benefits interact with Federally Regulated Employee severance pay
Unlike provincial employees who are covered by statutes that establish their minimum rights and protections at the time of termination, federally regulated workers (such as those employed in the energy, telecom, banking and financial services, transportation and the defence industries) are covered by the Canada Labour Code (CLC). As a result, when it comes to a without cause termination, their entitlements are much smaller – for example, they only get two weeks notice or pay in lieu.
A recent decision by the Supreme Court of Canada in Wilson v Atomic Energy of Canada Ltd, however, changed the landscape for these workers. In this case, the Court ruled that severance pay is a form of compensation that employees are entitled to under CLC and that employers must offer this benefit when they terminate their employment.
Federally Regulated Employee severance pay can be a very valuable tool for employees who are laid off as it can help cover expenses such as job search costs, the continuation of health benefits and retraining. It can also help to create a positive employer-employee relationship, which can increase loyalty and retention.
How do benefits interact with Federally Regulated Employee severance pay?
As an employer, it’s important to understand how this change impacts your business and your existing employee agreements. In addition to the new statutory requirement to provide two weeks’ worth of pay to a federally regulated employee upon termination, you now must also give these employees a statement of benefits at the time of their separation that details all wages, vacation pay, telecommunication employee severance pay and other benefits or pay that they have received during the course of their employment. This requirement applies to all employers, regardless of the size of their workforce.
The statement of benefits must be provided to the federally regulated employee in writing and as soon as possible. This is a change from the existing requirement to provide it in writing at the date of the termination, but it must still be provided as soon as possible, unless you are providing working notice or pay in lieu of notice to the employee.
In determining the amount of severance pay to be paid, the employer must take into account each person’s length of service with the Government and the government of the District of Columbia and the person’s age as of the date of his or her involuntary separation. If a person who is entitled to severance pay accepts a nonqualifying time-limited appointment, his or her severance payment allowance is suspended. However, if the individual separates involuntarily from the nonqualifying time-limited appointment, his/her severance pay allowance is resumed (without being recomputed).
The new requirements are minimum standards for severance pay, and they apply only when an employer dismisses a federally regulated employee without cause. However, employees may be entitled to greater severance pay under their employment agreement, at common law in most provinces, or at civil law in Quebec. For this reason, employers should review their employee agreements and consider the impact of these new requirements on their severance pay policies.
