Severance may depend on contract

Whether you are an employer in British Columbia or an employee, many of you are aware that the Employment Standards Act outlines, among other things, the severance obligations that employers have to meet in the event they decide to terminate an employee without cause.  It is also commonly known that the severance obligations set out in the Employment Standards Act are the minimum severance amounts that an employer must pay to an employee upon termination.  What is less commonly known, however, is unless an employer and employee expressly agree in an employment contract that the employee is only entitled to the minimum severance amounts, that employee's entitlement to severance will actually be determined based on common law principles (i.e. judge made law), rather than based on the amounts set out in the Employment Standards Act.  

Why is this distinction between common law severance and Employment Standards Act severance important to employers and employees?  The importance varies depending on whether your perspective is that of an employer or an employee.  The first reason the distinction is important is because severance determined in accordance with common law principles is generally more significant than the minimums under the Employment Standards Act.  Secondly, as an employer, knowing that you can limit severance pay-outs to the minimums set out in the Employment Standards Act means that you can minimize the cost of employee terminations, as long as you take the time to enter into appropriately worded employment contracts with your employees.  From an employee's perspective, on the other hand, it is important to understand that if you did not sign a written employment contract that expressly restricts your severance entitlement to the minimums set out in the Employment Standards Act, you may then be entitled to increased severance in the event of termination, based on common law principles.  In the event your employment in terminated, you should consult with a lawyer in order to determine whether the severance that is being offered is appropriate in your particular circumstances.

Based on the fact that employee terminations can have significant financial consequences for both employers and employees, it is wise, whether you are an employer or employee, to obtain legal advice when dealing with the unfortunate and difficult circumstances surrounding an employee termination.

Article submitted by Greg Pratch

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.