By Jeff Jedras
Many of questions I’ve been hearing from IBM Canada (NYSE: IBM) employees in the wake of the layoffs launched last week by the technology company in Canada and the U.S. have revolved around employment law, and just what IBM’s responsibilities and the rights of laid-off employees are in this sort of situation.
To get some answers, I spoke with a lawyer specializing in labour and employment law at a major Canadian law firm to get some general insight.
The laws and regulations vary by province, so we focused primary on Ontario, where the Employment Standards Act is the main governing legislation. Essentially, the legislation requires employers to provide a minimal notice of layoff, or payment in lieu of notice, and sets minimum floors for severance entitlement.
There are two types of severance to consider: termination pay and severance pay. An employee is entitled to one week of termination pay per year of service, up to 8 weeks. And if an employee has been with the company for five or more years, or the company does more than $2.5 million in business, or if the layoff is 50 people or more, they are also entitled to one week of severance pay per year of service, up to 26 weeks.
Termination pay is intended to give you time to find another position, while severance is compensation for time served. It’s not an either/or, if you qualify for both you get both, and it would seem that in the case of the IBM Canada layoffs both apply.
These are just legally-mandated minimums; individual employment contracts may require higher payouts, so check your employment contract. These minimums also cannot be contacted away.
I heard from one person that in the past, IBM Canada has gone above the legal minimums by offering an additional eight weeks for 10+ years of service, and they asked if this created a precedent. The lawyer told me that’s possible; if a policy had been formally articulated or enacted in that regard, it could be legally binding despite individual employment contract language.
Another question I’ve heard is if years served with a company that was acquired by IBM count towards calculating years of service. The answer there is yes, those years served do count for severance entitlement, and that’s not something that can be legally contracted or negotiated away.
Finally, a concern I’ve heard is how applying for or being offered an internal position effects one’s entitlement to a severance package. I’m told it depends on how it’s framed: is it a choice (take the job or the package), or an ultimatum (take the new position or no package).
Essentially, an employer cannot unilaterally change a fundamental term of the employment agreement, ie. a salary cut of ten per cent or more, or a location change of 100 km. or more. If the position being offered is not comparable in location or salary, and it’s presented as take it or you lose severance, then a legal case could be made for constructive dismissal. The choice can be offered, but if it’s turned down it doesn’t mean the right to severance is waived. If it is a comparable position though, than the situation is different.
So, I hope this provides some general insight into some of your concerns around employment law. Unfortunately, in this environment it’s an area all IT employees would we wise to educate themselves to.
Watch the CDN Web site Tuesday morning for a more complete article on the labour law surrounding IT layoffs. Read more about IT layoffs and severance rights at CDN's Web site. And remember, these are just general guidelines and observations. If you have legal questions or concerns you’d be best advised to speak to a lawyer yourself, and get educated about your rights.