There is no formula or severance calculator that reflects how judges determine what an employee is entitled to upon termination

What about the common belief that courts award one month of severance per year of service?

That was not the experience of Moyra Miller, who was recently awarded 14 months’ pay from the Ontario Superior Court Justice Maria Carroccia, after working for only seven months for Alaya Care as its vice president, client services.

This was, to me, an unsurprising decision, despite ostensibly flying in the face of that popular severance myth.

The reality is, there is no formula or severance calculator that reflects what judges actually do in determining what an employee is entitled to upon termination.

The main factors are usually the employee’s re-employability, age, position, length of service and remuneration. Those factors are all put into the hopper and then the court decides what a particular case is worth.

But there are other factors a court might look at as well.

In my Thomson Reuters text, The Law of Dismissal in Canada, I list more than 150 factors that courts have looked at in different cases to determine appropriate severance. A quick review of those factors can help inform what an employee should argue and an employer be concerned about (or alternately argue) in any given case, as they can increase or decrease the severance a court might award.

Miller had been offered the amount stipulated in her employment contract (four months) when fired after her seven months of service. She intelligently rejected that offer and sued for more, ending up with more than three times that amount.

Previously, she had been employed with Alaya’s competitor for 12 years and not looking to leave when, at age 61, she was approached by the company through LinkedIn.

Her employment contract was found to be unenforceable — as most Canadian employment contracts are — for several reasons, including the fact that it provided for only four months’ salary without including her bonus and benefits beyond the dismissal date.

The court found that some credit should be given to her previous 12 years of employment, in part because it was that experience, in a specialized field, that prompted Alaya to recruit her. In deciding whether she was induced to join Alaya, the court noted that the company reached out to her first, that it was prepared to indemnify her in the event her previous employer sued her for leaving to join a competitor and it inquired about her prior remuneration in order to “lure” her.

The court also set out the general factors in deciding whether there has been an inducement in such cases, including who sought who out, whether there were assurances of long term employment, how long the employee remained in the new position (the inducement lessening with the longevity of the employment), the length of employment with the previous employer and whether the discussions were more persuasive than what would be expected in the normal “courtship” between an employer and a prospective employee.

The court also noted that Miller was hired into a senior executive position with a substantial salary, bonuses, an equity share in restricted stock units (RSUs) and reasonably anticipated long-term employment — all of which also militated in favour of a longer notice/severance period.

In awarding the 14 months, the court provided to Miller, as per my own case at the Supreme Court of Canada in Matthews v. Ocean Nutrition, everything she would have earned if she had been employed an additional 14 months. This included not only salary but the value of her benefits, and the bonus the court concluded she likely would have been awarded had she remained employed, based upon how both she and the company performed over those 14 months. Finally, Miller was entitled to the RSUs which would have vested over that same period.

The case presents a pretty good snapshot of how courts deal with employees being terminated without cause and explodes the usual severance formula myths.