Worker Rights to Severance Pay

With our economy in free fall, unfortunately many people will see their jobs disappear. The number of unemployed is increasing at one of the fastest rates on record. At times like this, workers need to have a clear understanding of their right to severance pay.

Many people are under the misunderstanding that an employer is allowed to lay off employees - without any compensation for the lay-off, for economic reasons if times are tough. This is not the case. If the employer can justify the termination - that is, can point to some action on your part such as poor work performance, you are not entitled to severance pay. This situation is referred to as 'termination with cause'. Where the employer cannot point to some action on your part that would justify termination, this is called 'termination without cause'. The fact that a business has fallen on hard times and can no longer "afford" all of its employees, does not let the employer off the hook. The employer can lay you off but must provide adequate severance pay.

The longer you have worked for your employer, the greater the amount of severance pay you are entitled to. Many workers are under the mistaken impression that the amount of severance pay described in the Employment Standards Act [ESA] is all that they are entitled to. You should know that the ESA only sets out the minimum amount, the 'floor', of severance pay to which you are entitled. What many workers are not aware of is that a dismissed employee, terminated without cause, is generally entitled to severance pay in excess of what is spelled out in the Employment Standards Act. Above this minimum is something referred to as Common Law -- the body of cases that have previously come before the courts which act as a precedent. A court will look at these previous decisions to determine how much severance pay you are entitled to. As a very rough rule of thumb, you are entitled to between four weeks and six weeks severance pay for every year you have worked for your employer. For example if you have worked for a company for 10 years, you should be entitled to something between 40 weeks and 60 weeks of severance pay. This would be significantly more than what the Employment Standards Act would require your employer to pay you.

If you decide that you have not been offered adequate severance pay, and you take your employer to court, and the court decides that you were terminated without cause, you should know that the employer is able to deduct any income that you earned or received during the notice period from the severance pay you are entitled to. Let's go back to the example above. Suppose the court awarded you severance pay of 50 weeks. You would be entitled to an amount of money equivalent to 50 weeks worth of pay, with a reduction of an amount equal to all income you earned or received during the first 50 weeks after you were terminated. This would include any employment insurance benefits. One other fact to keep in mind is that any monies paid by your employer to you, either as a result of the court judgment or as a result of an out-of-court settlement, are taxable. You will have to pay income taxes on these monies.

I hope you have found this helpful. As always I welcome any questions or topics you'd like to see me blog about.

Accidents, Trusts and Diability Benefits

For most people involved in a motor vehicle accident, once their lawsuit has come to an end, either by winning in court or by reaching a settlement out-of-court, that would be the end of the matter. For people involved in a motor vehicle accident who are also receiving disability benefits from the provincial government, there is yet one more step to consider.

Individuals in receipt of disability benefits from the provincial government cannot have more than $3000 in their bank account. If they exceed this amout, their benefits are terminated. So, if the individual gets a settlement over this amount, they are at risk of losing their benefits. Until a few years ago this meant that individuals in receipt of disability benefits achieved a somewhat "hollow victory" at the end of a long litigation process. On the one hand they would receive money from ICBC; on the other hand their monthly benefits would be terminated. The good news is that it is now possible for individuals in this situation to establish a Disability Trust. So long as the trust is created properly, the individual can put all of the settlement monies into the trust and still retain their disability benefits. Although the trust will limit, to some degree, what the monies can be used for, it allows a person to keep receiving their benefits.

Another option, just recently available, is a Registered Disability Savings Plan. Money placed in an RDSP is also not considered to be an asset by the provincial government. Therefore, the individual will remain eligible for disability benefits. The extra benefit of an RDSP is that any interest earned is tax-free. A further benefit is that the federal government will match contributions to the RDSP each year. The first $500 is matched three to one for a total of $2000. The next $1000 is matched two to one to a maximum of $3000.

Fighting Insurance Companies!

For those of you who saw Michael Moore's movie, Sicko, it will come as no surprise to be told that insurance companies deliberately turn down valid claims. By doing so, they reduce the amount of money they pay out which increases their profit. They know that a significant percentage of claimants who have been turned down will not start a legal action to claim their benefits.

One method many insurance companies use is to hold off on an outright denial at first. Instead, they simply request additional information. The claimant [you] gathers all the information requested, sends it to the insurance company, and waits for an answer. Eventually, the insurance company provides a response which is still not a 'yes' or 'no'. Instead, you, the claimant, receives yet a request for further information. This process continues for many months if not years. In the meantime, the claimant is at risk of passing the limitation period. [The limitation peiod is the period of time within which a lawsuit must be started. After this time, no lawsuit can be started. For most insurance claims, the limitation period is one year.]When the outright denial finally comes, the claimant either gives up or decides to sue and hires a lawyer. From the time a lawyer is hired, it is not uncommon for two years to go by before the trial date arrives. Had the claimant hired a lawyer when the insurance company made their first request for information, and not been fooled into taking part in the insurance company's information-seeking charade, the two year wait for a trial date would have begun right away.

If your insurance company does not approve your benefits at the time you apply, you should seriously consider hiring a lawyer immediately.