“The great enemy of the truth is very often not the lie, deliberate, contrived and dishonest, but the myth, persistent, persuasive and unrealistic.”— John F. Kennedy
Many of my clients have received poor advice regarding the rule of thumb approach from friends, neighbours, or anyone else purporting to know employment law. You’ve likely heard about this approach — the one stating that terminated employees are entitled to one months’ pay for each year they have worked at a company.
The reality, however, is that no such rule of thumb exists. So where does this myth come from? Lawyers broadly used the rule of thumb approach when negotiating or litigating terminations as recently as the mid-1990s. It was even affirmed by a few of our courts.
But in 1999, the Ontario Court of Appeal concluded that this approach had very little statistical value when predicting the amount of reasonable notice that courts actually award. Therefore, there are two reasons why the rule of thumb approach should not be used. First, it is not accurate statistically. Second, the Court of Appeal rejected it.
So how does a court decide how much severance you will get, or, in legal terms, your entitlement to reasonable notice of your termination?
A court will apply what I consider the contextual approach because it takes into consideration all of a situation’s unique circumstances.
As such, here are the four most important factors that a court will look at when using this approach:
• The character or the type of your employment. If you perform more managerial or supervisory duties you are entitled to more severance pay. If your job is highly specialized and difficult to replace, you will receive more severance as well.
• The length of your employment. If you have been with the company for a longer period, you are entitled to more severance. However, the length itself is not always definitive. Some short-service employees can be entitled to substantial severance depending on the other three factors of the test or if you were induced to leave a secure job.
• Your age at the time of termination. It is generally viewed that older employees will have a greater difficulty finding a similar job to the one they were just terminated from. As a result, courts usually award older employees more severance.
• The availability of similar employment in light of your experience, training and qualifications. Here, a court will consider all of the circumstances either preventing or helping you find another, similar job.
The rule of thumb approach is just one more example of a legal myth with no merit. Ultimately, when it comes to assessing how much money you’re going to get once you’ve been terminated, the best advice remains to consult with an employment law expert before agreeing to anything that may affect your legal entitlements.