Employees keen to have say in package (Ask an Expert)

Employers can choose to negotiate — but review employment contracts first
By Brian Kenny
|Canadian HR Reporter|Last Updated: 10/22/2013

Question: Do terminated employees have any say in how their termination packages are handled? If the employee makes a direct request, how should the employer handle it?

Answer: Terminated employees do not have any power in determining how their termination packages are handled. However, an employer could choose to negotiate or comply with the employee’s requests — but is under no obligation to do so.

When assessing the terms of an employee’s termination package, it is prudent to review the employment contract first to determine whether any contractual obligations govern the package.

If the contract does not speak to the subject of termination packages, the matter is open for negotiation, so it would be possible for an employee to make certain requests on the way it is to be handled.

Ultimately, the employer will determine what it is prepared to provide over and above its statutory obligations, as set out in the relevant labour standards legislation.

In determining whether an employee is to be given working notice or pay in lieu of notice, the employer may want to consider the potential implications of this decision. In addition to a review of the practicalities associated with requiring an employee to stay in the workplace after providing notice of termination, one significant issue surrounds the provision of benefits during paid notice periods.

Where pay in lieu of notice is given and the former employee’s benefits are cut off, the employer may be liable if the employee is injured during the notice period.

For example, in Prince v. T. Eaton Co., a 1992 British Columbia case, an employee was dismissed from his position and received eight weeks’ termination notice and 34 weeks’ severance pay. After his termination, but before the end of the reasonable notice period determined by the court, the terminated employee was severely disabled.

Eaton’s refused to recognize the employee’s claim for benefits as the disability arose after he stopped being an active employee. But the court found a dismissed employee whose employment was wrongfully terminated is entitled to compensation for loss suffered as a result of the deprivation of benefits during the notice period.

In Prince, the policies and contracts at issue stipulated coverage would extend during the full notice period, regardless of whether the employee remained actively employed.

Later cases have confirmed the basic principle outlined in Prince, but the courts have determined a finding of liability for loss suffered as result of the deprivation of benefits will be based on the specific contractual provisions.

In other words, the case law does not actually establish a free-standing principle that employers must continue all benefits throughout the notice period.

Before termination, employers will want to review relevant insurance policies for this reason. Depending on the language, to avoid potential liability during a paid notice period, the employer may also want to take one of several actions.

It may keep paying for the employee’s benefits during the notice period or, alternatively, include a full and final release of liability in the termination package.

However, the employer cannot contract out of the provision of benefits during the minimum period of notice under the relevant employment standards legislation.

For more information see:

Prince v. T. Eaton Co., 1992 CarswellBC 138 (B.C. C.A.).

Brian Kenny is a partner at MacPherson Leslie and Tyerman in Regina. He can be reached at (306) 347-8421 or kenny@mlt.com.

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