Negotiating Your Severance Package in BC

How to Negotiate Your BC Severance Package

Too many employees in Vancouver accept the severance package first offered by their employers without checking whether they are entitled to a better deal.

When you are terminated without cause in BC, your employer has certain obligations to you. Depending on a variety of factors, this may include a significant package of wages and benefits, in the absence of reasonable notice being provided.

This is designed to tide you over until you can find another suitable job. But how do you know if what you are offered is fair?

It’s difficult to know without the professional opinion of an employment lawyer, who can also help you negotiate with your employer to make sure that you get the maximum payout.

If you decide to negotiate your severance package alone, bear in mind the following points…

Employment law vs. common law in BC

BC’s employment laws stipulate some minimum requirements regarding severance pay.

Even if employers are aware of the minimums specified in the Employment Standards Act (which is not always the case), they may not realize that many employees are entitled to more under common law.

Fair severance should be based on several factors, such as:

• Length of employment with the company
• Position at the company
• Current employment conditions
• Ease of finding another suitable job
• Age and health, etc.

Employees may need to push for an agreement beyond the bare legal requirement. That’s where the negotiation comes in.

“Reasonable notice” is open to interpretation

BC’s Employment Standards Act states that “reasonable notice” must be provided by an employer who terminates an employee without just cause – or severance pay in lieu of reasonable notice.

While the Act provides guidelines for what constitutes “reasonable notice” it has not been clearly defined.

Contrary to popular belief (and what many employers believe), this means that the laws are open to interpretation and that each case must be assessed on its particular characteristics.

This means that negotiation is nearly always an option for an employee.

In cases of just cause termination in BC, note that the employer is not obligated to provide any notice or severance pay.

Understand the main strengths and weaknesses in your case

It’s advisable to speak to an employment lawyer for an accurate assessment of what your severance package should be worth – based on the corresponding strengths and weaknesses in your case.

An employer will want to avoid a long and costly court trial. It is also usually in the interests of an employee to receive severance as soon a possible to help with the loss of earnings from employment and to avoid the stress, costs, and delays of going to court.

A negotiated settlement is often in the interests of both parties but be aware of any weaknesses (as well as strengths) when you enter into negotiations.

One typical strength is if you can show that it is very difficult for you to find similar employment in the market while a weakness might be that the employer offered you an alternative position before terminating you.

Will you be paid while you negotiate?

Your employer’s strategy may be to try to force you to accept the deal on the table (which may be the statutory minimum) by not paying you salary or benefits.

This could result in a breach of employment law and it may be time to speak to an employment lawyer if this happens. The employer’s actions would certainly look bad to the courts if your case ends up at trial.

Employers generally need to pay more than the statutory minimums to employees who are terminated without cause or reasonable notice.

Should you negotiate cash or other forms of severance?

Severance packages are called “packages” for a reason.

While many proposed severance deals involve simple lump-sum payments based on the length of service, this is not the only option.

Packages may include:

• Bonuses
• Commissions
• Car allowance
• Other benefits

Note that a terminated employee is entitled to receive the same compensation during the period of notice as they would have received if they were still working.

This means that this full amount should be compensated in a severance package in lieu of notice. It should not just include base salary unless this is specified in the employment contract.

Push for a lump-sum payment rather than salary continuance

Lump-sum payments are often preferable to other forms of payment like salary continuance – especially in terms of tax reduction.

The main tax benefits include:

• Lump-sum payments are typically treated as a Retiring Allowance – they will be subject to lower tax withholdings than regular salary payments.
• They are not subject to deductions such as Employment Insurance or Canada Pension Plan premiums.
• You may be able to have some or all of the money paid directly into your RRSP account and avoid taxes altogether.

Lump-sum payments are also generally not subject to the type of “clawback” that salary continuance payments are if you find new employment.

Actively seek alternative work while negotiating

It is in your interests to actively seek alternative employment while negotiating with your ex-employer.

Your employer may even offer to help to find you alternative work, as it is usually in their best interests too. That’s because if you start earning an income during the notice period, this income will be deducted from the amount of severance payable by your ex-employer.

If your old employer offers alternative employment and you refuse it, it may greatly weaken your position.

Do your homework and know your value

Before you accept a severance package, do your homework and know your value.

That may mean reviewing the package with an employment lawyer, who can assess whether you’re getting a fair deal – or whether you should be claiming more.

Only around two percent of claims filed with the courts get to trial so it is highly likely that your employer will settle out of court. That means you must have a strong understanding of your rights for a strong negotiating position.

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