Severance Package Review Lawyers for Western Canada

To explain what a severance package is, we must first explain some basic employment law principles.

First, there are two types of terminations: “without just cause” and “with just cause”.  While we discuss what constitutes a with just cause termination more fully in our “Dismissal with Just Cause” section, a simple definition is as follows:

[with] [j]ust cause is conduct on the part of the employee incompatible with his or her duties, conduct which goes to the root of the contract with the result that the employment relationship is too fractured to expect the employer to provide a second chance.¹

In contrast, a “without just cause” termination is simply a termination that doesn’t satisfy the above test. For example, if an employer terminates an employee because of a lack of work this will be a “without just cause” termination.

While employers are free to terminate employees without just cause at their discretion, there are some safeguards that help to protect the employee. For example, there is an implied term² in every employment agreement requiring employers to give employees common law reasonable notice of termination. Courts determine an employee’s common law reasonable notice period based on various factors such as age, length of service, and character of employment.

However, in practice, most employers terminate employees effective immediately without providing them with notice at all. When this happens, the employer has breached the implied term of reasonable notice and is liable to the employee for the damage that results. This damage is typically everything the employee would have earned had appropriate notice been given. These damages are also more commonly referred to as “pay in lieu of reasonable notice” or a “severance”. The amount of “pay in lieu of notice” or “severance” an employer offers an employee is a “severance package”.

With that said, when an employer terminates an employee effective immediately (such that the employer has breached the implied term of reasonable notice), employees also have a corresponding obligation: to “mitigate” their damages. This duty requires employees to take reasonable steps to search for comparable replacement employment. If the employee actually locates and commences work then the pay received reduces the employee’s claim dollar for dollar during the notice period. In contrast, if they are unable to find work throughout their notice period then their claim remains fully intact.

As we will see below, the principles of mitigation often impact whether an employee accepts the severance package their employer is offering them.