How to Determine Employee Severance Entitlements

How employers can avoid racking up unnecessarily high fees when determining an employee’s severance entitlements:

🔹 When calculating Employment Standards Act minimums, it’s necessary for employers to consider all forms of compensation earned by the employee over the preceding 12 weeks. This includes:

Incentive pay, such as bonuses,
commissions,
restricted stock units or phantom stock plans,
benefits RRSP or ESPP contributions

Failure to consider all benefits and incentives can result in the employee pursuing action to reclaim all amounts owed to them.

🔹 Employers should avoid overly aggressive negotiation tactics which can lead to costly legal fees.

Think of it like selling a house. If you set the price too high, no one will make an offer. If you set it too low, on the other hand, you’ll get many offers that you aren’t likely to even consider.

It’s necessary to set the initial offer at a point where the negotiation can lead to an arrangement both parties are happy with.

An aggressively low offer forces employees to pursue greater entitlements than they otherwise would, and sends a clear message that you’re uncomfortable paying common law notice.

Since common law notice is enforceable in court, employers then set themselves up to pay for a settlement plus the cost of their lawyer and fees to the employee’s council, too. This can result in employers paying $50,000 to $200,000 more than they needed to, all because they set the price too low in the opening negotiation phase.

🔹 Employers must produce accurate pay statements when asked.

This is where it becomes important to keep accurate records. Withholding this information and intentionally or unintentionally providing documents with miscalculations can lead to legal repercussions.

Not only is this seen as bad faith, it can damage the employer’s reputation as court proceedings are a matter of public record.

It’s necessary to remember that ignorance is no defence in the eyes of the law.

It’s always in the employer’s best interest to approach negotiations with fairness to prevent high fees.

If you have any questions, contact us to get excellent advice.