Strategies to curb soaring severance costs have become even more pressing. Recent court decisions have removed the traditional ceiling of 24 months’ of notice. Other judgments have diminished the importance of the traditional factors such as character of employment as significantly affecting the amount of notice. The effect is that even administrative employees with long service such as can claim higher amounts of notice which were traditionally off limits.
Employers can either roll over and surrender and pay or be strategic in their approach and reduce their exposure. A major weapon in the employer’s arsenal is the use of employment agreements that explicitly limit the amount of notice in the event of termination. A major hurdle is ensuring that they will be upheld by the courts and not struck down.
The secret is not to be greedy at the employee’s expense by setting the period at an arbitrarily low figure. As long as the notice provision assures the employee as much as the applicable employment standards legislation, the courts will uphold it.
In Ontario, that means ensuring that the employee will receive at least as much notice, including benefits extension and severance as the legislation demands. The omission of benefits extension during the notice in one employment agreement proved to be fatal to an employer in Wright v Wunderman.
The notice provision can be agreed upon or negotiated as a condition of hire. For existing employees, it becomes trickier as the courts will invalidate any agreement if there is evidence of duress or compulsion. In addition, employees must receive something of value or “consideration” in return for waiving their common law rights to reasonable notice.
Consult an employment law expert to devise strategies that are practical for your workplace.