Between Amazon, Meta, Google and Microsoft’s recent decisions to lay off or terminate thousands of their employees, the number of tech layoffs keeps growing. Canadian employees have not been immune, with companies such as Lightspeed, Clutch, Thinkific, Postmedia, Benevity, and Hootsuite announcing their own round of layoffs. Employees in this sector may be wondering what to expect if recently laid off or if employment ends in the near future. Specifically, you may be wondering, is your employer obligated to offer you a severance package and how do you determine if what you have been offered is fair?
All employees terminated on a without cause basis are entitled to severance. The main factor that will determine the severance amount is whether you have signed an employment contract that sets out your severance entitlement on termination.
Termination clauses in British Columbia must be carefully drafted, and even if your contract includes a severance clause, there are many reasons why the clause may not be enforceable. For example, if you signed the agreement after you started working, or if the termination clause is drafted incorrectly, then you may still be able to claim reasonable severance.
When employees do not sign an employment agreement, or if the termination clause is not enforceable, severance entitlement is determined by a number of factors set out under the common law. The frequently cited case in this area is Bardal v. The Globe and Mail Ltd., 1960 ONSC 294, and the factors are as follows:
Character of employment, including amount of compensation and whether the employee was in a supervisory position or had other employees reporting to them
Length of employment
Age of the employee
Availability of other comparable work
The Bardal factors are not exhaustive. A downturn in the economy or in a particular industry or sector of the economy which would indicate that an employee may have difficulty finding another position may justify a longer severance period. The British Columbia case Ansari v. Biritsh Columbia Hydro and Power Authority 1896 BCSC 1023, provided an update on the calculation of reasonable severance periods, and has been interpreted to support the position that economic factors are taken into account in favor of the employee when determining reasonable severance.
Following the changes seen in the job market due to COVID-19, courts were asked to consider the effect of the job market on an employee’s reasonable severance. When airline travel was significantly reduced as a result of the pandemic and airlines terminated many of their employees, courts looked at the conditions surrounding an employee’s dismissal and the job market they will be re-entering in order to determine a fair severance amount. See, for example, the court’s decision in Ruel v. Air Canada, 2022 ONSC 1779, where the court considered evidence such as that the “airline industry has been decimated by COVID” and that it was uncertain when the market would normalize, as part of their decision to increase the amount of severance provided to the airline employee.
Employees in tech may be faced with the difficult reality that many of their colleagues are also searching for jobs in an unfavourable market. Employees in tech may require more time than is typical to find new work. Severance packages are meant to provide a financial buffer for terminated employees so that they have a reasonable time to replace their position. When comparable available jobs are hard to find, recently terminated employees can expect that the determination of what constitutes reasonable severance will increase.
Contact us! If you have recently been laid off in the tech sector, we encourage you to review your severance entitlement to ensure it reflects the realities of the tech market and that it is fair and reasonable.