Typical severance package Canada
In determining what a reasonable severance package in Ontario is, we must discover four factors about a specific employee:
- The character of the employee’s employment.
- The length of the employee’s employment.
- The age of the employee; and
- The availability of similar employment considering the employee’s experience, training, and qualifications.
Once we have determined each of the above four factors, we compare those factors against publicly available completed lawsuits where the lawsuit was about an employee suing their employer with relatively similar factors. For example, if we get a new client who made $100,000 per year as a banker, who is 30 years old, who worked for three years, we will run a special database search of Ontario court employment law decisions for bankers, who made between $75,000 and $150,000 per years, age 25-35, who worked for around 3-5 years. In most cases, we will get about four of five relatively analogous cases to show us a range of reasonable severance packages for our client. We might get a case or two that says the client should get six months’ severance and one case that says he should get three months’ severance and another case that says he should get eight months’ severance. And with all that information, we can say the range of reasonable severance for our client is between 3 and 8 months. After that, if the client hires us, we will fight to get him to the top of that range.
Beware: It is impossible to estimate a reasonable severance package based on only a single factor. For example, we cannot say with any certainty how much severance someone age 40 is entitled to if that is the only information we have. We must also know the employee’s length of severance, income level, etc. To that end, someone age 40 could be entitled to between 0 and around 20 months’ severance. If one forty-year-old worked 20 years, perhaps she should receive 20 months’ severance (if the other factors indicate an extended severance package). Still, if a different forty-year-old only worked two months, there is a good chance she will recover no severance (if she has a probationary clause) or just a few months at most.
With all that said, I have created an Average Months Of Severance For Employees In All Stages Of Their Career Infographic here for you to review in thinking about how much severance you deserve. Beware, this is only a mathematical average, and no two cases are the same. Still, from the data, it is clear that short-term employees get significantly more “months of severance per year of service” than long-standing employees. In other words, short term employees are generally entitled to a couple of months’ severance per year of service, while long time employees are generally entitled a fraction of a month’s severance for every year of completed service.
Contact us for a free consultation and we may estimate your severance on the phone.
Nevertheless, I know people googled the topic of this blog post to find out instantly how much severance they might reasonably be entitled to. Thus, I will share some severance case law on three general categories: long-standing service employees, medium years of service employees and short service employees.
Reasonable Severance Package for Long-Standing Employees
Most employees with around 25 years or more service will be awarded 24 month’s severance, and, in exceptional cases, some employees can recover as much as 26 months’ severance. For example, in Keenan v. Canac Kitchens Ltd, the court awarded the employee, who was employed for 39 years, who was 63 years old, who worked as a manager, and who earned $190,000 annually with 26 months of severance.
Nonetheless, most employees with around 25 years or more service will be awarded 24 months’ severance. This is an unwritten cap in Ontario.
Reasonable Severance Package for Mid-Career Employees
Given that the general maximum severance for an employee is 24 months, it is not unreasonable to estimate, generally, that the amount of severance a mid-career employee may receive could be around 12 months’ severance. For instance, in Aitchison v. Canada Trust Co. et al., 1984 CanLII 2170 (ON SC), the employee who was 43 years of age worked as an assistant branch manager at a bank for 15 years and was awarded 12 months’ severance.
Reasonable Severance Package for Short Service Employees
As I mentioned above, once an employee is past his probation period (if he has one) and is dismissed within only around a few months to a few years of service, he is entitled to a proportionally larger severance package than someone with more extended service. This is because the law recognizes that it takes everyone at least several months to find new employment. Therefore, short-term employees should receive enough severance to get by while they take several months to find new, comparable work. To that end, in my Average Severance Pay in Ontario infographic, I showed that short term employees in all occupations with 0.5 to 2.5 years of service receive around 2.6-3.8 months of severance for every year of service depending on if they were a manager or not.
Take these three cases to demonstrate this phenomenon.
In Zik v. Biasutti Drywall Services (1983) Ltd., (1996), 23 CCEL (2d) 150 (Ont. Gen. Div.), the employee was a 45-year-old customer service representative with 20 months of service. The court determined that reasonable severance was six months.
In Isaacs v. MGH International Ltd. (1984), 1984 CanLII 1862 (ON CA), the employee was a 38-year-old purchasing agent with seven months of service. The Ontario Court of Appeal upheld the trial decision that reasonable severance was nine months.
In Katz v. Canada Mortgage & Lending Corp., 2009 Carswell Ont 1134 (Ont. SCJ), the employee was a 28-year-old insurance adjuster with six months of service. The court determined that reasonable severance was four months.
All of the above text is general information. No two cases are the same. The easiest way for you to estimate how reasonable your severance package might be is by calling us for a free consultation. Dutton Employment Law will speak with you for thirty minutes free of charge to advise your rights. Contact us today.
Jeff is an employment lawyer in Toronto. He is the Principal of the Dutton Employment Law Group at Monkhouse Law. Jeff is a frequent lecturer on employment law and is the author of an employment law textbook and various trade journal articles.