Severance Pay Be Offered in Cases of Involuntary Termination
When companies face a decline in revenue, economic difficulties, or just the need to reduce headcount, it is often necessary to lay off employees. While letting go of dedicated employees is never easy, many employers are willing to offer them severance pay as a way of softening the blow and providing financial security in their transition to new jobs.
Severance pay is compensation paid in addition to an employee’s final paycheck, and can be offered as a lump sum or as regular payments following a set schedule. Typically, it’s based on years of service and may include any unused vacation and sick leave and other unreimbursed business expenses. Bonuses are also sometimes included in severance packages, though it depends on state laws and whether the bonuses were performance-based or not.
Generally, employers are not required to provide severance pay in cases of involuntary termination. However, they may choose to do so in order to help defuse hard feelings between departing workers and to insulate themselves from liability issues that could arise after they release employees. Severance packages are also helpful in limiting negative word-of-mouth from leaving workers, which can hurt future job prospects.
Can Severance Pay Be Offered in Cases of Involuntary Termination?
As part of a severance package, employers might offer outplacement services, which are designed to help involuntarily terminated employees find new positions. These can include job search training, career coaching (especially for those who want to make a change in their careers), resume writing, and interview preparation. These services are usually provided for a limited amount of time, typically 21 days.
A company might also include miscellaneous perks such as allowing involuntarily dismissed employees to keep company equipment, releasing them from noncompete agreements or providing ongoing gym memberships. In exchange for these benefits, involuntarily terminated employees might agree to write letters of recommendation, or sign nondisparagement agreements that prevent them from speaking negatively about the company in the future.
The amount of severance pay Ontario an employer is required to provide is determined by law, and the minimum amount in Ontario can be found in the Employment Standards Act, 2000 (ESA). In cases where an employer wants to increase the amount of severance pay they’re offering, they can do so as long as the severance pay meets or exceeds the minimum legal requirements.
It’s important for involuntarily dismissed employees to carefully consider the pros and cons of accepting a severance package before making a decision. Taking the package can mean forfeiting some or all of the unemployment insurance they would otherwise qualify for, and it could also hurt their chances of finding a new job in the future if they accept an offer that pays less than what they are owed under the ESA.
An experienced employment lawyer can help involuntarily terminated employees review the terms of their severance package and determine if it’s an adequate offer. They can help explain complicated contractual language and ensure the severance agreement is in line with an employee’s entitlements under the law.