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Calculating severance: What do the courts say?

severance

We’ve all heard one of the following stories… An employee in heavy industry is laid off because of a downturn in the economy… Or an office worker is let go because she doesn’t get along with her supervisor… Or a company is going through a restructuring and has to terminate a quarter of its staff.

While the creation and destruction of jobs is essential to our economy and our workplaces, people affected by job-loss are nonetheless dealing with a unique form of personal tragedy. After all, a job is not only a source of income, it contributes to our overall well-being and is an important part of our identity.

In the past I have written about the different factors that are considered in assessing severance for a termination. Being a lawyer, I also provided the standard cop-out that “there is no formula for determining reasonable notice or severance amounts”. Fair enough, but maybe readers would like a sampling of recent case summaries to help understand how severance is applied.

Valle Torres v. Vancouver Native Health Society, 2019 BCSC 523– April 8 2019

Mr. Valle Torres worked for the VNHS for almost 20 years, providing social services on the downtown east side of Vancouver. He was 56 years old and came to Canada from El Salvador in 1990. Over the years he had worked with sexually exploited youth, as an early childhood support team lead and as a project manager.

On June 1, 2018, Mr. Valle Torres was rather unceremoniously terminated. He was paid 8 weeks wages in accordance with the Employment Standard Act requirements, and was offered an additional 4 weeks wages if he signed a release. When Mr. Valle Torres refused, he was walked off the premises. In the days following, the employer wrote a ‘cease and desist’ letter to Mr. Valle Torres threatening legal action and using other intimidating language.

On cross-examination, representatives for the employer stated that “the plaintiff was fired because he did not have the necessary skills for the job as he was not Indigenous”. The Plaintiff also testified that since his termination he has been depressed, sad, anxious, and “that it will take a long time to recover from this”.

The court awarded the plaintiff 24 months salary and benefits, $40,000 in accrued vacation, and $30,000 in aggravated damages for the unfair, dishonest and callous behavior displayed by the company.

Booton v Synergy Plumbing and Heating Ltd., 2019 BCSC 276 – March 1, 2019 

 The plaintiff is 42 years old. He graduated from high school and received a diploma in trades from BCIT. He completed a plumbing apprenticeship in September 2012 and was hired by Synergy Plumbing and Heating Ltd. in October that same year. By May 2014, Mr. Booton was made the interim service manager, and was making $83,000 a year, plus benefits and a car allowance.

Unbeknownst to Synergy, at various times during his employment (for instance, while on vacation), Mr. Booton would take on side-jobs for cash, some with existing clients of Synergy. Synergy argued that this was in breach of their company policies and Mr. Booton was terminated for cause on April 4, 2017.

In arguing that he was wrongfully dismissed, Mr. Booton stated that Synergy could not rely on its conflict of interest policies as they never trained him on them and he was unaware of their existence. He further argued that even if he was acting in breach of company policy, Synergy was aware of his side-jobs and condoned the behaviour.

The court agreed. As a wrongfully dismissed employee of 4.5 years, the court awarded 4.5 months of salary and benefits, plus an additional $500 for defamation.

Avelin v. Aya Lasers Inc., 2018 BCSC 2313 – December 11, 2018

In this matter, a 47 year old sales representative worked for a medical supplies company, selling high-end medical devices for skin care to dermatologists and medical clinics. The Plaintiff was hired as the company’s BC representative, starting on August 1, 2017. Her compensation was a combination of base salary and commissions.

After 7 months of employment, the employee was not meeting sales expectations and was terminated. Although she had no management responsibilities and was only employed for 7 months with the company, she was awarded 4 months’ pay in-lieu of reasonable notice. The court found that the Plaintiff’s age justified a somewhat lengthier notice period.

Chapple v Big Bay Landing Ltd. (Inc. No. 0764163), 2018 BCSC 1666 – September 27, 2018

In another example of an employee with short service, a 61 year-old started as a resort manager in February 2013. A little over two years later, he was terminated without cause. Mr. Chapple worked on a remote island community and earned $84,000 a year. At the time of his termination he was only provided with three weeks’ salary in lieu of notice.

The court found that opportunities for his type of work on the coast of British Columbia are limited. It also acknowledged that Mr. Chappel found alternate employment less than one year after his dismissal by the defendant.

Given that the facts of this case were straight forward, the matter was heard by way of a summary trial. In light of the plaintiff’s length of service, his age, his marketability and other factors, a notice period of nine months in lieu of notice was deemed to be appropriate, amounting to just under $60,000.

Comments

For the majority of these cases, I am not surprised by the outcomes. With the exception of short-term employees, it is common for dismissed employees to be awarded severance entitlements at roughly one month for every year of service. Granted, the way the employee is treated (Valle Torres) and the persons age and comparable employment (Chappel) are also important factors.

The only case that does surprise somewhat is Chappel. While I recognize that Mr. Chappel is an older worker, in a rural community and in a management position, awarding 9 months wages for an employee with 2 years of service seems on the high end.

By David M. Brown, Kent Employment Law

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