race, gender, sexual orientation etc.), you were induced to leave your previous employer and are terminated not soon after you start your new position, the termination was made in bad faith or done really poorly etc.

I feel I should get more severance. What should I do?

Most sophisicated employers will ask an employee to sign a release when they are terminated. Only sign it after seeing a lawyer to discuss (a) is this in the range of severance someone in my situation should receive? and (b) do I have any special circumstances that would indicate I should receive more severance (see above for some examples).

A good lawyer can probably get you more severance if your situation warrants it by a series of correspondence. Remember, the employer does not want to incur large legal fees and potential litigation and would rather than your hr file is “closed” as painlessly as possible.

If you have been part of a mass termination, you could band together and hire a lawyer for a discount of their regular billable rate given they are receiving volume in exchange. Many law schools do have legal aid centres that can provide legal advice for a low fee. Finally, many of Ministry of Labour departments have help lines as resources.

The key is to analyize  contextually whether you are being treated better or worse off than someone in a similar situation as you. This does involve talking about a very uncomfortable life situation but it could be worth it in the short-term to get you back on your feet.

Best of luck.

4 Comments on Severance pay: what am I entitled to? Part II

By Squawkfox » 41 Bloggers Share Their Best Money Advice on May 18, 2009 at 12:40 am

[...] pay: what am I entitled to? (Part 1, 2) | Thicken My [...]

By glen on March 2, 2011 at 5:37 pm

Went on WSIB it isgoing on two years, and have been excepted until 65 years old. work related repetitive work caused hand problems.. So now coming up and time for my severance and is saying only intitled to 1 week for every year worked up to 26 weeks.
They did allow me my benefits for 2 years, so this is why I had to wait. and see if WSIB had any resources. which had my grade 12 and being of age and jobs losses all around us, has given me a letter stating have been permanently disabled to find job.
I believe I am entitle to more being they said there was no job for me to do there, and this is why WSIB has them paying 10 % of this claim, now excepted my claim until 65 and I am only 55 …
Worked for this company for 18 years..
What can I do to get more severance? thanks Glen

By admin on March 7, 2011 at 9:58 pm

Glen- your WSIB rep would be a good place to start since they have probably encountered similar situations and can give you some context of what other people received could refer you to a resource. Good luck.

By tommy on January 11, 2012 at 9:40 pm

It’s really disappointing that the government only documents the minimum’s for termination/severands pay which are no where near what a middle-management worker should get. Union workers have unions to protect them, but it seems managers better consult a lawyer or they’ll get robbed. Really some standards should be published by the government, it’s shouldn’t be a secret that you need to consult a lawyer just to find out whether your termination offfer is fair!

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