A Look At Common Law Severance Pay: What Happens When Your Employer Cuts Back

You might be wondering how common law severance pay works in the first place. First, let’s look at what happens once you understand that your employer is about to let you go. In essence, common law severance pay in Alberta is determined by law once an employer terminates or fires a non-unionized employee without cause.

Termination without cause can be motivated by reasons that do not have to do with you. Anything from cutting down expenses, the employer’s company being insolvent or bankrupt, shutting down a division, selling a business, or any other reason that does not constitute just cause. If your employer fires you without cause, the employer is legally obligated to provide you with common law severance pay as compensation for reasonable notice, which from a public policy perspective is an estimate of the reasonable time it takes you to find another job and support yourself financially.

Your employer has to give you severance pay seven days after your contract ends, or on the date that would have been your regular payday. Some people have ‘hand-shake’ employment agreements that are informal and the common-law applies to them. Others have written formal contracts that speak to certain agreements between the worker and the employer. It would help if you looked at your employment agreement and bring it with you to meet a lawyer, often the employment agreement you have may dictate how much severance an employee is entitled to in any given circumstance. The common-law is there if you do not have an agreement to set your reasonable notice. The Courts have a system that assesses a dismissed employee’s fact situation to determine how much common law severance or notice an employee is entitled to.

The Courts determine that by reviewing the following factors of your employment:

• Employees age:
  • Courts consider your age since the older you get, it makes it difficult for you to find another job and compete against younger workers.
• Years of service:
  • By default, long years of service give an employee entitlement to a more extended notice period. In addition, some courts may argue that the length of your employment may influence a new employer to see you as unadaptable to a change.
• Type of job:
  • Different types of jobs require distinct notice periods. For example, a manager or specialist position requires more extended notice, which entails higher severance pay.

Based on the circumstances of each employee, Courts usually determine fair compensation. For example, in Alberta, according to the Code, the minimum severance pay is one weeks’ pay for 90 days of employment with an employer, and it can be up to 24 months’ worth of severance pay under common law. In rare circumstances of employment over 30 years the Courts have judged notice periods to be around 26 months owed.

However, each situation is individual, and some employers resort to giving the minimum severance pay under the Code. The employee may be entitled to more than that, depending on the employment agreement. Another common situation is employers forcing a fictional deadline for employees to sign a severance offer. This way, they are urging the employee to accept the offer with pressure to accept – again facing the uncertainty of unemployment. Most employees are entitled to more than what is first offered, never be afraid to ask for the courtesy of an extension of that deadline to consult an employment lawyer.

Severance Tax in Alberta – A Simple Explanation

Employees that receive severance pay are obligated to pay taxes on that sum. Therefore, your employer is obliged to include that amount on your Record of Employment and T4 form. However, your taxes will be between 5% and 30%, depending on your province of residence, the severance amount received, and the manner in which your severance amount is paid out. For example, if you receive severance in whole, you will be taxed on the entire sum. However, the taxes can be spread out if you receive them as a deferred salary. An experienced employment lawyer can advise you how to legally ensure you receive the maximum amount owed.

How is Severance Pay Calculated in Alberta?

The Code guarantees the minimum amount of employer termination notice (severance) pay you will receive when you lose your job. The amount depends on your length of service as an employee:

• Between 90 days and two years of service = 1 weeks’ notice
• 2 years to 4 years of service = 2 weeks’ notice
• After 4 to 6 years of service = 4 weeks’ notice
• After 6 to 8 years of service = 5 weeks’ notice
• After 8 to 10 years of service = 6 weeks’ notice
• After 10 years or more = 8 weeks’ of notice

However, the amount of common law severance you receive depends on your length of employment, age of the employee at time of termination, type of position held, including salary, responsibilities and if you signed an employment contract, and availability of similar employment. Generally, the longer you’ve been working at a company, the more common law severance you’ll be entitled to.

How Chapman Riebeek’s Severance Calculator Works

If you have been fired or laid off, it can be stressful and confusing. You are likely wondering how much common law severance pay you are entitled to and whether or not your employer will give it to you.

Chapman Riebeek’s employment severance calculator relies on a proprietary algorithm we developed. As we already mentioned, the common law and Courts consider your position, age, and the number of years and months you have been employed in the company.

The algorithm uses the same variables and the amount of severance pay the company offered you. The Severance calculator uses this information to give you precisely what you are entitled to by the information you enter. The results will be reviewed by a lawyer at Chapman Riebeek they will contact you by email for privacy purposes.

We are pleased to offer this tool to help you better understand your rights. Please contact us if you have any questions. We hope that this answers any questions you may have about how we calculate severance pay.

This severance calculator is not the same as legal advice. Every case is individual, and the results do not ensure your full entitlements. Please seek legal guidance from an employment lawyer about your specific situation before making any decisions.

Why Contact Chapman Riebeek Employment Lawyer

Chapman Riebeek lawyers believe it’s always better to negotiate and reach an agreement before making rash decisions or taking things to Court. With decades of experience, we can resolve any dispute. A severance calculator can only help you get a glimpse of what you might be entitled to based on your preliminary information.

However, many people have other individual circumstances that can help them surpass the minimal severance pay we mentioned. The main reason why contacting Chapman Riebeek employment lawyers would be a better solution is that they can provide counsel and advise you properly according to your case. In addition, personalized service and decisions can give you an advantage when dealing with these challenging circumstances.

Additionally, if your employer is trying to avoid your total compensation, being able to provide a written legal opinion can change their view. Finally, the fact that you have consulted an employment lawyer gives you an image of someone who has made an informed decision and knows their rights by heart.

Don’t settle for less

Contact Us if you have any doubts about what severance pay you might be entitled to.

Conclusion

Many factors determine how much severance pay you get, but one thing is for sure: if you’ve been terminated from your employment and were not given proper notice or severance, there are laws that protect you. The ESC states that an employer must give at least one week of severance pay for each year of employment. Severance calculators such as ours are free resources you can use as a comparison. It explains how severance pay works, but if you need clarification on the numbers or your circumstances, it’s best to contact an employment lawyer and seek advice.