A severance package is a term often used to refer to the package (including payments in lieu of notice), which includes money and/or benefits that your employer pays you when your employment is terminated without cause.
However, severance pay under the law is a specific payment meant to compensate for losses that result from the employment being severed, in contrast to termination pay which is required to be given in place of the required notice of termination.
Some scenarios where the employment relationship is considered to be ‘severed’ include where the employer dismisses or stops employing you, cases of constructive dismissal, permanent layoffs, or resignation.
In Ontario, to qualify for severance pay, your employment must have been severed, and you must have worked for the employer for five or more years. These years of employment do not have to be continuous. The employer must also have an annual payroll of $2.5 million or have severed the employment of 50 or more employees in a six-month period because all of the business has permanently closed. Recent changes to the common law in Hawkes v Max Aicher (North America) Limited, 2021 ONSC 4290 mean that the calculation of payroll for severance pay purposes is not limited to either Ontario or Canadian payrolls. Employers are required to pay severance pay within seven days after your employment is severed, or on what would have been your next regular payday, whichever is later.
If you believe that you are entitled to severance pay or your employer has not paid you the correct amount, an employment law lawyer can help ensure that you are obtaining the correct amount of severance pay and can assist you in resolving any disputes regarding severance pay in a timely manner.
If you are a federally regulated employee or work in Nunavut, Manitoba, or Quebec, please reach out to one of our employment lawyers who can provide specific information relating to your jurisdiction.