Severance Pay

Severance pay amounts vary depending on the length of employment before separation, contract stipulations, and on salary. The age and seniority of the terminated employee are definite factors as well when determining how much severance is owed. Being that the ultimate goal of termination pay and severance is to provide an employee time to find a different job, age plays a large role because it becomes more difficult the older you get.

Age and length of service increase the severance amount. In the case of a 59 yr old rabbi who was let go after 26 years of service, the court decided that even though his employer gave notice 9 months prior to termination, it was inadequate and required them to pay the rabbi the remainder of 30 months of severance. Because the rabbi never “intended to be employed for a limited term” and considered an indefinite term employee, he was eligible to receive severance pay. Contrasting this, another case found that a 29 year old store manager with five years of service was eligible for 5 months of severance pay, even though the circumstances surrounding his termination were… much less favourable than that of the rabbis (The store manager was falsely accused of sexual harassment).

According to Rizzo & Rizzo Shoes Ltd. (Re), employees are eligible for severance pay if the business they worked for goes bankrupt. Stating that, “former employees are entitled to make claims for termination pay (including vacation pay due thereon) and severance pay as unsecured creditors.” In this case, Rizzo Shoes went bankrupt suddenly and many employees were ‘economically dislocated’ because of it. Qualifying them as unsecured creditors allowed employees to pursue severance claims against Rizzo.

Eligibility aside, the amount of severance varies on a case-by-case basis. Consideration is given to the length of employment, age and chances of the terminated employee to procure new work, and the circumstances surrounding the dismissal. Judicial discretion plays a role as well.

Cases show that employers terminate workers for serendipitous and bizarre reasons. A case mentioned on involves a worker being terminated due to obesity. The employer went on, stating,” ability to properly perform his duties was significantly impaired by the plaintiff’s physical condition.” This is more of an exception than the rule, but as you can see the grounds for dismissal in an employer’s mind can vary greatly.

An attorney experienced with employment law will have a good idea of what severance pay you are entitled to.

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