Economic downturns can heavily impact your severance entitlements in Ontario. By understanding how economic conditions affect severance pay, you can protect yourself from losing your rights when you’re jobless.
How Economic Conditions Impact an Employee’s Severance Pay Entitlements
Severance pay for many employees depends on the state of the economy. Ontario’s Employment Standards Act (ESA) sets out the minimum severance pay that a company must provide. Still, companies may try to reduce their payout during economic instability, such as a recession.
However, courts can give you more generous severance under common law, especially if economic conditions prevent you from getting similar work. A company may provide a smaller severance package when it has financial difficulties and states it is because it has to work with harsh economic conditions and cannot pay.
Although these arguments can impact negotiations, an employment lawyer in Toronto can ensure the employer complies with statutory requirements and give legal advice on whether more compensation is owed under common law.
Factors Affecting Severance Pay
Company Performance
Severance packages are dependent on a company’s financial health. If it’s a recession or an economic downturn, businesses may not be receiving cash flow or facing more financial stress and, therefore, may be unable to afford as much severance.
But just because a company is in financial trouble doesn’t mean you give up your severance rights. In Ontario, the ESA requires companies to provide minimum severance pay. If your company’s performance suffers and your severance package is insufficient, an experienced employment lawyer can fight the offer and protect your entitlements.
Job Market
Severance pay, however, is also determined by the state of the job market. Economic conditions could mean you end up with a sluggish job market and won’t find similar employment as efficiently. This is one of the things that courts often look at when determining what common law severance amounts should be.
If you’re having trouble finding a new job, the severance you’re entitled to may increase. An employment lawyer will consider these factors before working out fair compensation for your situation.
Companies also use this argument that you can quickly get other jobs in tough economic times to reduce severance offers. If the job market is tough and comparable employment will take more than the employer contends, a Toronto employment lawyer can counter these claims with evidence.
Industry-Specific Factors
Economic downturns impact different industries. Retail, hospitality, and manufacturing are recession-prone industries, while technology and healthcare are less.
This could also apply if your industry has been hit hard by an economic downturn. However, industry-specific challenges notwithstanding, employers must also meet the statutory minimums set by the ESA.
But courts will sometimes take the economic health of your industry as a whole into account when deciding on severance. Suppose your industry is suffering, decreasing your ability to pick up more work quickly. In that case, you may be entitled to a longer notice period or a higher severance payout under common law.
When you’ve been laid off in tough economic times, navigating the intricacies of severance pay can be challenging.
If you are facing a wrongful termination suit or feel you have been dealt a bad deal at work, schedule a consultation with an experienced employment lawyer to protect your rights and get a fair deal during these difficult times.
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