Losing a job takes a serious toll on an employee’s life. Severance pay can alleviate the economic and personal blow of this situation, so employees in British Columbia must understand what they can expect if they lose their jobs.
When employers should pay statutory termination pay
Employers and employers may have a contract that specifies the payment and calculation of severance when the employment relationship ends. If this agreement is valid, the courts will typically enforce the parties’ agreed-upon terms.
However, in the absence of a written agreement about the amount of notice of termination or severance to be paid to the employee, the BC Employment Standards Act sets minimum requirements for the amount of actual working notice, or alternatively payment in lieu of notice, that must be provided to an employee upon the termination of employment. The minimum required amount will vary depending on an employee’s length of service, and may be as much as eight weeks. When an employee’s employment ends immediately and they receive payment in lieu of notice, we describe this as “statutory termination pay”.
Under the BC Employment Standards Act, employers may not be under any obligation to pay statutory termination pay in these situations:
- When an employee quits
- When the employee has not worked for the employer continuously for at least three months
- When an employer has just cause for terminating a worker (e.g., serious misconduct)
In other words, whether an employee receives statutory termination pay depends on an assessment of the facts.
How much statutory termination pay should be
Calculating statutory termination pay also depends on several details. Under the BC Employment Standards Act, the amount of statutory termination pay that must be provided is calculated using the following formula:
- Adding up all wages for regular working hours for the last eight weeks
- Dividing that number by eight
- Multiplying that number by the number of weeks employers must pay statutory termination pay, which varies based on an employee’s length of service.
Claims to additional severance under contract or common law
Some employment agreements will provide that an employee receives more than the minimum statutory termination pay in the event of a termination of employment. As stated above, if this agreement is valid, the courts will typically enforce the parties’ agreed-upon terms.
It is important to note that if there is no contractual terms that limits the employee’s claim to their statutory termination pay, an employee may have an additional claim for “reasonable notice at common law”. An employee could be owed a significant additional amount of severance, beyond the statutory termination pay under the BC Employment Standards Act.
Negotiating a severance package that is offered at the termination of employment may be in both the employer and the employee’s best interests, though it depends on the circumstances of an employee’s departure. This can be a tricky and possibly heated discussion, so it can be wise for parties to enlist the help of a lawyer to help them protect their rights and maximize their financial resources.