Should you Accept that Severance Package?

Jan 8, 2016

You were terminated from your job.  Your employer offered you a severance package.  Is it fair?  The answer to this question often turns on whether you previously signed an employment contract.  More specifically, did you sign an employment contract that has an enforceable termination clause?

Termination Clauses

A termination clause is a section of an employment contract that talks about how much notice or pay an employee will receive if he or she is terminated.  Typically, employers include these clauses in contracts in order to limit an employee’s entitlements at termination. This may also affect the amount an employer offers in a severance package.  A common termination clause states that an employee will receive the minimum notice of termination (or pay in lieu of this notice) that is required under the Employment Standards Act.

In the past few years, we have told you about several Ontario court decisions that found termination clauses like the type above which does not provide for the continuation of benefits during the notice period to be unenforceable.

However, a recent decision, Oudin v Le Centre Francophone de Toronto, 2015 ONSC 6494 creates further confusion about termination clauses. In Oudin, the termination clause in the employment contract did not tell the employee that his benefits would continue throughout the notice period. It was also confusing about whether the employee would even receive the minimum payments under the ESA if he was fired.  Despite those problems, the court found the clause to be valid and enforceable.

What does this mean for you?

It means that your employment contract is very important when assessing the severance package.  If you have been offered a new position, you should speak to an employment lawyer before signing an offer letter, to ensure that you understand the contract.  It also means that the law around termination clauses is not settled. If you have been terminated, even if your contract has a termination clause, you should speak to a lawyer about whether or not you may be entitled to more than your severance package is providing.

If you would like to speak with an experienced employment lawyer about your employment contract or severance package, please contact us at [email protected] or 647-204-8107.

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