Making Sense of Severance: What You Need to Understand About “Severance”

A lawyer’s job is to clear up misconceptions that clients have about the law. Legal jargon can be confusing, especially the terminology in the area of employment and labour law. The concept of ‘severance’ confuses many Canadians.

As the above suggests, severance pay and a severance package are distinct concepts, but they are both frequently referred to only as ‘severance’.  es, an easy solution might be for people – namely, professionals – to simply start specifying exactly what we mean, but, frankly, we humans love shortcuts. Since all of that is unlikely to change, let’s take a moment to unpack these terms.



What is a Severance Package

A severance package is an employee’s parting gift from a job.

A Full and Final Release is a legal document that absolves someone from any future legal action. A good lawyer is essential to getting the best out of a personal injury settlement.

The focus of this severance package negotiation is very often on how long the former employee will continue to be provided with pay or benefits.  This depends primarily on whether the Employment Standards Act’s (ESA’s) statutory minimum requirements apply, or if the employee is entitled to ‘common law reasonable notice’.  The latter is preferable, as it entitles the employee to a significantly larger payout. Which regime applies depends, in turn, on what it says in the employment contract between employer and employee.  It is in cases where the ESA applies that the second meaning of ‘severance’ comes into play. A creature of statute, severance pay is a much narrower concept than that of the severance package.



What is Severance Pay

An employee’s entitlement to the ESA minimums will be based on their length of service with the employer. The ‘termination pay’ is a basic amount of one week’s salary for every year of service.

Job loss can be confusing, but understanding the basic terms will help. Employees often accept less than they should, which is disheartening for lawyers. Before signing anything, one would almost always be wise to seek professional advice. The lawyers at Tailor Law are ready to provide the advice and advocacy you need to secure the best possible outcome. To schedule a free in-person or phone consultation, please reach out to our office at 905-366-0202, or contact us through our website, here.

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