According to Statistics Canada’s Labour Force Survey, thousands of Ontarians face job separations every quarter. Many assume they have no recourse, but the truth is that Canadian courts routinely hold employers accountable when they fail to provide reasonable notice or rely on unproven allegations of cause.

Wrongful dismissal isn’t about whether it was fair to fire someone. It’s about how the employer ended the employment relationship and whether the process and compensation complied with the contract and the law.

Key Takeaways

• Wrongful dismissal occurs when an employee is terminated without just cause and without reasonable notice or pay in lieu.
• Employers can dismiss for any reason; as long as they comply with contractual and legal notice obligations.
• Just cause requires serious misconduct or dishonesty; mere poor performance or conflict rarely qualifies.
• Constructive dismissal occurs when an employer changes core employment terms (e.g., pay, role, benefits) enough to force resignation.
• Federally regulated employees (banks, telecom, interprovincial transport, etc.) may file unjust dismissal complaints within 90 days instead of suing in court.
• Remedies include pay in lieu of notice, benefits, bonuses, and, in some federal cases, reinstatement.

What Is Wrongful Dismissal?

In simple terms, wrongful dismissal occurs when an employer terminates an employee’s employment without providing reasonable notice or pay in lieu.

The Supreme Court of Canada explained this in Honda Canada Inc. v. Keays (2008 SCC 39), stating that the obligation to provide reasonable notice is an implied term in every employment contract. When that term is breached, the employee is entitled to damages, which essentially is the income and benefits they would have received during the proper notice period.

For example, if an employer tells a ten-year employee to leave immediately and offers only the minimum notice required under Ontario’s Employment Standards Act, 2000 (ESA), the worker might still be owed months of additional pay at common law.

Signs your termination may be wrongful:

• You were suddenly dismissed, without warning or progressive discipline.
• Your employer claimed “cause” without proof or investigation.
• You received less than a few weeks’ pay despite your long service.
• Your benefits or commissions stopped immediately.

This claim isn’t meant to punish your employer; it’s simply there to ensure you’re compensated for the income you lost during the reasonable notice period.

What Counts as Just Cause for Termination?

Employers can only terminate without notice, for just cause, but courts interpret the definition of just cause narrowly. Misconduct must be so serious as to destroy the trust essential to the employment relationship.

In McKinley v. BC Tel (2001 SCC 38), the Court said the test is contextual: the misconduct must be proportionate to the punishment. A single act of dishonesty or poor performance isn’t automatically cause.

Examples that may constitute cause:

• Theft or fraud
• Workplace violence or harassment
• Repeated insubordination after warnings
• Serious conflict of interest or breach of confidentiality

Examples that rarely constitute cause:

• Occasional lateness
• Poor performance without clear coaching
• Personality conflicts or restructuring
• Refusing unsafe work

Ontario courts also expect employers to investigate fairly and use progressive discipline when possible. If they skip those steps, the claim of cause usually fails.

Constructive Dismissal: When You’re “Forced” to Quit

At this point, we have to note that not every dismissal involves the words “you’re fired.” Sometimes, an employer changes the job so drastically that the employment relationship has effectively been terminated.  The law calls this constructive dismissal.

The Supreme Court’s decision in Potter v. New Brunswick Legal Aid Services Commission (2015 SCC 10) remains the leading case. The Court found that even an indefinite suspension with pay, if carried out without proper authority or notice, can amount to termination.

Common triggers in Ontario:

• A significant pay cut (often 10–15 percent or more)
• A demotion or major loss of responsibility
• A transfer to another city without consent
• Removal of key benefits or bonuses
• Creation of a toxic or hostile work environment

In each case, the court asks: Would a reasonable person see the employer’s conduct as ending the employment relationship? If the answer is yes, the employee can treat the contract as terminated and sue for damages.

Wrongful vs. Constructive Dismissal

Unjust Dismissal for Federally Regulated Employees

While most employees in the GTA are governed by Ontario’s ESA, some industries (like for example banks, telecommunications, airlines, and interprovincial trucking) all fall under the Canada Labour Code.

Sections 240–246 of the Code allow non-managerial employees with at least 12 months of continuous service to file an unjust dismissal complaint within 90 days of termination (Government of Canada, Labour Program, “Unjust Dismissal” Guide).

If successful, the federal adjudicator can order:

• Reinstatement to the previous job
• Back pay for lost wages
• Correction of the employee’s record of employment

This federal regime offers remedies broader than those available under Ontario law, but the complaint must be filed quickly.

Notice, Termination Pay, and Severance

Understanding your rights to notice and severance begins with clarity. Each province and territory has its own Employment Standards Act (ESA) that sets the minimum notice or pay in lieu.

For example, Ontario’s ESA provides:

• 1 week per year of service, up to 8 weeks (minimum)
• Severance pay (if you have more than 5 years of service and employers’ payroll is over $2.5 million) : 1 week per year, up to 26 weeks

These are minimums. The common-law reasonable notice period is usually much longer, unless the employment contract clearly and lawfully limits it. Courts will strike down ambiguous termination clauses that attempt to undercut ESA rights.

Key differences:

• Termination pay = compensation for lack of notice
• Severance pay = compensation for long service or loss of seniority
• Common-law notice = court-determined, based on individual factors

(Source: Ontario Ministry of Labour, “Your Guide to the ESA – Termination and Severance”)

How Courts Determine Reasonable Notice

Every situation is different, for this reason judges use the Bardal factors (from Bardal v. Globe & Mail Ltd., 1960) to decide how long notice should be:

1. Length of service
2. Age of employee
3. Character of employment (seniority, skill level)
4. Availability of similar work

For instance, a 55-year-old manager with 20 years’ service may receive 18 to 24 months of pay in lieu of notice. By contrast, a 28-year-old technician with three years’ service might receive three to four months.

Courts include:

• Base salary
• Benefits and pension contributions
• Vacation pay
• Bonuses or commissions that would have been earned during the notice period (Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26)

If an employer wrongfully withholds a discretionary bonus during the notice period, the court may order payment unless the plan clearly excludes it.

Remedies for Wrongful Dismissal

The purpose of damages is to place the employee in the financial position they would have occupied had proper notice been given.

1. Pay in lieu of notice

Compensation equal to the salary and benefits for the reasonable notice period.

2. Continuation of benefits

Courts expect employers to maintain health, dental, and pension benefits during that period.

3. Bonus or commission entitlements

Following Matthews v. Ocean Nutrition, bonuses payable during the notice period are recoverable unless the plan language unambiguously excludes them.

4. Aggravated damages

If the manner of dismissal causes proven mental distress — for example, humiliation or reputational harm — courts may award additional sums (Honda v. Keays, 2008 SCC 39).

5. Punitive damages

Reserved for malicious or high-handed conduct meant to punish the employer rather than compensate the employee.

In Ontario, aggravated and punitive awards remain rare; most cases resolve through negotiated settlements reflecting the reasonable-notice range.

The Supreme Court in Honda v. Keays emphasized that aggravated and punitive damages are exceptional and require clear evidence of bad faith or mental distress.

Federal employees may also be entitled to reinstatement and back pay under the Canada Labour Code.

Timelines, Documents, and Next Steps

After a dismissal, timing and organization matter more than most realize. Knowing what to do and when, can make the difference between protecting your rights and losing critical compensation. Let’s break it down.

Limitation period: You generally have two years from the date of termination to file a civil claim under Ontario’s Limitations Act, 2002.

Documents to collect:

• Your employment contract and any policy manuals
• Termination letter and Record of Employment
• Pay stubs and benefit statements
• Performance reviews or disciplinary warnings
• Any emails or notes showing changes to your role or treatment

Immediate actions:

1. Do not sign any release or severance offer without legal advice.
2. Document conversations with HR or supervisors.
3. Apply for Employment Insurance (EI) but keep records — EI does not prevent you from claiming wrongful dismissal damages.
4. Seek legal guidance early to calculate both ESA minimums and common-law entitlements.

Employees can also file ESA complaints to the Ministry of Labour for unpaid minimum entitlements, though those do not replace common-law lawsuits for higher damages. If you file a complaint, you cannot later sue for common law notice.

Federal vs. Provincial Jurisdictions

The vast majority of employees are covered by provincial law. However, if your employer’s business is under federal jurisdiction— such as airlines, banks, railways, trucking or telecom companies — you may be under the Canada Labour Code instead.

To confirm, ask HR which statute governs your workplace. The federal Labour Program publishes an updated list of regulated industries (Government of Canada, Labour Program, “Termination, Layoff or Dismissal”).

Understanding the distinction matters, because federal unjust dismissal complaints can lead to reinstatement, while provincial wrongful dismissal actions usually result in compensation only.

Why Employment Contracts Matter So Much

A properly drafted employment contract can limit or expand your rights on termination. Many employers use standard clauses that attempt to cap notice at the ESA minimums. If those clauses are poorly worded or conflict with the Act, Ontario courts will declare them unenforceable, leaving the employee entitled to full common-law notice.

The Ontario Court of Appeal has consistently emphasized that ambiguity is construed in favour of the employee. Even a small drafting flaw (an outdated reference or missing continuation-of-benefits clause) can void an entire termination provision.

Employees should always review contracts before signing and again at termination. What seems like fine print often determines whether you receive weeks or months of pay.

The Human Side of Dismissal

Legal analysis aside, job loss hits hard. It’s emotional, disruptive, and often embarrassing. Courts recognize this human reality. In Wallace v. United Grain Growers Ltd. (1997 3 SCR 701), the Supreme Court acknowledged that termination can be traumatic and that employers owe a duty of good faith in the way they dismiss employees.

Although later cases refined the law (replacing the so-called “Wallace bump” with evidence-based aggravated damages) the principle remains: employers must act honestly, fairly, and respectfully.

In practice, that means providing clear reasons, avoiding false allegations, and handling the process with empathy. When they don’t, courts may increase damages to reflect the unnecessary harm caused.

Practical Example

Imagine a 52-year-old project manager in Toronto earning $90,000 annually, employed for 12 years. She’s suddenly told her position is “no longer required” and offered eight weeks’ pay. Her contract has a vague termination clause referencing the ESA but no benefits continuation.

If that clause fails to comply with the ESA and is void, she could claim 12 to 14 months’ pay under common law, including lost benefits and a pro-rated bonus. At roughly $90,000 per year, that’s a difference of more than $80,000 — all stemming from the employer’s failure to provide lawful notice.

Final Thoughts

Wrongful dismissal law in Canada balances fairness and flexibility giving employers freedom to manage their workforce while protecting employees from abrupt, unjust terminations.

If you were dismissed suddenly or under questionable circumstances, review your employment terms carefully and seek legal advice early. Whether through court action or the federal complaint process, Canadian law ensures you have the right to fair notice, fair pay, and fair treatment.

The post What Qualifies as Wrongful Dismissal in Canada? appeared first on Walter Law Group.

If you are suffering from a mental health issue and contemplating taking stress leave, it’s important to understand your employment rights.

Eligibility Criteria for Stress Leave in Ontario

In Ontario, sick leave is covered by the Employment Standards Act (ESA) . The ESA allows eligible workers to take sick leave for a personal illness, injury, or medical emergency. This includes mental health conditions such as stress, depression, anxiety and burnout.

Your rights are also protected by the Ontario Human Rights Code (Code). If your mental health issue is deemed a disability, your employer is obligated to make a reasonable accommodations for you.

Because stress can impact people differently, mental health leaves can vary. You may also be entitled to disability benefits under your employment contract, a group disability insurance policy, or your union’s collective agreement.

If you are suffering stress-related struggles, you need an employment lawyer who will fight to ensure you get the disability benefits you deserve.

The team at Walter Law Group is available to provide advice and guide you through the process of going on stress leave in Ontario.

Navigating the Process: How to Apply for Stress Leave

Work can be challenging, and some days are worse than others. However, if you are experiencing excessive stress, you should speak to a health-care professional about your issues and whether taking a medical leave would help.

There may have been a workplace incident that has impacted your mental health. Document any relevant information and tell your health practitioner.

You will need to provide your employers with written or oral notice. You will likely need a doctor’s note that outlines your condition. A medical note can also include the duration of an appropriate mental health leave.

There are legal options available if an employer refuses to acknowledge an employee’s medical condition or grant any stress leave. For example, an employee could be held liable for violating provisions in the ESA, the Ontario Human Rights Code or the Occupational Health and Safety Act .

An employee who is refused stress leave for a legitimate mental health issue may also be able to bring a claim for constructive dismissal and be eligible for severance pay.

Role of Healthcare Professionals in Stress Leave Documentation

Stress can lead to other mental health issues, such as anxiety, depression, and substance abuse. Researchers have also found a link between stress concerns and domestic or sexual violence. That is why it is essential to speak with your healthcare provider as soon as you are feeling overwhelmed.

Taking stress leave can be a challenge if you fail to take all the necessary steps. For example, you should keep track of what you are experiencing, write it down and report it to your doctor. Documented mental health information may help ensure you get the sick leave you require to help you get better.

A healthcare professional may be able to use that information to support their diagnosis of your ailment. And, in the end, it could result in a more complete medical note explaining the steps you have taken to recover and why a sick leave is warranted.

Understanding Employment Contracts and Sick Leave Provisions

Under the ESA most employees have the right to take up to three days of unpaid job-protected leave each calendar year due to a personal illness, injury or medical emergency. This is known as sick leave. Special rules apply to some occupations.

To be eligible, you must work for your employer either part-time or full-time for at least two full consecutive weeks prior to taking the time off.

If you are in a union with a collective agreement or you signed an employment contract, you may be entitled to additional sick leave and disability benefits over and above what is legislated by the ESA. You may even have extended health care benefits for psychological treatment.

This means you may qualify for sick leave beyond the minimum three days mandated by the ESA.

You are entitled to the greater protection provided either by an employment agreement or the ESA. For example, if your contract does not provide a greater right or benefit, then the ESA sick leave standard would apply.

It should also be noted that if you take one paid sick day off under your employment agreement, then you are deemed to have also taken one sick leave day under the ESA.

In addition, unused sick leave days cannot be carried over to the following year.

The Impact of the Ontario Human Rights Code on Stress Leave

“Every person has a right to equal treatment in employment without discrimination or harassment based on disability, among other grounds,” according to the Ontario Human Rights Code. That includes mental health disabilities and addictions.

That means an employer cannot fire someone or deny them a job or promotion if that employee takes stress leave because of a mental health issue.

Under the Code, employers must provide accommodations for workers up to what is considered undue hardship. In addition, employees are entitled to take stress leave for an extended period to recover from mental health and stress issues.

Your employer also has to accommodate a return to work to the same or comparable job when you are ready return to work.

Short-Term vs. Long-Term Disability: What Covers Stress Leave

Many employees are offered the chance to participate in workplace insurance plans when they are hired. Benefit plans vary, but your insurance policy can include such protections as bereavement leave, provisions for a nurse practitioner and income replacement.

You may have short-term disability (STD), long-term disability (LTD) coverage, or both.

As the name implies, short-term disability covers you for a limited period. Typically, STD benefits can last up to six months. If an employee takes a stress-related leave under an STD policy, their stress must be severe enough to make them totally disabled and unable to work.

After STD benefits end, long-term disability insurance benefits begin. If you don’t have short-term disability coverage, you may need to take an unpaid mental health leave and until your LTD claim is approved.

Employment Insurance and Stress Leave

If you are unable to work due to intense stress, and your employer does not provide STD benefits, you may be eligible for Employment Insurance (EI) sickness benefits, which can provide up to 26 weeks of income replacement, offering 55 per cent of your earnings up to a maximum of $668 weekly.

To qualify, you must have paid premiums into EI and prove that:

• you’re unable to work for medical reasons;
• your regular weekly earnings from work have decreased by more than 40 per cent for at least one week; and
• you accumulated 600 insured hours of work in the 52 weeks before the start of your claim or since the start of your last claim, whichever is shorter.

Employer’s Obligations Under Ontario’s Employment Standards Act

The Employment Standards Act is the law that protects workers’ rights, setting down the minimum standards for basic conditions of employment, including wages, work hours, public holidays and vacations, overtime, leaves of absence, notice and severance pay obligations upon termination.

The Act sets out the legal rights and obligations of employers and employees. The minimum ESA standards cannot be ignored by employers and apply even if they are not included in your employment contract. An employee cannot sign away their ESA rights.

Challenges and Solutions: Handling Denied Stress Leave Claims

Unfortunately, stress leave disability benefit denials are not uncommon. Even though you may feel you are entitled to a sick leave, your insurance provider may find a reason to challenge your claim.

If your stress leave claim has been denied, you can request an internal appeal. Like your original claim, the appeal will be handled by the insurer. You can also start a lawsuit to obtain your benefits.

It is important to get sufficient medical documentation and seek the support of a specialist who can provide evidence of your medical condition. You must also undergo any necessary treatment. Insurers commonly deny claims because the claimant does not seek help for their mental health issue.

Attempting to get benefits during a stress leave can be frustrating, and dealing with an insurance company denial can exacerbate your condition. That’s why you should get legal advice.

The experienced employment and disability team at Walter Law Group are here to help you navigate the insurance denial process. We will work tirelessly to ensure you receive the benefits you deserve while on stress leave.

Legal Support and Resources for Employees on Stress Leave

For those on stress leave, there are government resources, such as federal EI sickness benefits and protections provided by the Employment Standards Act and the Human Rights Code.

The Ontario government also offers family responsibility leave, which gives up to three days of unpaid, job-protected leave in the event of a family illness, injury, or family-related emergencies.

For more than three decades, the team at Walter Law Group has been trusted as experts in employment, disability and personal injury law. We are here to protect your rights, and we will vigorously advocate on your behalf.

Contact us today so we can begin working for you.

The post How to Go on Stress Leave in Ontario appeared first on Walter Law Group.

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.

The post Calculating Your Severance Pay appeared first on Walter Law Group.

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.

The post Understanding executive severance packages appeared first on Walter Law Group.

Soon after Mike Babcock joined the Columbus Blue Jackets as their new head coach, he was in the spotlight for allegedly asking some players to show their family photos off their mobile phones. Experts stated that Babcock may have crossed the line with this seemingly harmless request, even if he only wanted to know the players better. His request raised many privacy issues, with some people claiming that the head coach was misusing his position of power.

On the “Spittin’ Chiclets” podcast, Ex-NHL player Paul Bissonnette outlined that an anonymous player informed him that Babcock told the players to share their family photos. The head coach would then stream them on his television. The NHL Players’ Association allocated some executive directors to gather information on the Columbus Blue Jackets’ incidence of invading players’ privacy.

As Walter outlines, a delicate balance exists in conversations between managers and employees. When interacting with employees, employers must ensure that they don’t dig too deep into employees’ personal lives or relationships. Employees should not feel obliged to share personal details if they aren’t comfortable doing so.

In the ever-changing workplace landscape, employers must be careful and sensitive when navigating power dynamics. They must foster a positive work environment and respect employees’ boundaries. Employers must balance their curiosity to understand their employees with respect for employees’ privacy to have a cohesive workplace.

The post Cautionary Insights for Employers when Navigating Workplace Power Dynamics appeared first on Walter Law Group.

Yes, you can be fired without a reason but you must be given proper notice or pay in lieu of notice. This is known as termination without cause and it can be for cost-cutting measures or for poor work performance. The reason can be random and seem unfair but the employer is within its rights to end your employment as long as the dismissal is not discriminatory.

You can also be terminated for cause, but it must be for serious misconduct, such as theft. Even then, your employer must be able to demonstrate a progression in disciplinary action and prove dismissal was the only option available.

In law, there is also something known as constructive dismissal. This is an attempt to force an employee out of their job by imposing significant changes to the terms or conditions of their employment without their consent.

The law is constantly evolving with new legislation and court rulings that can change the employment landscape. Most people are unlikely to have a clear understanding of the many aspects of employment law.  What constitutes cause, wrongful termination or constructive dismissal can be easily misinterpreted. That is why it is essential to seek expert advice if you have a workplace issue.

Termination with cause vs. termination without cause

In Ontario, employees’ rights are protected by the Employment Standards Act, 2000 (ESA). The Act lays out rules about such issues as minimum wage, hours of work limits, termination of employment, public holidays, pregnancy and parental leave, severance pay and vacation.

The ESA provides that in most cases when an employer ends the employment of an employee who has been continuously employed for three months, the employer must provide the employee with either written notice of termination, termination pay or a combination (as long as the notice and the number of weeks of termination pay together equal the length of notice the employee is entitled to receive). If you have been employed for more than five years and work for an employer with an annual payroll higher than $2.5 million, you are also entitled to severance pay.

If you are a federally regulated worker, such as a bank or airport employee, the Canada Labour Code requires employers to provide a minimum of two weeks’ notice (or more depending on the years of service), in writing, when terminating an employee, plus severance pay.

When you are terminated without cause, you may also be entitled to additional severance for the duration of the common law reasonable notice period.

The difference between being terminated for cause and being terminated without cause comes down to your entitlement to notice or pay in lieu of notice. Essentially, if you have been successfully fired for wilful misconduct, your employer does not have to pay you notice or severance.  Being terminated for cause is serious and applies in cases of intolerable workplace misconduct that can include such misbehaviour as sexual harassment, breach of trust, insubordination, assault or theft.  Your employer has to prove it has grounds for a termination for cause.

Notice is required

Many factors can come into play when someone is dismissed without cause. A company may want to restructure or is dealing with a downturn in business. Unless you are a unionized worker, you can be fired at any time and for any reason in Ontario. Your employer does not have to justify their reason. However that doesn’t mean they are free from certain obligations.

You must be given reasonable notice of the termination that states when your employment will end. This allows you to seek out other opportunities to find alternative employment while still being paid. You could be entitled to pay in lieu of notice, which compensates you if a notice period is not provided by your employers. There can also be a combination of termination notice and termination pay.  If your employer does not provide reasonable notice or pay in lieu of notice, you can file a wrongful dismissal claim.

Notice periods vary depending on your age and years of service. There are basic entitlements laid out in the ESA but many employees will be entitled to more compensation under common law.  Under the ESA,  if you have been working for your employer for less than a year, you are entitled to receive one week termination notice. If you have been working for more than a year but less than three years, the notice period is two weeks.  Thereafter it is one week per year of service to a maximum of eight-weeks’ termination notice.  If you have been employed more than five years and work for an employer with an annual payroll higher than $2.5 million, you are also entitled to severance pay of one week per year of service.  Beyond the basic ESA entitlements, you can also be entitled to additional severance under the common law for a failure to provide reasonable notice of termination.

Know your rights

While the law uses precedent to determine a just outcome, every case is based on its own merits. What, if anything, you are entitled to in terms of notice and severance and can vary depending on the circumstances, which is why it is in your best interests to speak with an experienced employment lawyer who can explain your rights.

There are no absolutes, even if you have been terminated for cause. The first thing you should know is that you do not have to immediately accept the severance package your employer offers in a termination meeting. It may be in the company’s best interest to get your signature quickly but it makes sense to have any offer vetted by a lawyer to ensure it is fair. It is too late to change your mind once you have signed the agreement.

If the package you were offered is not acceptable you have two years from the date of termination to file a wrongful dismissal claim.

It is especially important to contact a lawyer if you have been fired for cause. First of all, being terminated for cause means you may not be eligible for Employment Insurance. It may also limit your job prospects.

Many employers mistakenly believe that firing someone for cause means they are not obligated to pay severance. But the fact is, the bar for establishing a termination for cause is extremely high and the onus to prove it is on the employer.

Termination for cause is typically reserved for serious issues. To justify a termination for cause, the employer must show the employee engaged in wilful misconduct and that the conduct was both serious and wilful.

If the employer fails to make its case the employee is entitled to damages

We have the advice you need

For 30 years, the Walter Law Group has been helping clients successfully negotiate better severance packages than they were first offered by their employers. We carefully examine every detail and watch for such things as a non-competition clause, compensation clawbacks, how the money is structured to be paid, tax implications and more.

We work to ensure your future, helping you to keep the most money in your pocket. Contact us today and let’s get started.

The post Understanding Your Employment Rights: When ‘Cause’ Doesn’t Justify Termination appeared first on Walter Law Group.

In a constructive dismissal, your employer has not directly fired you. Rather, it has unilaterally made a substantial change to the terms of your employment without your implied or express consent. Constructive dismissal can also occur when the workplace environment becomes hostile or toxic.

With a termination, whether for cause or without cause, the employer signals its intention to let a worker go. With a constructive dismissal, the employer is attempting to make conditions so intolerable that the employee eventually resigns out of frustration.

According to the Government of Canada, constructive dismissal is sometimes referred to as “disguised dismissal” or “quitting with cause.” That is because it often occurs in situations where the employee is offered the choice of resigning or agreeing to a change in their employment agreement.

In today’s work environment, it is not unusual for job descriptions to change. With COVID, for example, many people began working remotely. Some changes are temporary, but when your role and responsibilities change substantially and permanently, the conditions of your original employment contract may no longer apply and a new agreement will be needed.

You can agree to a new employment contract but the employer must provide “fresh consideration” in return. The promise of continued employment is not sufficient. Your employer must offer you something of value – such as a raise or more vacation time – in exchange for you entering into the updated employment agreement.

Some people have confused wrongful termination with constructive dismissal. While in both cases the employer is attempting to avoid paying proper severance, the difference between the two is the way that the employment ends. In a wrongful dismissal, it is the employer who directly terminates the employment. In a constructive dismissal, the employee resigns as a result of the employer’s actions, although the employer effectively forced the resignation.

Without your consent

To be considered a constructive dismissal, the employer’s action must be done without your consent. If not, any variation is seen as an agreed change to the contract of employment.

The employer’s failure to meet its contractual obligations distinguishes a constructive dismissal from a regular resignation. But it is not merely how you view your employer’s actions that count. The seriousness of the employer’s failure as well as the amount of deliberation apparent in its actions are also important factors in determining whether there has been a constructive dismissal.

It is up to you to indicate to your employer that you do not accept the new conditions of employment. This can be done by explicitly protesting the new conditions, making it clear that you reserve the right to take legal action. It can also mean resigning within a reasonable period after the change. By not resigning or making your concerns known, you are essentially accepting the new conditions of employment.

Under the law, if you resign as a result of a constructive dismissal you have been effectively terminated without cause and typically would be entitled to the same severance package as someone who is wrongfully dismissed.

Know the signs of constructive dismissal

Just because your job has changed it doesn’t necessarily mean you have been constructively dismissed. For example, your boss can assign you to work at the company’s office across town. However, if you have been re-assigned to a different city, that may be considered constructive dismissal unless you knew that potential relocation was part of the job when you accepted the position.

Signs of constructive dismissal can include:

• Reduced compensation This is a significant decrease in salary or loss benefits, typically more than 10 per cent.
• Withheld remuneration This occurs when your employer refuses to pay wages owed to you.
• Demotion This can include sudden change in job title or loss of responsibilities or being required to report to a previous subordinate.
• Increased workload You may be faced with a change in responsibilities that make it difficult to fulfill family caregiving obligations.
• Toxic work environment Examples of this are being unjustifiably disciplined, abused, harassed or discriminated against.
• Sudden shift change These can be changes in your work schedule that disrupt your work-life balance.
• Refusal to accommodate In this scenario, your employer fails to provide any workplace accommodations needed for you to fulfill your duties.
• Temporary layoff This occurs if you are temporarily laid off in violation of your employment agreement.

What do I do if I suspect constructive dismissal?

If you believe you have been constructively dismissed you cannot afford to sit back and wait. If you fail to act within a reasonable amount of time, your employer can claim that since you continued to work, you tacitly accepted the change.

If you suspect you are being constructively dismissed, keep a record of any emails, texts or letters dealing with the change in your employment agreement. If you meet with your employer about your job, take clear notes about the issues discussed. If you find yourself in a toxic work environment, document any intolerable behaviour and the dates they occurred.

It is important to carefully consider your next move. Remember, constructive dismissal carries the same consequences for an employer as a finding of wrongful dismissal. If an employer is guilty of constructive dismissal you are entitled to receive termination pay and possibly severance pay commensurate with your length of service, position and other factors. Termination and severance packages can include payments for lost wages, benefits and bonuses.

However, constructive dismissal is a complicated area of the law and proving a case can be challenging since it requires proof that your employer breached your employment agreement and did things that were serious enough to force you to quit your job.

Before deciding to resign or confront your employer, you should consult an employment lawyer who can identify if you have a legitimate claim, discuss your options and prepare a response to your employer. This can include sending your employer a demand letter, filing a statement of claim or pursuing other legal options.

We are here to help

If believe your employer has changed your employment relationship without your consent don’t quit before you call us. The Walter Law Group has been trusted as experts in employment law for three decades and we can hold employers accountable and advocate for compensation on your behalf.

We advocate for clients in Mississauga, Oakville, Brampton, Toronto, the GTA and across Ontario and we will work diligently to ensure you get the fair treatment you deserve.

Contact us today so we can help you move on to a brighter future.

The post Understanding Your Employment Rights: What is constructive dismissal? appeared first on Walter Law Group.

Upon joining the Columbus Blue Jackets, Babcock faced scrutiny for allegedly requesting that players share family photos from their phones, raising concerns about privacy and the misuse of his authority as head coach.

Experts emphasize the significance of recognizing the influence of positional power in such scenarios. Muneeza Sheikh, an employment lawyer at Levitt Sheikh LLP, explains that employees often feel compelled to comply with requests from superiors, even if they find them uncomfortable due to concerns about job security or workplace treatment.

Ex-NHL player Paul Bissonnette revealed on the “Spittin’ Chiclets” podcast that he was informed by an anonymous player that Babcock had asked team members to share personal photos, which he would then display on a television. In response to these allegations, the NHL Players’ Association dispatched its executive directors to investigate the matter.

Sheikh clarifies that it is not inherently wrong for an employer to express interest in employees’ personal lives, such as family photos. However, she underscores that positional power significantly influences workplace conversations, whether they are personal or professional.

According to Michael Walter of Walter Law Group, even when employers have good intentions of fostering a positive work environment, they must exercise caution when delving into personal matters. He highlights the importance of context and the potential for employers to inadvertently make their subordinates uncomfortable.

Walter emphasizes that there exists a delicate balance in the interactions between managers and employees. Employers must be mindful not to inquire too deeply into personal lives or relationships. Employees should not feel pressured to share personal information that they are uncomfortable disclosing.

Regarding employees’ devices, Sheikh notes that employers have a right to monitor devices used for both personal and professional purposes. However, she distinguishes between device monitoring and the invasion of personal photos. Privacy rights in Canada are not as extensive as commonly believed.

Stuart Rudner of Rudner Law observes that there is no current legislation preventing employers from making similar requests for personal photos or phone access. He acknowledges that employees may feel compelled to comply due to fear of job loss.

Rudner emphasizes the importance of simplicity in employers’ day-to-day interactions with employees. He advises against asking specific questions that could disclose sensitive information related to age, family status, religion, disability, or sexual orientation, as this could trigger human rights concerns.

Remote work has also introduced new dynamics to professional interactions. With virtual meetings, individuals may inadvertently reveal aspects of their personal lives, such as pets or family members in the background. However, Rudner emphasizes that discrimination based on protected characteristics remains unacceptable, even in remote work environments.

In conclusion, the evolving workplace landscape requires employers to navigate power dynamics with care and sensitivity, respecting employees’ boundaries while fostering a positive work environment. Balancing curiosity with respect for privacy is essential in creating a harmonious workplace.

Read Full Article here.

The post Navigating Workplace Power Dynamics: Cautionary Insights for Employers appeared first on Walter Law Group.

How Long Do You Have to Make an Insurance Claim?

After an accident, you should report to your insurance agent, broker, or company within seven days. If you do not report the accident within a reasonable time, the insurance company can fail to honour your claim. You should have the following information when calling insurance after an accident:

• Make, model, and licence plate number of your vehicle
• Your insurance policy number
• Date, time, and location of the accident
• The location of vehicle damage
• The list of your injuries

Police / accident Report

• Whether passengers were involved
• The names and licence numbers of other drivers involved in the accident
• Your description of the accident

How Long Does an Insurance Company Have to Investigate a Claim in Ontario?

Insurance companies must act fast to investigate cases and make determinations. The insurance company should complete the investigation within 30 days. The insurer must provide a written explanation if it can’t complete the investigation within this period. After the initial letter, the insurer will give you a case update every 45 days.

How Much Money Do You Get from a Car Accident Settlement in Ontario?

Your claim for Accident Benefits cannot be settled prior to the one year Anniversary of the accident date.  The amount you can get after an accident will vary depending on the circumstances of the accident and a variety of other complex factors. That’s why you need an experienced lawyer to work on your behalf and ensure you receive as much as possible in each case.

When No Insurance Coverage Is Available

It is illegal to operate a vehicle without insurance coverage. What happens if you are injured in an accident, and no other insurance is available? In this case, the Motor Vehicle Accident Claims Fund is the go-to option for compensation. You may be eligible for compensation for the injuries you suffer and property damage. You can claim:

• Accident benefits if you suffer an injury in the accident
• Death and funeral expenses compensation on behalf of a victim who dies in the accident
• Personal injury compensation or Income Loss Claim

Applying For The Motor Vehicle Accident Claims Fund

You can seek compensation from the Motor Vehicle Accident Claims Fund only if you have no access to any other insurance and you meet the following requirements:

• You reside in Ontario
• You were involved in a vehicle accident in Ontario, and the involved parties had no auto insurance
• You suffered injuries.

Perhaps you do not have insurance, and you suffered injuries in a car accident. You might be eligible for compensation if:

• You were not in the vehicle at the time of the accident. For example, you could have been cycling or walking, and a vehicle driver without insurance hit you.
• You were a passenger in a car where the driver was uninsured.
• You were involved in a hit-and-run accident, whereby you cannot identify the other vehicle.

How To Apply for Accident Benefits

When applying for accident benefits, you will need the following documents:

• A duly filled and signed Statutory Accident Benefits Application, abbreviated as OCF-1
• A copy of the police report
• A completed Disability Certificate (OCF-3)

A Completed Employer’s Confirmation (OCF-2)

Recovering Death and Funeral Benefits

If your loved one dies in a vehicle accident, you can seek compensation on their behalf. When seeking death and funeral benefits, you will need the following:

• A duly filled and signed OCF-1
• OCF-4 (An application for Death and Funeral Benefits)
• Copy of the police receipt
• Invoice and receipt from the funeral home
• Death certificate or the coroner’s report

When Your Vehicle is Damaged in an Accident

You can apply for compensation for property damaged because of the accident. You will need the following when making a claim for vehicle damage against your own Insurance Company:

• A copy of the police report
• Repair invoice or damage estimate
• Pictures of the vehicle damage.

Insurance companies assign different adjusters to vehicle damage claims vs. personal injury claims and it is important to understand how to handle each one to make sure your interests are protected.

Contact An Experienced Lawyer Today

If you have been involved in a car accident in Mississauga, you should not face insurance adjusters on your own. Instead, you should contact an experienced lawyer to guide you through the insurance claim requirements and process. At Walter Law Group, we have helped many accident victims to seek compensation for their damages. Contact us today to speak to one of our lawyers.

The post Navigating Insurance Claims: A Comprehensive Guide for Accident Victims appeared first on Walter Law Group.

What Factors Should Be Considered When Determining Executive Compensation?

Negotiating terms prior to accepting a position is always a careful dance.  You want to ensure you obtain the best possible terms while balancing the relationship with your new employer. Hiring a lawyer to help you through this process ensures your rights are protected in a professional and straightforward way and that any negotiation is done by your lawyer and not between you and your new team.

Expert legal advice and guidance help uncover any issues or things to consider before the deal is done.  Before you sign employment, executive compensation, non-solicitation, non-competition, and severance agreements, seek expert legal advice to ensure you are accepting terms that are clear and favourable and that any gaps or loopholes are closed.

Why Executive Compensation Is An Issue

Employment contracts for executives are more complex than regular contracts. Understanding the compensation you are entitled to and the industry standards can help you make an informed negotiation.

If an employer offers you an executive compensation package, you will likely encounter several complexities like tax and other issues. These issues need to be reviewed by a lawyer before you sign the contract. The common issues that arise in executive compensation include:

• Taxes
• Deferred compensation and stock options
• Restricted stock
• Release of legal rights and claims
• Bonuses and bonus structures
• Travel privileges and expense reimbursements
• Retirement benefits, including medical, disability, dental, and life insurance
• Legal and tax fee reimbursement
• Change of control provisions
• For-cause termination & delineated severance benefits
• Restrictive covenants like non-solicitation, non-competition, confidentiality clauses, and trade secrets

Executive Compensation Negotiation Checklist

Executive compensation contracts differ from normal contracts. Several compensation categories are used to ensure that executives receive competitive compensation. What are the four elements of compensation for top executives within organizations? Here’s what you should focus on when negotiating an executive compensation package:

Base Salary

This is the easiest element of executive compensation that requires the least explanation. Who are the key players in setting executive compensation? The compensation trends in the industry or in a company’s geographical area play a main role in determining an executive’s annual salary. Many companies are leaning toward incentive-based compensation, but base salary still remains relevant. Incentive-based compensation ensures that executives act in the company’s best interests and meet their target goals.

Benefits

Like regular employees, executives also receive benefits. The benefits include health benefits, life insurance, and long-term disability coverage. Other benefits include life insurance, long-term disability coverage, increased holiday days, and increased vacation days.

Perquisites

These are commonly known as non-cash privileges or perks. Executives receive perks in addition to financial compensation. Perquisites can include a wide range of benefits and are tailored to the unique needs of an executive. The common perks include gym memberships, trips abroad with family, cell phones or other technology, education reimbursement plans, club membership, vacations, and others.

Severance & Change-In-Control Agreements

An executive compensation plan can also outline what you are entitled to if your employment is terminated. It also outlines what will happen if there is a change in the control or ownership of the company. According to the Employment Standards Act, an executive is entitled to severance pay in case of termination without cause. However, the severance pay in an executive compensation plan will likely be significantly higher than the amount owed under the Act. For example, instead of receiving a week of pay per year of service, an executive might receive a month of pay per year of service.

Another executive contract example can outline that if an executive is terminated without cause within the first year of employment, the executive receives a severance package. The severance package will include one month of pay per year of service. The service will not just be with the current employer but the year of service to the previous employer as well. With these arrangements, executives will be comfortable leaving their companies and joining new ones without worrying about what will happen if the new deal turns sour.

Golden Parachute

Executive compensation contracts can also include a golden parachute. The provisions of a golden parachute outline that in the event of a change of control or ownership of a company, the executive will receive certain compensation. The compensation can be in the form of a sum of money, stock option, property, pension proceeds, or annuity or insurance proceeds. In addition to compensating the executive, these measures prevent hostile takeovers of companies by increasing the costs associated with acquiring a company.

Short-term Incentives

These include annual bonuses and incentives incorporated into executive pay. These benefits are awarded at the end of the year. They vary depending on the executive’s performance in their role. The bonuses and incentives can be a fixed amount or a percentage of the executive’s pay. Bonuses can be tiered, whereby an executive receives a target bonus upon performing well and a stretch bonus when the executive performs extraordinarily.

Long-term Incentives

Long-term incentives are mainly awarded to top-level executives whose contribution directly affects the company’s performance. Unlike short-term incentives that mainly promote good performance, long-term incentives encourage loyalty to the company. They include stock option plans, non-qualified stock options, and golden handcuffs. For a golden handcuff, an executive receives a certain sum of money, but only after staying with the company for a predetermined period. The golden handcuffs ensure that executives don’t just stay in their positions for short stints. It ensures that executives work with the company for more than a transient period.

Negotiating Private Equity Compensation

The C-level position negotiation strategies for private equity portfolio company executives differ from those of a public company. For a private equity company, you will be negotiating employment terms driven by performance, time, and achieving liquidity and growth. The driving forces in an executive team’s compensation structure are the exit and liquidity upon exit. Other legal definitions like “good reason,” “cause,” “dispute resolution provisions,” and “restrictions” are similar to any executive contract. These standard terms are mainly negotiated based on market terms.

Other Executive Negotiation Points

In addition to negotiating for executive salary, you should negotiate on the following:

Due Diligence

As an executive, you should have ample due diligence on the organization’s performance and expectations before you sign the contract. The company must also give you sufficient time to review your offer. You should review the offer with an experienced lawyer. Only a small percentage of executives consult lawyers when reviewing offers from companies. You should not make this mistake. Hiring a lawyer might look like an additional expense. However, it will pay up in the future. With legal guidance, you are assured that the executive contract will set you up for success.

Equity Structure

You must look beyond the bonus potential and give yourself an opportunity for a guaranteed income. Here are some terms that you should understand and negotiate for:

• Double trigger
• Cashless exercise
• Extended exercise
• Milestone payments

Aligned Compensation

When working as an executive, you have a right to market-driven, fully aligned salaries and commissions. An executive has a significant role in the success of the business. Aligned compensation indicates that an executive understands how the business generates income and its role in achieving this objective.

Right to Consult

You can build your wealth through advisory or consulting work. When negotiating executive compensation, you should ensure that it has a right-to-consult clause. Your employer should not restrict you from using your hard-earned expertise to generate income through consulting agreements.

Our Lawyers Can Help

It is crucial to understand the components of an executive compensation contract. It helps you ensure that you receive appropriate compensation and that your interests are safeguarded in the long term. You should always consult an experienced lawyer before signing any contract. A lawyer will help you identify areas you can negotiate in your favour and the problematic clauses that you should be aware of. Your lawyer also helps you to determine the enforceability of the punitive portions of your executive compensation contract. A lawyer can also be helpful if you have been terminated from an executive position. If you need guidance on how to negotiate executive compensation, contact Walter Law Group and discuss your case with experienced lawyers.

The post The Legal Rights of Executives in Compensation Negotiations appeared first on Walter Law Group.