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How Is Severance Calculated: Without-Cause Termination Of Employment

Introduction

Alberta Employers, it’s true: our laws recognize your right to manage your workforce. This includes the ability to hire and fire employees. Although this article focuses on without-cause terminations, for more information on the distinctions between just-cause and without-cause termination, please see our article titled: Back to Basics.

Without Cause

Reasons for without-cause terminations can be broad, because the power to terminate is discretionary. Examples of without-cause terminations include an employer’s need to cut costs, to restructure, to downsize, or because the employee is no longer a good fit, or for other reasons. Although an employer is not legally required to provide a reason to the employee to dismiss them without cause, an employer is required to provide reasonable working notice, or else pay severance.

Determining Severance

So, how does an employer determine what to provide for severance? This is not an easy question and legal advice should be obtained. Severance assessment focuses on the specific facts of the termination of employment, and considers at least the following factors:

  • Any valid and applicable policy manual; and,
  • The employment contract.

Caution: Just because a termination provision is contained in an employment contract or policy manual, does not mean that it is legally binding or enforceable. Before relying on such termination wording, we recommend you obtain legal advice on the specific details.

If a policy manual or employment contract does not contain enforceable termination clauses, then the following tools assist in determining what amount of severance is required:

  • Applicable employment standards legislation; and,
  • The common law.

Employment legislation prescribes strict minimum standards, whereas the common determines severance on a case-by-case basis and the case-law has set some criteria to determine severance entitlements:

  1. the character and nature of the employment;
  2. the length of service;
  3. the age of employee; and,
  4. the availability of alternative employment.

Walsh LLP is here to help

These criteria are not an exhaustive list. Many more factors need to be considered in effort to minimize and employer’s risk to owing additional damages that go beyond severance. That is, the employer may unintentionally incur even more to the former employee (including human rights complaints or other claims). These liabilities can be significant and harm your reputation and your bottom line.

For this reason, we strongly encourage you to reach out to us for some legal advice if you are considering a termination, restructuring, or other employment questions. Likewise, we encourage employees, to seek legal advice to ensure that their rights are being protected and they are receiving fair compensation from their employer.

For assistance or additional information on terminations and severance and legal considerations specific to your circumstances, whether as an employer or an employee, please contact Walsh LLP’s Employment Lawyers.