Merger Affect Federally Regulated Employee Severance Pay
Generally speaking, if an employer is undergoing a merger or closing a plant, they are required to offer severance pay to affected employees. This is especially true if the employer is closing down in a way that affects a large number of workers. Severance pay is a form of termination compensation that consists of either cash or an amount equal to an employee’s regular salary.
In some cases, severance packages include the value of benefits that are not necessarily tied to business-related activities. This could include car allowances or club memberships. However, an employer should be careful not to exceed the minimum Federally Regulated Employee severance pay requirements set out in the Canada Labour Code. The Canada Labour Code states that employees must receive at least two weeks notice or pay in lieu of employment when they are terminated. This amount does not increase with the length of service and is therefore significantly different from provincial laws in this area.
As with any termination, it is always best to consult with a lawyer. Whether an employer is laying off workers due to a merger or simply because of the need to downsize, it is important that employees understand their rights and that any proposed changes be discussed with an attorney. If an employer attempts to make a significant change to an employee’s pay, position or title, job responsibilities, or schedule, it could be considered constructive dismissal and the employee would be owed severance pay as well as additional damages.
How Does a Merger Affect Federally Regulated Employee Severance Pay?
A non-unionized Federally Regulated employee in a managerial role cannot be dismissed unless the employer can prove they have a valid reason for firing the individual. This is in contrast to workers governed by provincial law who are able to be fired without cause as long as a full severance package is provided. The Supreme Court of Canada ruled this in the case of Wilson v Atomic Energy of Canada Ltd (2016).
Employers must clearly spell out what will be included in the bank employee severance package and what will not be. In addition, the employer should be clear on how they will handle taxation. Depending on the arrangement, severance pay may be treated as regular wages and subject to standard withholdings, or it may be paid separately and thus be taxed at a lower rate.
In many situations, the amount of severance pay can be substantially different from one company to the next. This is because the laws in this area vary from one province to another. As a result, it is important that employers review their policies and consider the impact of the various provincial laws when making staffing decisions. Employers should also consult with a lawyer about any severance package they are considering offering to an older worker in order to ensure that it is in compliance with the Older Worker Benefit Protection Act, which provides specific disclosure and waiver requirements when asking older workers to waive their ADEA claims.
