The employer/employee relationship is governed in Alberta by the Employment Standards Code and the common law. The Employment Standards Code sets out the statutory responsibilities of the employer. If an employer terminates an employee without cause, the Employment Standards Code dictates how much termination pay the employer is obliged to pay to the employee.
(a) one week, if the employee has been employed by the employer for more than 3 months but less than 2 years,
(b) 2 weeks, if the employee has been employed by the employer for 2 years or more but less than 4 years,
(c) 4 weeks, if the employee has been employed by the employer for 4 years or more but less than 6 years,
(d) 5 weeks, if the employee has been employed by the employer for 6 years or more but less than 8 years,
(e) 6 weeks, if the employee has been employed by the employer for 8 years or more but less than 10 years, or
(f) 8 weeks, if the employee has been employed by the employer for 10 years or more.
The termination pay set out in the Employment Standards Code is not meant to supplant the jurisdiction of the court to order additional severance pay if the court thinks it is justified in the circumstances. The common law says that in the absence of cause, an employer has a duty to give an employee reasonable notice of his intention to terminate the employment relationship, or to pay him severance in lieu of such notice. The notice period is determined by a number of factors, including the following:
a. length of service for the employer;
b. responsibilities of the employee;
c. age of the employee;
d. likelihood of finding comparable employment;
e. whether there was a written agreement regarding severance;
f. what representations may have been offered to the employee upon being hired;
g, the circumstances under which the employee was hired.
The most important factor seems to be the length of the employment. After considering the factors set out above, and other relevant factors as well, the court will set a notice period and award damages for the amount of salary the employee would have received had he worked for the duration of the notice period. There is no hard and fast rule, but the court usually awards between 2 weeks and a month for every year of service. For a more nuanced assessment of your case, you may want to consult the online database of wrongful dismissal decisions at http://www.wrongfuldismissaldatabase.com/
The employee has a duty to find comparable employment upon being let go. This is called mitigation of damages. There are a number of factors that make it difficult for an employee to bring a successful claim for wrongful dismissal.
1. The employee has a positive duty to find comparable employment as soon as possible. If the employee does find new employment, his damages will stop or be reduced by the amount he/she earns in the new job.
2. The employee usually as to hire a lawyer to pursue the claim. The lawyer will want to be paid. It is a rare circumstance where the employee is able to recover their legal costs in their entirety or at all.
3. The damages awarded for wrongful dismissal are taxable. If you are paying a marginal tax rate of 39%, that is a big reduction in the money you actually receive.
4. If the employer alleges termination for cause, the employee has to prove that the termination was unjustified. If he/she is unable to do so, and the matter goes to trial, the employee will have to pay the employer’s legal costs in addition to their own.
A terminated employee needs to make a quick decision. The employer will usually pay termination pay in accordance with the Employment Standards Code, unless they are alleging termination for cause. In this situation, the employee must try to assess the likelihood of getting more money if they push their claim. In many cases, they will be entitled to more money, but it may not be worth it to try to push for more. I have seen a lot of employers offer employees 2 week’s salary for every year of service. It will only be long term employees who will find it worthwhile to ask for more in this circumstance. For example, let’s consider a 10 year employee earning $5,000 a month. His employer has offered him 5 month’s severance, but he thinks he may be entitled to 10 month’s severance. The employee must consider the likelihood of finding another job within the 10 month period. Then he has to consider the cost of bringing a claim or pushing for more money. He also has to consider that any award is taxable. In this example, the employee would have to bring a claim for an additional $25,000. Law suits are stressful, and costly. The prize may not be worth the effort. If the employee does decide to proceed, they might want to file a claim in Provincial Court Civil Division where the procedure is simpler and many Plaintiffs are unrepresented by counsel.
From an employer’s perspective, it is these very factors that inform their decision how to structure an offer to an employee they need to let go. If they just pay the statutory termination pay the employee may feel hard done by and seek legal advice. Lawyers will usually tell the employee that there is good chance that the employee is entitled to something in addition to the statutory minimum. It is therefore a good idea to pre-empt the employee by offering something in addition to the statutory minimum. From the employers perspective, there is also a good chance that the employee will quickly find a new job. If he does then the employer’s liability for severance stops or is dramatically reduced. It is in the employer’s interest to hold off on offering more money to the employee while he waits to see if the employee finds a new job. There s no good reason for the employer to offer an employee the maximum amount that an employee could conceivably receive at trial as a starting offer. That is why we often see employers offering employees to 2 weeks severance pay for each year of service. It falls in the middle of the range, and it is usually enough to placate the employee.
I hope you have found this information to be useful. It is an attempt to simplify what can be a complicated subject. If you continue to have questions after reading this article, please do not hesitate to call me, whether you are an employer or an employee.