The news seems to be filled lately with stories about major Canadian employers cutting jobs. RBC has already eliminated over 600 positions and anticipates eliminating thousands more in the coming months. Major telecommunications providers Rogers, Telus and Bell also announced substantial workforce reductions earlier this summer.
Beyond shedding a substantial number of employees, these companies share another commonality: they are all federally-regulated employers. The rules governing employment in industries like banking, telecommunications, and other businesses including airlines and railways fall under the purview of the federal government. These rules are different from the ones that apply to the majority of Canadian workplaces, which are regulated by the provinces they operate in.
This blog post outlines two important considerations employees of large federally-regulated employers, such as RBC, Rogers, Telus, and Bell, should weigh if they are offered a severance package by their employer.
Federally-Regulated Employees: Enhanced Entitlements
Most Canadian employers can dismiss non-unionized employees at any time without giving the employee advance notice. If a summary dismissal is "without cause" – meaning no serious employee misconduct is alleged – the employer must provide a sum of money to the employee representing a period of “notice” owed upon dismissal. Many employees confronted with a severance package assume a formula of one month's notice or pay for each year of service is appropriate. While this formula can serve as a starting point, the actual entitlements upon dismissal hinge on a number of factors, including whether the employer is federally-regulated.
Federally-regulated employers are an exception. Unlike their provincially-regulated counterparts, many non-unionized employees of federally-regulated enterprises, such as banks, telecommunications, airlines, and railways, cannot be dismissed from their jobs unless the employer can justify it. This “unjust dismissal” protection, typically reserved for unionized employees in Canada, is a powerful job security protection that can lead to reinstatement and substantial backpay.
It is important to clarify that not all federally-regulated employees are protected from "unjust dismissal." Only non-management employees who have completed 12 consecutive months of service enjoy this protection. However, the exclusion of managerial employees is narrowly defined, and employees with a "Manager" title may still have a viable unjust dismissal claim.[1]
As a result of the “unjust dismissal” protection they enjoy, employees of federally-regulated employers may be entitled to more generous severance packages compared to their provincially-regulated peers. The unjust dismissal safeguard for federally-regulated employees implies that a severance package that is reasonable in the provincial context (using the one month's notice or pay per year of service formula or otherwise) might not be equitable in federally-regulated industries. In addition to providing the employee with adequate notice of dismissal, a fair severance offer in the federal sector should also account for the remedy of reinstatement and backpay the employee is forgoing when accepting a settlement offer.
If your employer offers you a severance package, consulting a lawyer is recommended. While employees might consider an offer reasonable due to the "rule of thumb" suggesting one month's notice or pay for each year of service, those at federally-regulated employers might be entitled to significantly more.
A Fair Severance Package Should Account for all Aspects of an Employee’s Compensation
Many employees at large corporations such as RBC, Rogers, Telus, and Bell also receive non-salary compensation, including pension benefits, bonuses, stock options, and other incentives. Ordinarily, wrongfully terminated employees are owed compensation for the loss of contractual benefits they would have earned, including these non-salary components. Therefore, a fair severance package offer should not only encompass an amount for salary, but also the pension benefits, bonuses, stock options, or other incentives the employee would have earned if their employment had not been terminated.[2]
Assessing non-salary compensation at the time of dismissal is a complex yet crucial exercise when evaluating the fairness of a severance offer. For example, an offer that compensates a 10-year mid-level employee with 12 months' pay might seem very generous. However, if the offer only covers salary and neglects to address the pensionable service the employee would accrue during the 12 month period, the employee could be missing out on significant value by accepting the offer.
Non-salary compensation, including pension benefits, bonuses, stock options, or other incentives, should all factor into a severance package. Ignoring these benefits might result in substantial losses for the employee. A brief consultation call with a lawyer to review your severance package is well-advised, particularly if you are eligible for non-salary compensation.
In Conclusion
This blog post aims to highlight specific considerations for employees terminated by federally-regulated employers such as RBC, Rogers, Telus, and Bell, and the factors these employees should weigh when faced with a severance offer. These considerations are not exhaustive, and additional factors might apply to your situation. If you have received a severance package, consulting a lawyer to review your options is recommended.
For assistance, call 416.964.1115 to speak with one of our employment lawyers or request a consultation online.