Understanding notice pay and severance

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Terminating an employee can be a challenging and sensitive process for both employers and employees. It's essential to follow the legal requirements, including providing proper notice and, in some cases, severance pay. 

Notice Pay vs. Severance Pay

Notice pay, also known as termination pay, is compensation given to an employee who has been terminated without cause. The employment standard minimum varies across the country, but typically starts at one week’s pay up to a maximum of 8 weeks.

Severance pay is any dollar over and above the Employment Standards minimum. Not every employee is entitled to Severance pay. Being entitled to Severance depends on the employee and their employee file. Note that some jurisdictions require severance to be paid if the business meets certain thresholds in terms of size of payroll, number of employees, etc. 

Common Law reasonable notice

Employers should consider common law reasonable notice when terminating the employment of an employee when there is no explicit employment contract specifying a different notice period or termination procedure. Common law reasonable notice is a default standard used to determine the amount of notice or pay in lieu of notice that an employer must provide to an employee upon termination.

The factors that influence the determination of common law reasonable notice include:

• Length of Employment: Longer-serving employees generally require longer notice periods.
• Nature of the Employment: The employee's job responsibilities and level within the business can impact the notice period.
• Age of the Employee: Older employees, especially those who may have more difficulty finding new employment, often require longer notice.
• Availability of Similar Employment: If it's difficult for the terminated employee to find comparable work in their field, a longer notice period may be required.
• Custom and Industry Standards: Industry norms and practices can influence the reasonable notice period.
• Employment History and Promises Made: Any promises or representations made by the employer regarding job security can also factor into the determination.

Special Requirements in Quebec

Quebec, which follows Civil Law rather than Common Law, has a unique set of requirements for employee terminations. It's crucial for employers in Quebec to be aware of these special conditions:

Communication: In Quebec, employers must provide all employment-related documents, including termination letters and notices, in French.

Labour Standards Act: Quebec's Act Respecting Labour Standards outlines specific rules regarding termination and notice periods. Employers must adhere to these regulations, which can differ from those in other provinces.

Termination Notice: The notice period for termination in Quebec can vary depending on an employee's length of service.

Collective Agreements: If your employee is covered by a collective agreement, it is essential to consult the terms of the agreement when considering termination. Collective agreements can impose additional obligations on employers.

CFIB members with questions about notice and severance can contact our Business Advisors at 1-833-568-2342 or cfib@cfib.ca.

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