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What Is Included In A Severance Package?

by | Jul 15, 2022

It is natural to feel worried and anxious about what comes next when you are let go of your job. If you are lucky, your employer will offer you a severance package. This can be a great relief, but it is important to know what is included in a severance package before accepting it. Employment law is complex, and you want to make sure you are getting what you are entitled to.

Today’s post will discuss what is typically included in a severance package. We will also touch on workers’ compensation law and how it applies in the event of a job loss.

What is a severance package?

First, let’s go over what is typically included in a severance package. A severance package is a set of benefits or compensation that an employer offers to an employee when they are let go from their job due to no fault of their own. The most common reason for this is company downsizing or restructuring. Severance packages are not required by law, but many employers offer them to soften the blow of job loss and show appreciation for years of service.

Severance packages can vary significantly in terms of what is offered, but typical items are often included. These can include:

  • A lump-sum payment of salary or wages owed
  • Continued health insurance coverage
  • Outplacement services
  • Vacation pay

Severance packages can also include other benefits, such as pension plan contributions or stock options. The value of these benefits will depend on the company’s policies and the employee’s specific situation.

It is important to note that severance packages are usually offered to employees who have been with the company for a certain time, which brings us to our next point.

How to determine your company’s policy on severance

If you have been with your company for many years, you may be wondering if you are entitled to a severance package. The answer to this question will depend on your company’s policy on severance. Many companies have policies that state how much severance an employee is entitled to, based on their length of service.

Look at your written employment contract if you have one. It should state whether or not your company offers severance pay and, if so, how it is calculated. If you do not have a written contract, your company’s employee handbook may have information on severance pay. You can also ask your human resources department about your company’s policy.

For the contract to be valid, these conditions need to be met:

The contract is compliant with relevant laws

The Employment Standards Act is the law that sets out the minimum standards for workers in Ontario. This includes things like vacation pay, minimum wage, and public holidays.

If your employment contract does not meet the minimum standards set out in the Employment Standards Act, it is not valid, and your employer cannot enforce it. You are still entitled to the protections under the Employment Standards Act, even if your contract says otherwise.

For example, if your employment contract states that you are not entitled to vacation pay. However, the Employment Standards Act requires that all workers be given at least two weeks of vacation pay after one year of employment. Even though your contract says otherwise, you would still be entitled to two weeks of vacation pay.

You signed the contract before you started working

If you signed your employment contract after you started working, it might not be valid. That’s because, in order for a contract to be valid, both parties need to have agreed to its terms before work begins.

For example, let’s say you start working for a company and, two months into your job, your employer asks you to sign an employment contract. The contract states that you are not entitled to severance pay. However, since you did not agree to this before you started working, the contract may not be valid, and you may still be entitled to severance pay.

What happens if you have no contract?

If you do not have a written employment contract, the common law will determine your rights and obligations. Common law is a set of rules that have been developed by judges based on previous court decisions.

Under common law, you are entitled to reasonable notice of termination if you are fired from your job, meaning your employer must give you enough time to find another job. How much notice you are entitled to will depend on factors such as your length of service, your age, and the type of job you have.

Generally speaking, this period of time will vary from a few weeks to several months. However, in some cases, workers have been awarded up to 24 months of notice. It is important to note that, under common law, you are only entitled to reasonable notice if you are fired from your job. If you resign from your job, you are not entitled to severance pay.

Are you entitled to recover payments for damages?

In some cases, workers who have been wrongfully dismissed from their jobs may be able to recover damages. They can sue their employer for things like lost wages and benefits. These losses also apply to the timeframe in which workers are given reasonable notice of their termination.

In the case of Matthews v Ocean Nutrition Canada Ltd, 2020 SCC 26, Mr. Matthews was 13 months into his 15-month grace period when the company he worked for went public. He would have been entitled to share options totaling roughly $1 million if he had still been employed when the company went public. However, because he was dismissed 13 months before the IPO, he was not entitled to any share options.

The Supreme Court of Canada ruled that Mr. Matthews was entitled to damages for the value of the share options he would have received if he had still been employed when the company went public.

This case shows that it’s paramount to understand the full extent of your rights and obligations.

Find a Wisconsin worker’s compensation lawyer

If you have been wrongfully dismissed from your job, it is essential to speak to an expert in worker’s compensation law. They will be able to review your case and advise you of your options. They can also help you recover any damages you may be entitled to.

At Vanden Heuvel & Dineen, S.C., our worker’s compensation lawyers have nearly 40 years of experience representing local workers who have been wrongfully dismissed from their jobs. We will fight to get you the severance pay and benefits you deserve.

Contact us today to schedule a free consultation.

Written by Vanden Heuvel & Dineen, S.C.

Business Law | Worker's Compensation

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