Colloquially, severance means all the money a person is to get from being wrongfully dismissed. Technically in law, there is a difference between severance and pay in lieu of notice. With Matthews v. Ocean Nutrition, the Supreme Court of Canada [2020 SCC 26] clarified the distinction between severance and pay in lieu of notice. According to the Supreme Court of Canada at 69:
Severance pay, [...], “acts to compensate long-serving employees for their years of service and investment in the employer’s business and for the special losses they suffer when their employment terminates”, and is often provided for in provincial employment standards legislation (Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 26).
The court also clarified (looking specifically at the law of Alberta) that pay in lieu of notice is damages payable for the breach of the implied term in the contract of employment to provide pay in lieu of notice.
The Ontario Court of Appeal in the case of Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402 looked at whether mitigation applies to severance.
With regards to severance:
[111]Statutory entitlements are not damages. Ms. Brake was entitled to receive her statutory entitlements even if she secured a new full-time job the day after the Appellant terminated her employment. Therefore, the income that Ms. Brake earned during her statutory entitlement period is not subject to deduction as “mitigation income”. In reaching this view, I adopt the reasons of the Divisional Court in Boland v. APV Canada Inc.(2005), 2005 CanLII 3384 (ON SCDC), 250 D.L.R. (4th) 376.
This case does not appear to have been considered in Alberta, but in light of Matthews v. Ocean Nutrition, it appears to be sound law. Mitigation will still apply with respect to pay in lieu of notice.
If you have been terminated in Alberta and require counsel, please feel free to contact us.
The information contained in this article is not legal advice. No solicitor client relationship is formed through this article. The reader is encouraged to retain counsel for advice in these matters.
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