Month: May 2024

Downsizing is an unfortunate fact of employment life, as witnessed by the many layoffs documented last year. And executives are not immune from this reality.

Being terminated can be traumatic and the steps you take when it happens can have a long-lasting impact on your life.

A World Economic Forum survey released in May 2023 found one-quarter of jobs are set to change within the next five years. Reuters reported about 69 million jobs will be created and 83 million eliminated by 2027.

The employment landscape is in constant flux. Both employers and employees face the challenge of labour market churn, the term used to describe the constant movement and turnover of workers.

Labour market churn reflects the changing demands of businesses, advances in technology and evolving consumer preferences. As companies strive to remain competitive, they will restructure, merge or even downsize.

Labour market churn can benefit employees, offering the chance for higher pay and career advancement. However, it can also lead to periods of unemployment.

If you have been “packaged out,” a severance package can help as you transition to the next stage of your career. That is why you should consult an experienced employment law firm that will work diligently to ensure your rights are protected. At Walter Law Group, we will examine every detail of your severance package with an eye to your future.

Using a severance pay calculator

It is not uncommon for people to go online to research employment law issues and severance entitlements. One supposedly helpful tool is a severance pay calculator. The idea is simple enough. You are prompted to answer such questions as your age, length of employment, salary and type of job. You then receive a range of what you can expect in terms of the months of severance with the proviso that the information is a guideline and not a substitute for legal advice.

You have basic severance entitlements under the law. The Ontario Employment Standards Act (ESA) mandates a minimum severance pay of one week of pay for every year employed up to a maximum of 26 weeks. Federally regulated workers can receive two days of pay for every year of service under the Canada Labour Code.

You qualify for severance pay under the ESA if your employment is terminated and:

• you have worked for the employer for five or more years (whether continuous or not) and;
• your employer has a global payroll of at least $2.5 million or severed the employment of 50 or more employees in a six-month period because all or part of the business is permanently closed.

Under the Canada Labour Code, you are entitled to severance pay if you have completed 12 consecutive months of continuous employment in a federally regulated industry.

It should be noted you would not be entitled to severance pay or even notice of termination if you have been fired for cause

A severance pay calculator is only helpful in providing the most cursory feedback in uncomplicated scenarios. However, as an executive, you are generally entitled to more financial remuneration and benefits than a regular worker. That is because the executive pay structure differs from what other employees receive and typically consists of salary, annual incentives, long-term incentives and benefits. This will have a bearing when determining the appropriate compensation package.

Because only basic information is required to calculate severance entitlements, critics view severance pay calculators as little more than marketing ploys to entice potential clients to book consultations.

The danger is the lack of detailed information could result in users having an overinflated estimate of their entitlements. Conversely, if someone gets a low estimate, they could be inclined to settle for an inferior package offered by the employers, leaving thousands of dollars on the table. This is why it is essential to seek advice from a lawyer who is experienced in severance issues.

Factors influencing your severance package

Some established factors help guide employers and employees when it comes to determining an executive severance package. They can include age, length of service, salary, benefits, commission, bonuses, pension or RRSP contributions, profit sharing, stock options and future employability. However, there is no universal formula that applies in each situation. Determining severance can be a complex process and will largely be determined by individual circumstances.

Your severance package can be limited to what has been agreed to in your employment agreement. However, it is important to remember that these contracts are not always as iron-clad as your employer would have you believe. It can come down to how the specific language contained in the agreement is interpreted.

An experienced severance lawyer will do a deep dive into your contract. Did your duties or responsibilities change during the course of your employment? If so, were you offered a new contract? Courts will not hesitate to invalidate an employment agreement that fails to meet the letter of the law. That is again why it is in your best interest to consult with a knowledgeable lawyer who can determine if your rights have been breached.

The Employment Standards Act provides a framework for severance pay in this province but common law supplements ESA minimums when it comes to your notice period. In Ontario, an employee must be given notice of termination if they have worked continuously for a company for three months. If not, the employee could be entitled to damages.

Several other factors can have an impact on an executive severance package, including company size, competition for high-performing executives, type of industry, employee performance and economic conditions.

How to negotiate a severance package in Canada

The internet provides a wealth of information on a seemingly endless variety of topics including employment law. Unfortunately, it is not always accurate, which is why it makes sense to seek qualified advice when negotiating your severance package.

During the shock of a termination, your employer may pressure you into accepting a quick deal. But before you enter any negotiation, it is imperative that you understand your legal rights and obligations. Does your severance agreement contain a non-compete clause limiting your employment options? Is that clause enforceable?

In a negotiation, you want to clearly understand your legal rights and ensure you get what you deserve.  Monetary details such as severance pay, stock options and bonuses will be paramount. But don’t forget to include such things as health insurance along with outplacement and retraining services.

Prepare for counteroffers and weigh every concession and trade-off. A release from a restrictive covenant such as a non-compete clause may be worth taking less severance pay if it means you can move on to a new job.

The importance of legal counsel

Employment law can be complicated and negotiating an executive severance package can present challenges that require legal expertise. A lawyer can help minimize your legal risks and exposure.

Many people are facing termination for the first time but the team at Walter Law Group has decades of experience and can protect your interests, negotiate better terms and offer the emotional distance that can provide peace of mind during a tumultuous period in your life.

Chances are, if you are considering hiring an employment lawyer you already need one. Even if you are still undecided, it is in your best interest to sit down with someone to discuss the merits of your case. Seek out a lawyer who is proficient in executive severance negotiations. Someone current on the latest developments and court rulings in employment law can guide you through challenging legal waters.

A knowledgeable severance lawyer is also able to negotiate a payment structure to lower taxes and liabilities and ensure that any necessary release terms do not impose any unreasonable requirements.

We are severance lawyers you can rely on

When someone has been terminated, they typically just want to put the ordeal behind them so they can move forward with their lives. At Walter Law Group, we understand that.

However, before you sign anything, talk to a lawyer who will negotiate, advocate and litigate expertly on your behalf. Our team will do a comprehensive Severance Package Review to determine if you are being treated equitably.

The compensation you receive should be based on your circumstances and take into account what you were paid at the time of dismissal, including salary, bonuses and/or incentive payments, allowances, stock options, profit sharing, restricted share units and long-term incentive plans. There are other details, such as payment for unused sick days and vacation days or provisions for retraining which may not seem significant but may still need to be considered.

Remember too that even though you may have an employment agreement that spells out your severance entitlements, it is not uncommon that these provisions are unenforceable or fail to fully protect your legal rights.

Don’t take a chance with your future, contact us today.

No job lasts forever. In today’s employment landscape, it is rare for someone to start at a company and remain until retirement. Some research suggests that Canadians may hold about 15 different jobs in their lifetime, with the average employee staying at one company for about four years before moving on.

There are multiple reasons for job turnover. People may want more of a challenge, a higher salary, the need to feel valued or they are searching for growth and career advancement.

It is not always the employee’s choice, of course. Companies have their reasons for moving on from employees. They include a shortage of work, cost-cutting, restructuring or poor job performance. Employers are not obligated to share the reason for a termination. However, unless you have been terminated for cause, they must provide notice and, in many cases, severance.

Severance pay, not to be confused with termination pay, is compensation paid to a qualified worker and is designed to assist employees in bridging the gap in employment from one job to the next.

While severance pay generally works the same for executives and regular employees, there are distinct differences. That is why it is essential to seek advice from an experienced employment lawyer to ensure you are receiving the maximum severance package. Walter Law Group has been successfully negotiating on behalf of our clients for more than 30 years, winning better severance packages than they were first offered by their employers. Severance Package Reviews help ensure you get the very best.

Calculating executive compensation

Before discussing severance, it can be helpful to examine how executives are paid. These employees are entitled to more financial remuneration and benefits than regular workers because they are responsible for overseeing major organizational decisions, operations and the overall direction of the company. Due to their experience and expertise, compensation packages are designed to attract and retain valued executives.

In addition to a base salary, executives may also receive short-term incentives such as annual bonuses and profit-sharing plans. They could qualify for long-term incentives such as stock options, which allow executives the right to purchase company shares at a pre-determined price. As well, they may be entitled to performance shares, which are awarded for meeting specific performance targets over a pre-set period.

There could be other perks, such as a company car, country club membership and enhanced retirement benefits. All forms of compensation must be considered when negotiating a severance package.

No easy answers when it comes to severance

Among the first questions a typical employee will ask after they have been dismissed from their job is, “Am I entitled to severance and how much will I receive?” While these are fair questions, employment law is complex and there are no simple answers or one-size-fits-all solutions. Under Ontario’s Employment Standards Act, minimum severance pay is one week of pay for every year employed up to 26 weeks. If you are working in a federally regulated industry, such as banking, you are only entitled to two days’ pay for every year of service under the Canada Labour Code.

Many factors can come into the equation when determining severance. In Bardal v. Globe & Mail Ltd. the Ontario Supreme Court sets out what is commonly known as the Bardal factors in determining the applicable notice period:

• The character of the employment.
• Length of service.
• Age.
• Availability of similar employment.

These factors can be especially significant in determining the appropriate executive severance package. Executive positions pay more, require a particular set of skills and these jobs can be difficult to find so it only makes sense that severance should be higher.

It is important to remember that you are not entitled to severance pay or even notice of termination if you have been fired for cause. This would be behaviour such as assault, theft or insubordination.

What is a typical executive severance package?

The industry you work in, the size of your company and your job title will have a bearing on your compensation package. Also,th keep in mind that what is included in a severance package will rely heavily on your compensation at the time of dismissal. Generally, you could be compensated for lost salary, bonuses and/or incentive payments, allowances, stock options, profit sharing, restricted share units and long-term incentive plans.  As well, there could be a continuation of RRSP and pension contributions. An executive severance package may also include continuation of health and dental benefits, along with short-term disability and long-term disability insurance coverage.You may also receive payment for unused sick days and vacation days.

In return, you could be expected to return any company property and sign a non-solicitation clause, a confidentiality agreement and release of claims and covenant not to sue the company.

While monetary considerations are always at the forefront of any severance package, you may also want to negotiate for other elements that could assist as you transition to a new job. This can include fees for retraining and outplacement counselling, professional development expenses as well as legal and accounting fees.

Key elements to consider

Your severance package may have been already established in your employment contract when you started with the company. However, many of these contracts fail to meet the rigours of a legal challenge and are unenforceable, which is why it is in your best interest to seek advice from an employment lawyer. Even if you believe that the package you are receiving is fair, you may be entitled to additional compensation under common law.

A lawyer with expertise in executive severance packages can help you find the answers to such questions as:

• Is your compensation package in line with what other employees received in similar circumstances?
• Should you accept a lump-sum amount or spread out the payments?
• If severance is paid in instalments will there be offsets, mitigation or clawbacks?
• Does severance pay include partially or fully accrued but unpaid bonus?
• If the settlement is paid over time, will payments continue upon death or disability?
• If you get a new job does pay continuation end?

Remember, any compensation you receive, even small payments such as cellphone plans or mileage allowance, must be assigned a dollar value to determine the appropriate severance pay. Leave nothing unaccounted for.

We are in your corner

Employment law in Ontario has many intricacies and negotiating a severance agreement can be challenging and onerous. Your employer may attempt to bully you into accepting a subpar offer. Unfortunately, it is not uncommon for people to accept less than what they deserve just to put an unpleasant period of their lives behind them. Don’t fall into that trap.

Being dismissed is stressful but it is important to remain calm so you can help yourself. Take notes during the termination meeting and never sign a severance agreement until you understand the terms. Your employer might try to pressure you to sign a severance offer immediately but you are not legally required to do so.

Take the time to study the exit agreement, research and understand your complete compensation package and get an opinion from a lawyer who understands executive severance and can protect your rights. Accepting an agreement without legal advice can be costly and once you sign, it is too late.

At Walter Law Group, we examine every nuance of your offer. We will evaluate what you have been paid and what you are owed, making sure you get the package you deserve. We negotiate, advocate and litigate expertly in all levels of court. Contact us today to see how we can help you.