This is a 4-part article series that points out crucial aspects of identifying when an employee has been wrongfully dismissed. Our goal is to teach you to recognize when the termination of your employment is unjust and assist you in fully understanding your employee rights.
If you missed Part 1 of our series, you can read our blog post about identifying the difference between getting fired and quitting your job.
In Part 2 of this series, we are going to discuss the different circumstances in which an employee is fired and becomes entitled to compensation.
What is Severance Pay?
Severance pay is a type of pay employees may receive upon being fired from their job.
Think of it as a form of compensation for the length of time you worked for a particular employer.
When is an Employee Entitled to Severance Pay?
It is of the utmost importance for employees to know when they are entitled to severance pay.
There are two main distinctions: Fired for cause and fired without cause.
Fired For Cause
If you are “fired for cause,” you are not entitled to severance pay.
In order for this to stick, however, the cause for which you were fired has to be a “just cause.”
For example, a cashier gets caught stealing money from the cash register at the end of their shift. This would be an example of the kind of conduct that may warrant a “summary” firing for cause.
Meaning, a single act of dishonesty which leads to an employee getting fired. Theft in this manner is one example of just cause for firing an employee.
However, it is rare that an employee is fired for a single act of dishonesty as described above. Generally speaking, it is a pattern of behaviours or acts that cumulatively lead to an employer firing their employee for cause.
An example of this would be an employee who is abusive towards their fellow employees and is warned to change their behaviour a number of times for violating the company’s anti-bullying policy.
The employee does not modify their behaviour, despite a number of warnings, and this ultimately leads to a breakdown of the employee-employer relationship.
The employer fires the employee for just cause.
Fired Without Cause
If you are “fired without cause,” you are entitled to severance pay.
A common example of being fired without cause is when an employee is told their position has been eliminated as a result of restructuring the workplace.
You will often hear of employees being “bought out” by their employers in this situation, meaning that they were given severance pay, or, a “settlement package.”
Employers are generally able to fire employees for no cause at all, as long as they pay the employee their severance. However, this is subject to what is written in the employment contract between an employee and their employer.
For example, if an employee belongs to a union, it may be the case that the collective bargaining agreement with their employer has protections in place that prevent an employer from firing an employee without cause.
It is also noteworthy that if an employer fires an employee in bad faith, they may be liable to pay damages to the employee in addition to their severance pay.
How Much Severance Pay is an Employee Entitled to?
Now that we know when an employee may be entitled to severance pay, it is of equal importance for an employee to understand how much they are entitled to when they qualify for severance pay.
Section 63 of the Employment Standards Act, RSBC 1996, c 113, sets out a minimum standard for severance pay.
Upon being fired, employees are entitled to 1 week of wages for every year they work for an employer, up to a maximum of 8 weeks’ wages.
The wages are calculated by taking an average of the last 8 weeks where the employee worked normal hours.
This is a minimum standard, meaning that an employee in BC cannot be paid less severance than what they are entitled to under the Employment Standards Act, and this right cannot be waived by contract.
This means that, if an employee were to sign an employment contract that contained a provision entitling them to no severance pay or less severance pay than the minimum standard, that contract provision would be of no force or effect.
Oftentimes, an employment contract will contain a provision entitling an employee to only the minimum standard for severance upon being fired. This is good in law.
The reason for this is freedom of contract – an employee and employer are free to agree to whatever terms they wish with respect to the employment relationship, as long as the terms do not violate the minimum standards set out by the Employment Standard Act.
And indeed, oftentimes employment contracts will contain termination provisions which entitle employees to more severance than the minimum standard.
No Employment Contract
If there is no written employment contract, an employee who is fired without cause is likely entitled to “Reasonable Notice damages” as their severance pay.
Reasonable Notice damages are often significantly higher than the minimum standards guaranteed under the Employment Standards Act.
However, employees often have to fight their employers in court to get their full entitlement to Reasonable Notice.
A number of factors go into determining the amount for Reasonable Notice damages, and this determination largely turns on the circumstances of each individual case.
In the next blog post, we will discuss Reasonable Notice more at length.
As we learned, the different circumstances under which an employee becomes entitled to severance pay is largely dependent on whether an employee is fired for just cause or without cause.
We also learned that the amount of severance pay an employee is entitled to depends on the minimum standards set by the Employment Standards Act, and also whether a written employment contract exists, which makes provisions for severance pay.
In Part 3 of the Wrongful Dismissal Series, we will explore how courts determine the amount owed to an employee for Reasonable Notice damages in wrongful dismissal cases.
The preceding content is for informational purposes only and does not constitute legal or professional advice. To obtain such advice, please contact our offices directly.
Read the rest of our Wrongful Dismissal Series: