When an employer terminates an employee, severance package acceptance often follows. While seemingly straightforward, these documents are often overlooked or misunderstood until they become directly relevant. Severance package agreements are often laden with legal complexities and implications that can significantly impact your future. As such, understanding what a severance package entails and the necessity of legal scrutiny becomes paramount. 

This blog post will review what a severance package is and why it is imperative for individuals facing such agreements to seek legal advice before signing any offer. From understanding the components of a severance package to recognizing potential pitfalls, having a knowledgeable employment lawyer review the agreement can make a difference in protecting your rights and ensuring fair treatment during a challenging time.

What is a Severance Package?

In simple terms, a severance package is a contract between an employer and a terminated employee that outlines various matters, such as: 

  • The terms of the employment termination, including the reason for termination;
  • The date on which your termination is effective; 
  • How much notice you are required to receive from your employer; and
  • The amount of compensation to be paid upon termination of employment, in addition to any other benefits provided by the employer, such as the continuation of medical benefits. 

The severance package will also include a release which is signed by you, stating that you will not file a claim against your employer as a result of your termination. 

Compensation Entitlements Beyond the Employment Standards Code Minimums

Under Alberta’s Employment Standards Code, if you have been terminated, you are entitled to reasonable notice or severance pay in lieu of notice. However, some employers may only try to offer you the bare minimum “termination pay” based on your length of service, while under common law, you may be entitled to additional compensation. 

Because many employees are not familiar with assessing the fairness of a severance package offer, they may be unaware that the terms of the offer can be negotiated and should take into consideration several factors aside from length of service with the employer. Although resources such as severance pay calculators are available online, these can be inaccurate and misleading as they fail to consider all of the relevant circumstances. Therefore, it is critical to seek independent legal advice from an experienced employment lawyer who can thoroughly review your proposed agreement and advise you of your options. It is also important to note that once a severance package release is signed, contesting the amount of severance pay you have accepted can be difficult.

Understanding Severance Pay in Alberta

In Alberta, the majority of employees who have been employed for 90 days or longer are entitled to be provided with a notice of termination. This type of severance is primarily based on the minimum standards set out in the Employment Standards Act and depends on the employee’s length of service with the employer, resulting in one to eight weeks’ notice.  

However, aside from the length of service, additional factors should be considered when determining an appropriate and fair severance package, such as:

  • Your job title, role and nature of your work at the time of termination;
  • The reason for your termination;
  • Your age at the time of termination; 
  • Additional compensation you would have received from your employer as part of your compensation structure, such as benefits, bonuses, and commissions; 
  • The availability of comparable work in light of the current job market conditions. 

Employees should be mindful that there are also fact-specific exceptions to the general rules of severance pay and reasonable notice, particularly in relation to additional benefits and incentives. Although your employer may claim that your bonuses are “discretionary” and that you would not have gotten one during your termination year, the common law has determined that these claims are not always true. 

What is a Severance Package Review?

Although some employees may feel overwhelmed and intimidated into signing a severance package agreement as soon as it is offered, it is important to know that you are entitled to seek legal advice on its terms. In a severance package review, your employment lawyer will review and assess your proposed severance package, along with your employment contract and other relevant documents to determine whether the proposed package is fair and lawful. 

Outcomes and Next Steps

Upon completion of the review, it may be determined that:

  • The severance package is a fair offer and you may be advised to accept it, or
  • The severance package is not fair and contains unreasonable terms, and as such, you may be advised that you are entitled to additional compensation.

If it has been determined that you may be entitled to more than what has been offered, you may retain your lawyer to help you negotiate a better severance package with your employer. Alternatively, if this is unsuccessful, you may work with your lawyer to commence a lawsuit against your employer for additional damages. 

Additional Things to Know

When you are presented with a severance package, your employer may put a tight deadline on the offer. This can be used to add pressure and motivate you to sign the release quickly. However, it is important to seek legal advice as soon as possible to ensure that you can make an informed decision and begin negotiations or commence legal action, if necessary.

Key Takeaways for Terminated Employees

It is important to know that you should not accept a severance package or sign a release from your employer until you are aware of your statutory and common law rights and entitlements and know what you should receive. Protecting your interests is paramount regardless of any pressure or influence from your employer. In most cases, the best way to do this is to remove the urgency and consult with a trusted employment lawyer who can review your severance package offer, explain how the law applies to your circumstances and can advise you of your options moving forward. 

Contact Getz Collins and Associates for Advice on Employee Terminations During the Probationary Period

At Getz Collins and Associates, our knowledgeable team of employment lawyers regularly provide employees with comprehensive severance package reviews and advise them of their options regarding claims of wrongful and constructive dismissal. We understand that workplace issues can involve strict timelines, so we work closely with our clients to provide effective and efficient legal advice. From our offices in Calgary and Strathmore, we help clients develop a tailored legal strategy to address their concerns while protecting their rights and interests until a settlement has been reached. To speak with one of our employment lawyers regarding your severance package questions, contact us online or call us at (587) 391-5600.