Should You Sign a Severance Package in Ontario? What You Need to Know First

Losing your job is stressful enough. Then your employer hands you a severance package and tells you to sign by a certain date. It can feel like pressure is coming from every direction.

Here’s the thing: you don’t have to sign right away. And in many cases, the first offer your employer puts in front of you may not be the best offer you’re entitled to. Before you put pen to paper, here are a few things worth understanding.

The Deadline Isn’t Always as Final as It Looks

Most severance packages come with a signing deadline, sometimes just a few days. Employers may present this as a hard cutoff, but in many situations, that deadline can be extended if you ask.

You have the right to take reasonable time to review what you’re being offered. If you feel rushed, you should speak with a lawyer before the deadline passes. A quick review could make a significant difference in what you walk away with.

The Release Language Matters A Lot

One of the most important parts of any severance agreement is the release clause. When you sign, you’re typically agreeing to give up your right to make any future claims against your employer.

That means once you sign, it’s generally very difficult to go back and claim you were wrongfully dismissed, harassed, or owed additional compensation. You’re closing the door on those options.

Read the release carefully. Make sure you understand exactly what rights you’re giving up before you agree to anything.

Your Benefits, Pension, and Other Entitlements

A severance offer isn’t just about the lump sum of money. You should also look at:

•       Benefits continuation: Are your health and dental benefits included in the package? For how long?

•       Pension and retirement savings: Are there any matching contributions or pension credits you may be owed?

•       Vacation pay: Depending on the facts of your situation, unused vacation may need to be paid out separately from your severance.

•       Stock options or equity: If you had stock options, whether they vest or expire on termination depends on the terms of your plan, this is worth checking carefully.

Missing any one of these could mean leaving real money on the table.

Don’t Forget About Bonuses and Commissions

If you were earning a bonus, commission, or other variable pay, those amounts may form part of your overall compensation and in some cases, they may need to be factored into your severance entitlements.

Whether this applies to you depends on the facts, including your employment contract, your history of receiving those payments, and how your employer structured your pay. If bonuses or commissions were a regular part of your income, it’s worth asking whether they’ve been properly accounted for.

Watch for Restrictive Covenants

Many severance agreements include clauses that limit what you can do after you leave, such as:

• Non-compete clauses: preventing you from working in the same industry for a period of time

• Non-solicitation clauses: preventing you from reaching out to your former clients or colleagues

• Confidentiality clauses: restricting what you can say about your time at the company

Some of these restrictions may be reasonable. Others may be overly broad and difficult to enforce. If the package asks you to agree to restrictions that could affect your ability to find new work, you should understand what you’re agreeing to before signing.

Is the Offer Actually Fair?

This is the question most people have, and there’s no one-size-fits-all answer.

What you may be entitled to depends on factors like how long you worked there, your age, the type of role you held, how easy it is to find similar work, and what your employment contract says.

Ontario’s Employment Standards Act sets out minimum entitlements, but those minimums are often just a starting point. Depending on the circumstances, you may be entitled to considerably more through what’s called “reasonable notice” either working notice or pay in lieu.

The only way to know whether what you’ve been offered is fair is to have someone who knows employment law take a look at it.

Frequently Asked Questions

Q. How long do I have to sign a severance package in Ontario?

A: There’s no fixed legal deadline set by law, the deadline in your package is set by your employer. In many cases, you can ask for more time to review the offer. You should speak with a lawyer as soon as possible so you can make an informed decision before any deadline passes.

Q. Can I negotiate a severance package in Ontario?

A: Yes, in many cases, severance packages can be negotiated. Employers often make an initial offer that may be lower than what you’re entitled to. Whether there’s room to negotiate depends on the facts of your situation, including how long you worked there and the terms of your contract.

Q. What happens if I sign and later realize the offer was unfair?

A: Once you sign a release, it can be very difficult to challenge. In limited circumstances, such as where you were misled or didn’t understand what you were signing, there may be options, but these situations are uncommon. It’s much better to review the offer carefully before signing.

Q. Do I need a lawyer to review my severance package?

A: You’re not legally required to hire a lawyer, but having one review your package is generally a good idea. A lawyer can help you understand whether the offer is reasonable, flag any problematic clauses, and advise you on whether to negotiate. Many employment lawyers offer initial consultations.

Talk to DevLaws Before You Sign

If you’ve been offered a severance package in Ontario and you’re not sure what to do next, DevLaws can help. Our team works with employees across Ontario to review severance offers and help them understand their options.

contact@devlaws.com  |  +1 437 290 0424  |  devlaws.com

DISCLAIMER

This article is provided for general information purposes only and does not constitute legal advice. It is not intended to create a lawyer-client relationship. Laws and regulations can change, and the information here may not reflect the most current developments. Every situation is different, and the information in this article may not apply to your specific circumstances. If you have questions about a reduction in your hours or any other employment matter in Ontario, you should consult a qualified lawyer for advice tailored to your situation. DevLaws does not guarantee any particular outcome or result.