Canadian Employment Law Today

CELT June 26 2013.qxp:celt 467.qxd 13-06-17 10:36 AM Page 2 June 26, 2013 Ask an Expert with Colin Gibson Harris and Company, Vancouver Have a question for our experts? Email jeffrey.r.smith@thomsonreuters.com. ■ EMPLOYMENT STANDARDS: Lump sum or salary continuance? Question: A dismissed employee has been offered a severance package with continuation of the employee's salary for a specified period. However, the employee has made a formal request to receive her severance in a lump sum payment. Is the employer required to comply with this request, or does the employer get to decide how to structure the package? Answer: The answer depends on factors such as jurisdiction, whether the employment contract defines the severance package, and whether the employer is in the public or private sector. Employment standards statutes across Canada are generally uniform in their approach to severance payments made in lieu of statutory notice of termination: such payments must be provided in a lump sum. Under the Ontario's Employment Standards Act, 2000, where an employer pays severance instead of giving working notice, the employer must also pay the applicable benefit premiums over the statutory notice period. At common law, there is a presumption that wrongful dismissal damages are to be awarded in a lump sum. In Tull v. Norske Skog Canada Ltd., the B.C. Supreme Court ruled it may endorse an employer-imposed salary continuance severance package as a proper means of 2 paying wrongful dismissal damages, but only if the length of the salary continuance is equivalent to the period of notice the court finds to be reasonable, and only if the employer has continued the employee's benefits over the period. Courts in other provinces have been less willing to adopt this approach. For example, in Ontario, courts have held they are restricted to making a lump sum award of wrongful dismissal damages. In Russo v. Kerr Bros Ltd., the court found this approach to be consistent with the Courts of Justice Act, which provides for periodic payments only in the case of a personal injury or family law decision. The court found the legislature's decision to exclude periodic payments in other circumstances suggested judges lack the power to make such an award. Despite the presumption in favour of lump sum payments, employers should pay close attention to any governing statutes which may provide otherwise. In British Columbia, for example, the Employment Termination Standards regulation established under the Public Sector Employers Act states that in the public sector, severance must be in the form of periodic payments unless the employer, in its discretion, considers a lump sum to be more appropriate. An employer and an employee can agree to displace the common law presumption of a lump sum severance payment by entering into an employment contract that expressly provides for severance in the form of salary continuance. Care must be taken in drafting termination clauses of this nature to ensure they meet or exceed the employee's rights under employment standards legislation. ■ EMPLOYMENT STANDARDS: Termination versus layoff Question: What is the difference between a "termination" and a "layoff" and how can the use of these terms affect the end of an employment relationship? Answer: A "termination" generally describes a permanent cessation of an employment relationship, while a "lay- off" usually refers to a temporary interruption of employment due to lack of work, redundancy or other factors. Employees who are laid off usually have a reasonable expectation of recall, while terminated employees do not. There are profound differences between a termination and a layoff depending on whether the employee is unionized. It is a general principle of labour relations statutes across Canada that a unionized employee can only be disciplined or discharged for just cause. However, under most collective agreements, an employer can lay off a unionized worker for lack of work. The procedural requirements the employer must comply with, the length of the employee's recall rights, and any entitlement to severance compensation will be dealt with in the applicable collective agreement. With limited exceptions, a non-union employee can be terminated with or without cause. If the employer has cause for dismissal, there will usually be no requirement to provide any working notice or severance compensation. Without cause, the employer can terminate the employee as long as it provides the amount of notice or severance required by the applicable employment standards legislation, and by the express or implied terms of the employment contract. In the non-unionized context, a permanent layoff is considered in law to be a dismissal and employers do not necessarily have the right to lay off an employee temporarily for lack of work. Whether at common law or under employment standards legislation, there must be an express or implied term providing the employer with the right to implement a temporary layoff. In B.C., for example, the Employment Standards Act allows an employer to lay off a nonunion employee temporarily for up to 13 weeks within a period of 20 weeks, but the Employment Standards Branch takes the position that an employer cannot exercise this right unless a layoff is permitted by the express terms of the employment contract, industry practice, or agreement of the employee. At common law, a layoff will usually give the affected employee the right to Published by Canadian HR Reporter, a Thomson Reuters business 2013 Continued on page 6

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