Many people expect to receive financial compensation in the form of severance payments when their employment comes to an end. This expectation is based on a common but mistaken belief that workers are automatically entitled to severance payments.
Some employment standards laws, such as Ontario’s Employment Standards Act, 2000, do require employers to provide unconditional severance payments in some circumstances. However, the overriding legal obligation that Canadian employers have is to provide employees with advance notice of their dismissals (generally referred to as “working notice”).
The working notice requirement is meant to be a “bridge” from the original role to a new one. Ideally the transition to new employment occurs without the worker suffering any loss of income.
If an employer decides against providing working notice to a departing employee, a severance payment will be made instead.
The decision to provide working notice or a severance payment is entirely within the employer’s discretion. However, there are limits to this discretionary power.
While working notice is a legitimate and lawful method for terminating an employment contract, Canadian courts recognize that an employer’s deployment of working notice is not appropriate if it places employees in a situation where they are forced to endure an atmosphere of hostility, embarrassment or humiliation. Similarly, given that the purpose of working notice is to assist an employee transition to a new job, if the workload is so severe that it obstructs his or her job search, that too raises an argument that the working notice has become unreasonable.
Determining the appropriateness of working notice is entirely fact specific. If working notice is not suitable, the dismissed employee can lawfully refuse to report to work throughout the notice period and seek to receive a severance payment instead. This is a determination that should be made very carefully, and ideally with the assistance of an experienced employment lawyer, because the consequences of unlawfully refusing to report to work during a working notice period can be significant:
- the individual will be viewed as having resigned their employment, and will forfeit their severance entitlements; and
- the individual can be held personally responsible for any losses or costs incurred by the company as a result of their abrupt departure, including, for example, lost revenues and recruitment costs.
If faced with working notice, individuals are strongly encouraged to consult with an employment lawyer in order to review their rights and obligations before taking any steps that could jeopardize their severance entitlements and/or expose them to a lawsuit by their former employer.
Alex Kagan is an employment lawyer at Singh Lamarche LLP. He advises both employees and employers with respect to all aspects of employment law. If you have any questions regarding an employment matter, Alex can be reached by telephone at 647-799-0499, or by email at firstname.lastname@example.org.