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Prepared By Timothy C. Platnich
The content of this article is intended to be informational only. We caution you against using or relying upon any information contained in this article without first seeking legal advice regarding your particular matter. All matters arising from the use of our website, including this article, shall be governed by Alberta law and shall be within the exclusive jurisdiction of the courts of Alberta.
The End of the Employment Relationship
Most employees have what are known as indefinite term employment contracts. This means that there is no fixed term of employment and no fixed date when the employment will end. The employment relationship continues until one of the parties decides to end it. This article deals with indefinite term employment contracts.
In these situations, where an employer decides to end the employment relationship of an employee, the employer must, at a minimum, comply with the Employment Standards Code. Further, the employer must provide "reasonable notice", "pay in lieu of reasonable notice" or a combination of both. Pay in lieu of notice is commonly referred to as severance. What constitutes reasonable notice depends on the circumstances of the individual employee. The most important factor considered by the courts in determining reasonable notice is the length of employment of the employee. This is not the only factor however. Other factors such as skill and age come into play. Effectively the courts are trying to predict how long it will take the employee to find equivalent replacement employment. Reasonable notice or severance is intended to give the employee a reasonable period of time to find alternate employment.
A rough rule of thumb for reasonable notice/pay is between 2 and 4 weeks for each year of employment. This rule of thumb may or may not be applicable to a particular employee's situation at a given point of time.
Where the employer elects to pay severance instead of giving "working notice" other considerations are involved such as compensation for lost benefits and tax consequences to the employee. These considerations can become complicated. Employers and employees can be creative and fashion an agreement that may work best for both parties.
Big employers have Human Resource departments that handle these matters. Smaller employers often need advice and assistance to ensure that they are meeting legal requirements when structuring a termination. When faced with a "package" employees are advised to seek legal advice to ensure they understand their rights before they accept the package.