Whether you’re an employer navigating the complexities of letting an employee go or an employee seeking clarity on your entitlements, it’s essential to understand the legal obligations and rights surrounding termination pay to ensure a fair and compliant transition.

In Alberta, termination pay serves as a form of financial protection for people who lose their jobs involuntarily. It is a crucial aspect of employment law that governs the compensation employees receive upon the termination of their employment.

At DLegal, we assist our clients in navigating employment law and business law. We have in-depth knowledge of the Alberta Employment Standards Code and offer guidance tailored to your specific situation.

Difference Between Severance Pay And Termination Pay Alberta

Although severance pay and termination pay are often used interchangeably, they have distinct meanings and serve different purposes within the realm of employment law.

Termination pay, as mandated by Alberta’s Employment Standards Code (ESC), refers to the statutory minimum of compensation that employers must provide to employees whose employment is terminated without cause and without notice. It serves as a financial safety net, ensuring a measure of stability and support for people who lose their jobs without choosing to leave.

On the other hand, severance pay is an additional sum of money awarded to long-term employees who have dedicated a substantial service period to their employer. Unlike termination pay, the amount of severance pay provided is not a statutory requirement outlined in Alberta’s employment standards legislation. Instead, it follows the common law principles as a gesture of appreciation for an employee’s loyalty, commitment, and contributions to the company over an extended period.

Severance pay often comes into play when employees with a considerable tenure are terminated due to circumstances, such as restructuring, downsizing, or the closure of a business. It recognizes the employee’s long-term investment in the organization. It aims to ease the financial burden that may arise from sudden job loss as they search for new employment opportunities or navigate the challenges of transitioning to a different career path.

It is important to note that a full severance package and/or pay is not guaranteed in every termination scenario, particularly when the employment relationship is relatively short-term or the termination is for a cause.

While termination pay is mandatory according to the Alberta ESC, the amount of severance pay is discretionary and largely dependent on factors such as the employee’s length of service, the employer’s policies, and any contractual agreements or negotiated terms that may exist.

Note that failure to comply with the termination pay provisions of the ESC can result in legal consequences for employers.

What Is Termination Without Cause?

Termination without cause occurs when an employer terminates or ends an employee’s contract or employment for reasons other than the employee’s misconduct or performance issues. It may result from other factors, such as downsizing, restructuring, or the employer’s financial constraints. In such cases, employers are obligated to provide termination notice to affected employees in accordance with the Alberta Employment Standards Code or pay them in lieu of notice.

What Is the Notice Period For Termination Of Employment In Alberta?

The minimum notice period for termination of employment in Alberta depends on the length of an employee’s continuous service with the employer. According to the ESC, employers are required to provide written notice of termination or pay instead of notice to employees as follows:

Less than 90 days of service: No statutory notice or termination pay is required. However, it is considered good practice for employers to provide employees with reasonable notice or pay in lieu of notice.

    – 90 or more days but less than 2 years of service: At least one week’s notice or one week’s pay is required.
    – 2 to 4 years of service: Two weeks’ notice is required.
    – 4 to 6 years of service: Four weeks’ notice is required.
    – 6 to 8 years of service: Five weeks’ notice is required.
    – 8 to 10 years of service: Six weeks’ notice is required.
    – 8 years of service or more: Eight weeks’ notice is required.

These are minimum requirements, but the notice period can be extended if the employment contract or collective agreement between the employer and the employee specifies a longer and more reasonable notice period.

Employers must note that employees may not be required to take leave or work overtime during the notice period.

When Does an Employer Not Have To Give a Termination Notice In Alberta?

While employers in Alberta are generally required to provide notice of termination or provide them with payment instead of that, there are certain cases where employers are not required to give notice or make a payment:

Engages in Wilful Misconduct or Neglect of Duty: If an employee’s actions demonstrate severe misconduct or negligence, the employer may be exempt from providing notice or termination pay. However, it is essential for employers to thoroughly document and investigate such cases to avoid potential disputes.

Participates In a Strike Or Lockout: During a strike or lockout, termination notices, and termination pay obligations may be suspended until the labor dispute is resolved.

Is Employed For a Definite Term or Specific Task: If an employee’s employment contract clearly states that their employment will end upon the completion of a specific project or after a fixed duration, the employer is not obligated to provide written termination notice or pay.

Is Employed Under a Collective Agreement That Sets Out Termination Procedures: Collective agreements may include specific provisions regarding termination, including notice periods and termination pay. In those employment situations only, the rules and conditions specified in the collective agreement take precedence.

How Much Is Termination Payout In Alberta?

The employer may choose to pay an employee termination pay instead of giving notice of termination. This minimum amount of termination pay in Alberta is calculated based on the employee’s regular wages, length of service with the employer, and the associated legal notice period. This excludes items such as overtime pay, vacation pay, or any other additional benefits or entitlements.

Employees terminated without cause are entitled to certain minimum payments:

For instance, if an employee has been with a company for 3 years and is terminated without notice, they would be entitled to two weeks’ termination pay instead of a termination notice.

In addition to termination pay, employees may also be entitled to other payments upon termination, such as accrued vacation pay or outstanding wages. These additional amounts are separate from termination pay and should be provided to the employee accordingly.

It is important to note that these are minimum standards, and some employment contracts or collective agreements may provide for more generous termination pay provisions.

How Does an Employment Contract Affect Termination Pay?

The terms outlined in an employment contract can impact the entitlements and obligations related to termination pay. If an employment contract specifies a longer notice period or a higher termination pay than the minimum amounts required by the Employment Standards Code, the employee is entitled to the more favourable terms.

On the other hand, if the contract states a shorter notice period or less payment upon termination of the employment relationship, it would likely be seen as invalid and cannot be enforced. In that case, the minimum legal requirements would be applicable.

How Long Do Employers Have To Pay Out Employees After Termination?

Once an employee’s employment is terminated, employers in Alberta are required to pay out termination pay within 10 days after the end of the pay period in which termination occurred or 31 consecutive days after the last day of employment. The employer may choose which option suits them best. This timeline ensures that employees receive their entitled compensation promptly, aiding their transition to new employment or financial stability.

How Does Termination Pay Affect Employee Benefits

Termination pay not only provides financial compensation but also has implications for employee benefits. Understanding how termination pay affects various benefits is important for employees navigating the termination process.

Continuation Of Benefits During The Notice Period: Employees may be entitled to continue certain benefits during the notice period, such as health insurance and dental coverage. The specifics depend on employer policies and benefit plan terms.

Duration of Benefit Continuation: The duration of benefit continuation during the notice period varies. Some employers maintain benefits until the end of the notice period, while others cease them on the termination date.

Conversion Or Portability Options: In some cases, employees may have the option to convert or port their group benefits after termination. Conversion allows employees to convert group coverage into individual policies, while portability enables transfer to a new employer’s benefit plan.

Impact On Retirement and Pension Plans: Termination pay generally doesn’t directly affect retirement savings or pension plans. However, employees should review employment contracts and pension plan documents for any specific provisions.

Employment Insurance (EI) And Termination Pay: Termination pay may affect access to Employment Insurance (EI) benefits. In Alberta, receiving termination pay may delay eligibility for EI, as it may be considered earnings and affect the waiting period.

It is important to note that the Alberta Employment Standards Code does not provide specific rules regarding employee benefits. Employees should review their contracts and benefit plan documents and consult HR or benefits administrators to understand how termination pay impacts their benefits. Seeking advice from an experienced employment lawyer can provide further clarity on termination pay’s effects on employee benefits.

Understanding termination pay in Alberta is crucial for both employees and employers. By knowing their rights and obligations, employees can ensure fair compensation upon termination, while employers can comply with the legal requirements, fostering positive workplace relationships.

Know Your Rights!

Understanding termination rules is a challenging matter. If you are seeking legal help, we are ready to help you. Whether you are an employer or an employee, contact DLegal for guidance on termination pay and the Alberta Employment Standards Code.

Please note that this is simply a general overview of the subject and does not constitute legal advice. Consult a lawyer for formal advice about your specific situation.