Obligations to comply with request?
Question: If an employee requests a termination or severance payment in a different form than his normal method of payment (such as a physical cheque instead of direct deposit), does the employer have to comply?
Answer: Unless the employee’s employment contract (or in the case of a unionized environment, the collective bargaining agreement) provides otherwise, in all jurisdictions in Canada an employer is permitted to continue to pay an employee his wages on termination in the same fashion it previously paid the employee’s wages.
An employee is not entitled to require that his final pay, or his termination or severance pay, be paid in an alternative manner than how he was previously paid.
However, while employers maintain discretion at termination regarding the manner in which a payment of wages is made, you may want to consider providing payment of severance or termination pay in the manner the employee requests (provided the method complies with relevant employment standards legislation). Particularly in contentious severance situations, agreeing to the employee’s preferred method of payment may assist in resolving matters at termination, thereby avoiding litigation. Moreover, in many cases it may be possible to structure severance monies paid after termination as a retiring allowance, with portions of the severance deposited directly to an RRSP without deductions for tax, and/or with the retiring allowance taxed at a flat rate for income tax, with no deductions for CPP or EI. In these cases, making such payments by cheque, rather than direct deposit, may be simpler for negotiations.
In other words, flexibility with respect to how a payment is made can go a long way to resolving a difficult termination. However, an employee is not entitled to require an employer to provide his final pay, termination pay, or severance pay by cheque, when, up to the date of termination, he had previously been receiving payments by direct deposit.
