Understanding Severance Calculations Beyond Minimum Requirements

1. Understanding Severance Calculations Beyond Minimum Requirements

2. The laws and practices surrounding severance can be a source of confusion and uncertainty for employers, but an employment lawyer can provide support. This tricky area of the law consists of multiple approaches that often mean the amount of severance offered to employees may vary significantly based on the circumstances. Employers frequently consult the requirements established by the Employment Standards Code in Alberta. This Code sets minimums related to notice of termination or pay in lieu of notice, with the amount tied to length of service. However, the Employment Standards Code only provides for the minimum amount of termination pay or severance that is owed to an employee. An employee is generally owed a greater amount in severance than is provided for under the Employment Standards Code.

3. Employers may use employment agreements to limit an employee’s severance package to the statutory minimums found in the Employment Standards Code. However, such agreements may require careful crafting with support from employment and labour lawyers in Edmonton to ensure enforceability. Employment Standards Code Minimums vs. Common Law

4. Although all employer are required to pay termination pay as per the Employment Standards Code, certain situations can require an employer to also pay additional severance, which is often referred to as “common law severance” or “common law reasonable notice.” Common law on severance applies when there is no employment contract or when an employment contract does not limit severance to the minimums under the Code or stipulate a fixed amount of severance due to the employee. This may allow terminated employees to seek compensation beyond what the Standards Code establishes as a minimum. Employers should understand what to anticipate in a common law scenario.

5. What Factors Influence Common Law Severance Calculations? The most confusing element for employers concerned with common law severance is that there is no singular standard for calculating the appropriate amount. Because common law derives from many judgments over time, different approaches exist. Courts may therefore use one or more standards to consider when settling a severance dispute.

6. For example, the employee’s length of service with the employer is a common factor in calculating severance. However, no standard means of converting service time into a monetary value exists, and outcomes can vary broadly. An employee’s age may also be a factor, with older employees receiving higher severance due to the difficulty of re-entering the workforce compared to a younger employee. Other factors may include:

7. The employee’s position within the company; • The gravity or nature of the employee’s job role and responsibilities; • The relative value of benefits and additional compensation, such as bonuses; and • The current state of the job market within the industry. As we can see, many factors can impact the outcome of this process. The Need for a Thorough Legal Review of Severance Offers

8. Because many factors can influence common law severance, lengthy disputes can develop between employers and former employees over the correct amount. These battles can be time-consuming and costly, requiring significant attention over a prolonged period. Even contracts that attempt to limit severance can lead to a common law battle if the language is not strictly aligned with the Employment Standards Code or is vague and unclear. An employee can seek severance under common law if an agreement is found to be unclear and invalid.

9. Striking the right balance to avoid a dispute is not always easy, but the effort can prove worthwhile. While an employee may still choose to dispute your offer, you can enhance compliance and improve offers to mitigate risks. With so many factors involved, working with employment and labour lawyers in Edmonton can illuminate how to craft stronger contracts or more balanced offers. Find Support Navigating Severance Issues Today

10. With no one-size-fits-all formula to calculate severance beyond the minimums of the Standards Code, businesses can face difficulties in common law situations. Therefore, legal support to align with the law and manage business needs surrounding severance can be valuable. At Lypkie Henderson, we can connect you to clarify the law in this area and help you understand your options and next steps. Connect with us today for friendly, experienced support.