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TERMINATION LAWYERS FOR PROFESSIONALS

Are you a professional that’s been terminated? Call us now. We can help.

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Job loss is one of the most stressful experiences that someone can go through. No matter your life situation, whether you’re married or single, have kids or no kids, own a home or rent an apartment, it can be an extremely stressful time in your life and certainly can be viewed as a significant career setback.

For professionals, being terminated can be an exceptionally difficult experience – but the feelings are no less or no greater than how others experience job loss. We are not robots. Although everyone has different coping mechanisms, going through some type of grieving process is inevitable, professional or not, and dealing with the emotional aftermath is almost always a challenging experience.

For professionals, however, the chances are that it will be much more difficult to find alternative equitable employment with a similar salary and benefits, as fast as others might be able to. It may also be difficult for older professionals who are terminated to find a similar or comparable position.

Since 2003 we have assisted non-union professionals (any worker who earns their living from a specified professional activity) such as:

  • dentists;
  • hygienists;
  • accountants;
  • business valuators;
  • lawyers;
  • doctors;
  • broadcasters;
  • tv personnel;
  • athletes with contractual issues;
  • chemists;
  • developers;
  • marketing executives;
  • architects;
  • engineers;
  • and many more.

Professionals and severance

In Ontario, most employees are entitled to termination pay as set out in section 55 of the Employment Standards Act. Surprisingly, until 2012, professionals who required advance learning and who provided “professional services” such as teachers, doctors, lawyers, chemists, accountants, dentists, nurses, or pharmacists were not entitled to termination pay. Presently, however, any professional who provides professional services is entitled to notice of termination and termination pay.

What is termination pay, and how is it calculated?

Unlike the USA, Canada does not have at-will employment. All jurisdictions, including Ontario, have minimum standards legislation providing that the employer is required to provide a specific minimum amount of advance notice of the termination of the employment relationship. The period of notice is typically provided for as termination pay, in most circumstances.

To qualify for termination pay, the professional needs to have completed three months of service with his or her employer.

In order to calculate termination pay, the employer must calculate the employee’s length of service.  The termination notice period, based on length of service, is set out at Sections 54 and 57, Employment Standards Act, 2000, which provides the following:

  • 1 year to less than 3 years = at least 2 weeks;
  • 3 years to less than 4 years = at least 3 weeks;
  • 4 years to less than 5 years = at least 4 weeks;
  • 5 years to less than 6 years = at least 5 weeks;
  • 6 years to less than 7 years = at least 6 weeks;
  • 7 years to less than 8 years = at least 7 weeks;
  • 8 years or more = at least 8 weeks.

Am I entitled to benefits during my notice period?

Yes, benefits must be continued for the notice period even if termination pay is given, rather than termination notice.

Am I entitled to severance pay?

In Ontario, the term “severance” (section 63, Employment Standards Act, 2000) has a different meaning than “termination.”

An employer who severs the employment relationship is required to pay severance pay if the employee was employed by the employer for five years or more and at least one of the following two circumstances exist:

  • the severance occurred because of a permanent discontinuance of all or part of the employer’s business at an establishment, and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or
  • the employer has a payroll of $2.5 million or more

Some professional will no doubt be entitled to severance pay under certain circumstances – particularly if they worked for larger or national firms or companies. While termination notice may be given as working notice or pay in lieu of notice, severance pay must be given as pay.

Are termination pay and severance pay set off against each other?

No. severance pay and termination notice are cumulative and cannot be set off against each other.

Common Law Reasonable Notice

In addition to termination pay and severance pay, a professional may be entitled to common law reasonable notice. What is reasonable notice?

In every non-unionized employment relationship, an employer has been an implied common-law obligation to give an employee reasonable notice of its intention to end the employment relationship, unless the employee is terminated for cause. If the employer fails to give that employee reasonable notice, then the employee can start an action for wrongful dismissal and breach of the implied term mandated upon employers to provide reasonable notice of termination.

Remember, the purpose of providing reasonable notice is to assist the employee for a period of time in which he or she searches for alternate equitable employment.

How is reasonable notice determined?

Again, in the absence of a contract for a definite period of employment, the law presumes an indefinite hiring subject to termination on reasonable notice.  There is no fixed formula for determining what constitutes reasonable notice of termination. There are only guidelines. Those guidelines are the principles enunciated by the courts and the examination of previous decisions with similar facts, particularly if they are decisions of the same province or if they involve employees of similar status terminated by the same company at the same time. In short, the assessment of reasonable notice is considered an art rather than a science. Most of the time, the starting point for determining reasonable notice is set out in a famous case called Bardal v. Globe and Mail.

In that case, our courts identified four main key factors which include

  • the character of employment
  • the employee’s length of service
  • the employee’s age and
  • the availability of similar employment having regard to training, qualifications and experience of the employee.

These factors are considered of utmost important when assessing how much notice should be provided – with no single factor to be given disproportionate weight. There are other issues that we look at as well, such as whether or not the employee has a medical condition, the current economy, how specialized the position was –  among many other things. One thing is for certain, when a professional terminated, the determination of reasonable notice is a very fact specific exercise and is calculated in accordance with various factors which would be presented to a trial judge.

Professionals and reasonable notice

Age does matter

Courts have been crystal clear that older professionals are generally entitled to more reasonable notice based on the rationale that it will take an older employee longer to find new employment.

For example, in the profession of law, it would be difficult for senior counsel to find alternative equitable positions as many law firms wish to hire lawyers within a certain budget or age range, which is typically 3 to 5 years of experience. Also, for example, certain dental profession such as oral surgery, would appreciate more experienced and senior dental surgeons while older general practicioner dentists may find it more difficult to find equitable alternative positions in dental clinics. This is why each case needs to be determined on its own facts.

The character of employment – and the specialized position

A primary purpose of the implied term to give reasonable notice is to permit the dismissed employee an opportunity to find new employment. When determining the length of reasonable notice

the court will take into account similar employment which is of equal value to that from which the employee has been dismissed. The court will consider employment similar in remuneration as well as job function. For example, a highly specialized employee may warrant a longer notice period. A limited number of positions in the terminated employee’s city is a factor which will militate in favour of a longer notice period. The relevant consideration is the availability of similar employment, not the availability of positions in the type of industry the plaintiff worked in.

For some professionals, there is no doubt that a similar job opportunity may be very difficult to find because one is highly specialized, such as someone specialized in the atomic energy field, a chemical engineer, a tax litigator, or hair transplant specialist.

In addition, courts will assume that obtaining similar employment for a professional would be more difficult if the employee is in poor health – although courts are divided on this factor. Employment lawyers representing employees will argue however that the notice period should no doubt be increased if that professional employee is in poor health, or disabled, such that there is a negative effect on their ability to secure alternative employment.

Providing pay instead of notice

Where employment is terminated without the required notice, the employee is entitled to termination pay. Termination pay consists of all amounts and benefit plan contributions that the employee would have been entitled to receive for the period of required notice.

Is there an upper limit of reasonable notice or payment in lieu of notice that professionals are entitled to receive?

Yes and no. 24 months severance is typically the upper limit. Generally, only exceptional circumstances will support a notice period in excess of 24 months. It is very rare for a court to award any employee, including a professional, in excess of 24 months notice.

What if the professional was compensated solely or in part by commission?

If the professional compensated solely or in part by commission, they will be entitled to damages for loss of their commission during the notice period. That professional will normally not be entitled to projected commissions beyond the reasonable notice period, unless these damages are specifically provided for in their employment contract.

Also, it’s important to note that the professional would be entitled to damages for unpaid commissions that were earned prior to his or her termination of employment, even if the goods were not delivered until after the date of termination. Damages for unpaid commissions are calculated in accordance with the applicable commission plan and are not considered part of notice damages.

What about bonuses during the notice period?

The employee or professional may be entitled to damages for loss of bonus during the notice period. The right to a bonus is normally created at the time of hiring or contract renegotiations, through bonus policy or as a result of commitments made to the professional through the term of his or her employment.

Normally, professionals are entitled to non-discretionary bonuses, which is a bonus that must be paid of conditions in the employment contract or bonus plans are met. It’s important that you speak to a Hamilton termination employment lawyer to determine whether or not you are entitled to your bonus upon termination. Once it is established that you are entitled to a bonus, then we must prove the value of your loss. Our courts will consider what amounts of bonus the employer, acting reasonably, would’ve granted the professional if their employment had continued through the notice period.

What about benefits, disability benefits and life insurance?

Typically, life insurance and disability benefits are terminated once the employment is terminated, regardless if the professional is paid ongoing salary continuance. It’s important to note that in Ontario, an employer must continue to make benefit plan contributions during the statutory notice of termination period. Many benefit plans provide that coverage ceases with the last day of active employment, however, in Ontario, the employee is deemed to be actively employed during the statutory notice period, regardless of the provisions in the benefit plan. If the insurer refuses to extend benefits to the professional over this time period, then that would be in contravention of the legislative provision which overrides contractual limitation.  Once the termination period has expired, it would be up to the employer and professional to negotiate which benefits (typically health and dental) would continue and for how long.

If I have been fired, can I convert my benefits to a private plan?

Many insurance plans provide for a period of time after termination where the professional can convert their group insurance plan to individual insurance without medical evidence. This is of particular benefit to the employee who may not be able to secure replacement benefits due to their health condition.

The employee should be told about their conversion options, and the time period for conversion, at the time of their termination. Failure to do so may expose the employer to liability for payment of those benefits if the employee dies or becomes disabled during the notice period. If the employee is made aware of their ability to convert their insurance and does not convert their benefits, their damage claim may be reduced or denied.

What about fringe benefits?

Normally, the professional may be able to claim for loss of automobile benefits during the notice period. The primary considerations in determining if he or she is entitled to damages for loss of automobile benefits are:

  • the terms of the employment contract;
  • whether the vehicle was provided for personal or business usage;
  • if the employee uses the car primarily for their own benefit and only incidentally uses it for employment purposes, then they should be compensated for the value during the period of reasonable notice. Alternatively, if the employer supplies a car in order to allow the employee to carry out their job responsibilities (for example, a consultant, journalist or foreign aid officer) then the employee should only be compensated to the extent that they put the car to personal use.

Other fringe benefits which are often factored into the professional’s loss during the notice period are:

  • employer’s matching contributions to the employee’s RRSP;
  • loss of employee discount;
  • professional membership dues;
  • social club memberships;
  • cell phone costs;
  • renton Internet service costs;
  • Canadian pension plan contributions; and
  • employment insurance contributions.

Normally, the employee will be entitled to damages if the employee can establish that the fringe and if it is quantifiable and that he or she would’ve received that particular benefit during the notice period if they had not been wrongfully dismissed.

How can severance be paid?

Normally severance is structured in three ways, either by working notice, lump sum payment or salary continuance (with or without a clawback). The methods of payment can be varied and/or combined – for example, an employee can be provided with working notice and a lump sum payment, working notice in salary continuance, no working notice in a lump sum payment, followed by salary continuance etc.

Is severance taxable?

Yes although employers are not required by law to articulate the exact amounts that will be deducted for taxes in the termination letter, severance is always subject to applicable statutory deductions.  Typically, your employer will not offer methods of tax sheltering at the time of termination. However, as part of negotiations with your employer, you may be entitled to shelter part or the entire termination package.

Are lump sums taxed at a different rate?

Yes, Under the Income Tax Act, if the professional is paid a lump-sum amount upon termination, different income tax deduction rates apply. The lump-sum Federal Income Tax withholding rates are:

  • 10% for lump sum of $5,000 or less (5% in Quebec).
  • 20% for lump sum of $5,001 to $15,000 (10% in Quebec).
  • 30% for lump sum of $15,001 or more (15% in Quebec).

If you are professional who is been terminated, we can help.

If you have been terminated, it’s important that you speak to an employment law professional instead of trying to negotiate your own severance package.  It’s important that you ensure that the final terms of your settlement agreement are clear and that both you and your employer have a meeting of the minds on the terms of the separation agreement. Remember, as the employee, you have the onus of establishing that you are entitled to a particular form of compensation during the notice period and establishing the financial value of all your damages. It’s important that an employment expert helps you with structuring any termination package that will reflect your potential losses. We understand that you may be experiencing tremendous anxiety and sleepless nights after your termination. We also understand the fear of the unknown is of great concern – which is why you need to protect yourself financially during this uncomfortable and emotionally challenging time.  Contact us by filling in a contact form and book your free consultation today. Talking to us is always free.

 

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