Online severance calculators are not a substitute for appropriately tailored legal advice

While technocrats sing the siren songs that the arrival of algorithms and artificial intelligence can solve our legal problems, in the world of litigation and employment law, online severance calculators may give terminated employee’s a false appreciation of their common law entitlements upon termination. This is problematic because terminated employees, after punching their data into an online severance calculator, might conclude that the employer’s initial offer is more reasonable than it really is, and sign the offer back without consulting a lawyer.

While Ontario courts will apply the factors set out in Bardal v. Globe & Mail Ltd. to determine an appropriate period of reasonable notice at common law (including character of employment, length of service, the employee’s age, and the availability of similar employment), it is important to recognize that these are not the only factors that may apply. Some employment lawyers have recognized as many as 120 factors that can have an impact on wrongful dismissal damages.

For example, if a 35-year-old sales or marketing employee with 5 years of service is terminated on a without-cause basis, most online severance calculators might “calculate” that the reasonable notice period range is 6 to 8 months. Yet, this might be wholly false. Let us assume the employer made an offer of 4 months pay-in-lieu-of-notice and see how three different individuals might respond to the same offer.

Individual A receives the 4-month offer but does not consult a lawyer. Their friend or relative told them that “one month” per year of service is standard. As they worked five years, why engage an employment lawyer to quibble over one month? Individual A confidently signs back the first offer, not realizing that one-month-per-year-of-service is not the law, as many types of employees are entitled to much more than one month per year of service.

Individual B receives the same 4-month offer but consults several online legal blogs and online severance calculators. The online severance calculators show that B is entitled to 6 to 8 months notice. B decides to negotiate his or her own severance, makes a counteroffer for 6 months, and ends up settling for 5 months. Now that releases have been signed, there is nothing A or B can do about under-settling their cases.

Individual C receives the same offer but takes a different approach and hires a litigation and employment lawyer. C’s lawyer reviews the employment contract and notices that there is a separate confidentiality agreement with a ‘non-compete clause’. The non-compete clause prohibits C’s ability to work for a competing business for 12 months following termination. C does not recall any severance calculator asking about a non-compete, but C recognized that a severance calculator is a tool and not a substitute for legal advice.

C’s lawyer advises that there is case law that states that the existence of a non-compete clause in an employment contract increases the period of reasonable notice. Even if a non-compete clause is unenforceable, the courts recognize that when an employee commences employment the employee might believe that the non-compete is enforceable and that his or her ability to obtain re-employment will be greatly restricted for 12 months following termination. C’s lawyer advises they seek 9-12 months. Let’s assume C settles for 10 months.

The online severance calculators that A and B used might have allowed them to put in a “dollar figure” as an alternative to how many “months” were offered. That dollar figure might only request “base salary” be entered, but not values for bonus, restricted stock units, deferred profit-sharing plan contributions, pension contributions, commissions, benefits, or even parking where it is a taxable benefit. Often, these other aspects of remuneration can be more than base salary when applicable.

Although A, B, and C all worked for the same employer, were hired at the same time and were the same age, had they all consulted a severance calculator and neglected to seek legal advice, they might have all settled their severances within a month’s notice of each other and left a substantial sum of severance money on the table. Instead, C is the unequivocal winner in this example. Because C retained a lawyer, C was able to obtain triple the settlement of the others once we consider doubling the notice of A or B as well as taking into account all aspects of remuneration as opposed to only “base salary”.

This blog does not constitute legal advice and is not intended to be a summary of the law relating to wrongful dismissal, but it is intended to show that online severance calculators are not a substitute for appropriately tailored legal advice. Every situation must be assessed independently. If you have been wrongfully dismissed or are seeking advice relating to a severance package being offered, please do not hesitate to contact us for a consultation: info@cuttresslaw.com