Termination, restructuring and severance

A properly constituted severance agreement is essential to managing employee dismissals and protecting employers from lawsuits.

Employers must take proper precautions before dismissing employees.  Missteps in the termination process can result in hard feelings, negative precedents and costly mistakes.

Because every dismissal is different, every exit package should be drafted to meet an employer’s needs.  Employers need to consider how much severance an employee is entitled to and in some cases whether severance is even owed at all.  This will depend on a variety of factors and must also take into account forward looking elements such as whether ex-employees have direct contact with customers, clients and suppliers, and whether any proprietary knowledge may pose unique risks to a business if not handled correctly.

What is included in a Severance or Termination Package?

A severance package will generally include a termination letter and a release.  The termination letter lays out the terms of the dismissal, including severance entitlements, the structuring of the payments and the timeframe for payment.  This should also address what happens in the event that an ex-employee quickly secures another job.  Releases are imperative as they protect employers from lawsuits by providing for binding terms on the departing employee, and legal recourse should the employee breach any of those terms.

Severance packages should contemplate and include clauses such as:

  • Confidentiality
  • Non-competition and non-solicitation
  • Return of property
  • Protection of proprietary information
  • Non-disparagement
  • Indemnities and other clauses to prevent future lawsuits

Before proceeding with a dismissal, consider the following:

  • Is this dismissal with or without cause?
    • It is extremely important to have a lawyer assess whether an employee can be terminated for misconduct and consultation with a lawyer is a must to avoid wrongful dismissal claims.
  • Reviewing employment contracts?
    • Severance entitlements may be pre-defined according to the terms of the employment contract.  It is imperative to have a lawyer review whether the terms of an employment contract properly and legally limit severance claims.
  • Statutory obligations
    • Different jurisdictions in Canada have different employment standards legislation.  Business need to understand the legislative regime surrounding the termination and ensure that the appropriate rules are respected.

Restructuring

Businesses that are considering restructuring will often be faced with the difficult decision to terminate certain employees or entire departments.  When dismissing a large of number of employees at once, it is especially important to ensure that the proper processes and legislation are followed to avoid any unnecessary expenses.  Restructuring may also bring forward complicated corporate and employment law questions that must be carefully considered.  Employment lawyers can assist businesses in most aspects of restructuring, including:

  • Adding, eliminating or merging roles
  • Revitalizing company brand or products
  • Merging with another organization
  • Changes to corporate or departmental structure

How can Whitten & Lublin, Employment & Labour Lawyers help?

Knowing how to approach employee dismissals can be tricky for most employers.  The experienced team at Whitten & Lublin Employment & Labour lawyers are here to help employers assess and reduce risk and to ensure that severance packages comply with the applicable statutory and legal requirements, while protecting employer interests.  Each dismissal is different, and we will work with you to understand your business needs and facilitate positive employee departures.

Ensure your rights are protected by consulting with Canadian Employment & Labour Lawyers, Whitten & Lublin.