Offered a Severance Package in Ontario? 7 Things to Check Before You Sign
Being let go is stressful, and many employers ask you to sign a release within days. Before you do, it's worth taking a careful look. Once you sign, you usually give up the right to ask for more.
1. Don't rush to sign
Employers often set short deadlines. It's usually reasonable to ask for more time to get legal advice, and many employers agree. Read the release closely: it typically waives all claims against the employer, including some you may not have thought of.
2. Compare the offer with your ESA minimums
The Employment Standards Act, 2000 sets a floor. Most employees are owed up to eight weeks of termination pay, plus up to 26 weeks of severance pay if they have five or more years of service and the employer's payroll is at least $2.5 million. You're entitled to ESA minimums whether or not you sign a release.
3. Then compare it with common-law notice
Unless your contract validly limits you to the ESA, you're likely entitled to "reasonable notice" at common law, which is often much higher. Courts consider your age, length of service, the character of your job and how hard it will be to find similar work. Try our severance pay calculator for a rough idea.
4. Check your termination clause
Many employment contracts include a clause limiting notice to the ESA minimum. Courts are strict about these clauses. Since Waksdale v. Swegon North America Inc., 2020 ONCA 391, Ontario courts read the termination provisions as a whole, and if any part breaches the ESA, the whole clause can be unenforceable. A clause that looks airtight may not be.
5. Look beyond salary
A fair package should account for more than base pay: health and dental benefits, bonus or commission you would have earned during the notice period, pension contributions, vacation pay and, in some cases, stock or other incentives.
6. Ask about the non-money terms
A reference letter, an agreed message for colleagues, the timing and structure of payments (which can affect your taxes) and outplacement support can all be negotiated.
7. Mind the deadlines
Many wrongful dismissal claims must be started within two years, and Human Rights Tribunal applications generally within one year. Keep in mind that you're expected to look for comparable work in the meantime. That's called mitigation, and it can affect what you recover.
