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Put yourself in the shoes of an employer. You have an employee about to start the next day and you realize that you should have them sign an employment contract before they start.

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We have all seen them: long sprawling agreements, chock full of legalese, that employees are expected to sign. You take one look through a past contract prepared by your legal counsel and think to yourself, “Maybe I can save a few dollars by making the entitlements on termination just a little bit less generous. What could the harm be?”

The unfortunate answer, as many employers have learned, is that it can end up hurting your bottom line far more than if you had sought legal advice.

Generally speaking, when an employee is owed severance, there are three places to look:

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1. The applicable provincial/federal employment statute — this sets the bare minimum of what they are owed
2. The employment contract — this may set a different formula than the legislation and tries to limit employees’ access to common law severance entitlement. Few employment contracts are more generous than what a court would provide. Indeed, the very purpose for most employers in having contracts is to restrict employees’ entitlement; and
3. Common law — this is the employee’s ability to sue their employer and have the court dictate how much severance is owed.

While the bare minimums owed can be substantial (up to 34-weeks’ pay in Ontario), common law severance entitlements are usually...

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