Short answer: in Alberta, there is no single severance formula that applies to every employee.
For many employees, the starting point is the minimum termination notice or termination pay required by Alberta’s Employment Standards Code. But in some cases, an employee may be entitled to more than the statutory minimum under common law reasonable notice.
That means the real answer depends on the facts, including:
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how long you worked for the employer;
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whether you were terminated with or without cause;
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whether you had a written employment contract;
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whether that contract validly limits your severance;
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your age, position and job duties;
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your compensation structure; and
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how difficult it may be to find comparable work.
The important point is simple:
The amount offered in a termination letter is not always the amount the employee is legally entitled to receive.
What Does “Severance” Mean in Alberta?
People often use the word severance to mean any money paid when employment ends.
Legally, there are usually three different concepts to consider:
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minimum termination notice or termination pay under Alberta employment standards legislation;
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common law reasonable notice, which can be higher than the statutory minimum; and
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any additional amounts owed under an employment contract, bonus plan, benefits plan or other compensation arrangement.
In everyday language, all of these may get called “severance.”
But they are not always the same thing.
That distinction matters because an employer may offer the statutory minimum, while the employee may have a larger common law claim depending on the contract and circumstances.
Alberta’s Minimum Termination Pay Rules
Under Alberta’s Employment Standards Code, an employer who terminates an employee without cause must generally provide written termination notice, termination pay, or a combination of both.
The minimum amount depends mostly on length of employment.
The general minimums are:
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1 week if the employee worked more than 90 days but less than 2 years;
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2 weeks if the employee worked 2 years or more but less than 4 years;
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4 weeks if the employee worked 4 years or more but less than 6 years;
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5 weeks if the employee worked 6 years or more but less than 8 years;
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6 weeks if the employee worked 8 years or more but less than 10 years; and
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8 weeks if the employee worked 10 years or more.
These are minimum standards.
They are not always the full amount an employee may be entitled to receive.
Notice, Pay in Lieu, or Both
An employer does not always have to pay severance as a lump sum immediately if it gives proper working notice.
In Alberta, an employer can generally terminate employment by giving:
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working notice;
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termination pay instead of notice; or
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a combination of working notice and termination pay.
For example, if an employee is entitled to 4 weeks of statutory notice, the employer might provide 4 weeks of working notice, 4 weeks of pay, or a combination such as 2 weeks of working notice plus 2 weeks of pay.
However, if the employee is entitled to common law reasonable notice, the required notice or compensation may be significantly more than the statutory minimum.
The Statutory Minimum Is Only the Starting Point
One of the biggest mistakes employees make is assuming the minimum termination pay under the Employment Standards Code is the full severance entitlement.
It may be.
But it may not be.
The statutory minimum is the floor. It sets the minimum amount an employer must generally provide if the Code applies and no exception removes the notice requirement.
Common law reasonable notice may provide a larger entitlement, unless the employee’s contract validly limits the employee to the statutory minimum or another enforceable amount.
The practical rule is this:
Employment standards minimums tell you the least an employer may have to provide. They do not always tell you what the claim is worth.
Common Law Reasonable Notice
If an employment contract does not clearly and validly limit severance, an employee may be entitled to reasonable notice at common law.
Common law reasonable notice is not calculated using a fixed formula.
Courts consider several factors, including:
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the employee’s length of service;
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the employee’s age;
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the character of the employment;
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the nature of the employee’s role and responsibilities;
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the employee’s experience, training and qualifications; and
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the availability of similar employment.
This is why two employees with the same length of service may have different severance entitlements.
A long-service senior employee in a specialized role may have a very different claim than a short-service employee in a position where comparable work is easier to find.
Is Severance One Month Per Year of Service?
Not necessarily.
You may hear rules of thumb such as “one month per year of service” or “two weeks per year.”
Those rules can be misleading.
Alberta law does not apply one universal severance formula to every employee. Length of service is important, but it is only one factor.
A proper severance assessment looks at the whole employment relationship, including the employee’s position, age, compensation, contract language and the job market for comparable work.
The better question is not:
“How many weeks per year do I get?”
The better question is:
“What notice period is reasonable in my circumstances, and does my contract validly limit that amount?”
Why the Employment Contract Matters
The employment contract can make a major difference.
A properly drafted termination clause may limit an employee to the minimum amounts required by employment standards legislation.
But not every termination clause is enforceable.
A contract may fail to limit common law notice if the wording is unclear, incomplete, inconsistent with employment standards legislation or does not properly remove the employee’s common law entitlement.
This is especially important because many employees are told that their contract limits them to a certain amount when the clause may still need to be reviewed carefully.
The practical rule is simple:
Do not assume your termination clause is enforceable just because it appears in your employment contract.
When Minimum Termination Pay May Not Be Required
There are situations where an employer may not be required to provide statutory termination notice or termination pay.
Examples can include:
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employment of 90 days or less;
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termination for just cause;
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employment for a definite term or specific task that ends as agreed;
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certain seasonal employment;
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refusal of reasonable alternative work;
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certain strike or lockout situations;
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certain temporary layoff situations; or
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circumstances where performance of the employment contract becomes impossible for reasons beyond the employer’s control.
These exceptions are fact-specific.
An employer calling something “just cause” does not automatically make it just cause. Similarly, calling a job “temporary,” “seasonal” or “contract” does not always end the analysis.
The facts and the legal relationship still matter.
Terminated With Cause vs. Without Cause
A without-cause termination means the employer is ending the employment relationship even though it is not alleging serious misconduct that eliminates the employee’s right to notice or pay.
In a without-cause termination, the employee is generally entitled to notice, pay in lieu of notice, or both.
A with-cause termination is different.
If an employer proves just cause, the employee may not be entitled to termination notice or termination pay. But just cause is a serious allegation. It usually requires significant misconduct, and the employer must be able to justify the decision.
The practical point is this:
If your termination letter says “cause,” that does not end the matter. The employer still has to prove it.
What Can Be Included in Severance?
Severance is not always limited to base salary.
Depending on the circumstances, a severance package may need to account for:
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regular wages;
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vacation pay;
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benefits;
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commissions;
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bonuses;
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incentive compensation;
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pension or retirement contributions;
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car allowance or other allowances;
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stock options, restricted share units or other equity compensation; and
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other compensation the employee would have earned during the notice period.
This is especially important for employees whose total compensation includes more than salary.
A severance offer that looks reasonable at first glance may be incomplete if it ignores commissions, bonuses, benefits or other compensation.
Vacation Pay and Final Earnings
When employment ends, the employer must still deal with earned wages and vacation pay.
These amounts are separate from severance.
For example, if an employee has unpaid wages, accrued vacation pay or other earned amounts, those amounts may still be owing even if there is also a dispute about severance.
The practical rule is simple:
Severance is only one part of the termination package. Final pay, vacation pay and other earned compensation must also be reviewed.
Bonuses and Incentive Compensation
Bonus and incentive compensation can be one of the most important parts of a severance review.
The question is not simply whether the employee was actively working on the bonus payment date.
The analysis may include:
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whether the employee would have earned the bonus during the notice period;
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whether the bonus was discretionary or part of regular compensation;
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what the bonus plan or employment contract says;
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whether the plan clearly removes entitlement after termination; and
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whether the limiting language is enforceable.
This can matter a lot for executives, sales employees, managers and employees with annual performance compensation.
The practical point is this:
Do not assume a bonus disappears just because employment ended before the payout date.
Temporary Layoffs Can Trigger Termination Issues
A temporary layoff is not always harmless.
In Alberta, temporary layoffs are governed by specific statutory rules. If a layoff lasts too long, employment may be treated as terminated, and termination pay may become owing.
There can also be common law issues if the employer did not have the contractual right to temporarily lay off the employee.
The important point is this:
A layoff may eventually become a termination, and the deadline matters.
Should You Sign a Severance Package?
Many severance offers come with a deadline and a release.
A release usually means the employee gives up the right to bring claims against the employer in exchange for the payment offered.
Before signing, the employee should understand:
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whether the offer is only the statutory minimum;
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whether common law reasonable notice may be higher;
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whether the contract validly limits the entitlement;
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whether benefits, bonuses, commissions and vacation pay are included;
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whether there are restrictive covenants, confidentiality terms or non-disparagement terms;
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whether the release is broader than expected; and
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whether the deadline is realistic.
The practical rule is simple:
Once a release is signed, it may be difficult or impossible to ask for more later.
What Happens If the Employer Offers Only the Minimum?
Sometimes an employer offers only the minimum required by the Employment Standards Code.
That may be lawful if the employment contract clearly and validly limits the employee to those minimums.
But if the contract does not do that, the employee may have a claim for more.
This is why severance packages should not be evaluated only by comparing the offer to the Alberta employment standards chart.
The chart is important.
But it may not be the full answer.
What This Means Practically
Three rules are worth remembering.
Do not assume the offer is all you are entitled to receive. The first offer may be based on the statutory minimum, not common law reasonable notice.
Do not rely on a simple severance formula. Alberta severance depends on the employment contract, length of service, role, age, compensation and other circumstances.
Do not sign a release without understanding what you are giving up. A severance package may affect wages, benefits, bonuses, commissions, claims and future rights.
Speak With an Alberta Employment Lawyer
If you were terminated and received a severance offer, the key question is whether the offer reflects your full legal entitlement.
A proper review should consider:
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your employment contract;
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the reason for termination;
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your length of service;
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your age and role;
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your full compensation package;
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any bonus, commission or benefits issues;
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whether the employer is alleging cause; and
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whether the release affects other rights.
This article provides general information about severance and termination pay in Alberta and is not legal advice. Severance entitlements are fact-specific, and the amount owed can depend on the employment contract, legislation and common law.
Berjak Law handles employment law matters in Edmonton and across Alberta.
Berjak Law
10080 Jasper Avenue, Suite 301
Edmonton, Alberta
780-879-0200
