Severance Packages in Alberta: What’s Fair?

Losing a job is stressful, and one of the first questions employees in Alberta ask is: Am I entitled to severance pay? For employers, the concern is just as pressing: What is fair, and how much should we pay?

Severance packages in Alberta are governed by both employment standards legislation and the common law. The amount that’s fair often depends on multiple factors — which can be confusing for both sides.

In this article, our Employment Law team at Libra Law breaks down how severance packages work, what factors courts consider, and when to seek legal advice.

What Is Severance Pay?

Severance pay is compensation an employer provides to an employee when their job is terminated without cause. It is meant to provide financial support while the employee searches for new work. Severance is not the same as termination notice or termination pay, though the terms are sometimes used interchangeably. 

Minimum Standards vs. Common Law

Employment Standards Code (Alberta)

Under the Employment Standards Code, employees are entitled to a minimum amount of notice or pay in lieu of notice once they have completed 90 days of continuous service, based on their length of service.

Common Law Severance

“Severance pay” is not required by Alberta’s Employment Standards Code. Instead, it is a common law or contractual concept. It applies:

• If an employee is dismissed without cause, courts often award reasonable notice (or damages in lieu) that can be much more than the statutory minimum termination pay.
• This “severance” is based on factors like age, length of service, character of employment, and availability of similar work in the market (the “Bardal factors”).
• Severance can also arise from the terms of an employment contract or a company policy that promises additional payments.
• Severance may include additional compensation negotiated between the employee and the employer
  

Alberta courts often award employees more generous packages under common law, considering the Bardal factors. Employees may be entitled to up to 24 months of severance, far exceeding the Employment Standards Code minimums.

What’s Considered Fair in Alberta?

There’s no fixed formula, but “fair” usually means compensation that reasonably reflects the time it will take an employee to find comparable work.

For example:

• A younger employee with short service may receive severance pay closer to the statutory minimum.
  
• An older employee with decades of service and a senior role may be entitled to months of severance pay.
  

Employers should also be careful not to pressure employees into signing unfair packages too quickly. Employees, on the other hand, should never assume the first offer is final.

Common Severance Issues

1. Release agreements
   
• Employers often require employees to sign a release waiving future claims.
  
• These agreements should always be reviewed by an employment lawyer.
  
2. Misclassification
   
• Independent contractors may actually be employees entitled to severance.
  
3. Just cause terminations
   
• Employers don’t owe severance if termination is for just cause — but proving cause is a high bar.
  
4. Non-competition clauses
   
• Restrictions in contracts may affect severance negotiations.
  

Why Legal Advice Matters

Both employers and employees benefit from early legal guidance:

• Employees: Ensure you are not leaving money on the table.
  
• Employers: Reduce the risk of wrongful dismissal claims and costly litigation.
  

Our Employment Law services cover severance package reviews, employment contract drafting, and dispute resolution.

You can also explore our Services page to see how employment law intersects with other areas like Business Law and Immigration Law — important if foreign workers are involved.

Related Reading

• Buying a Business That Employs Foreign Workers
• Importance of Corporate Records in Alberta
• Do I Need a Lawyer to Incorporate?
• More insights in our Articles section.
  

Final Thoughts

Severance packages in Alberta are rarely straightforward. What’s “fair” depends on more than just the minimums set out in the Employment Standards Code. Factors like age, role, and length of service can significantly increase what employees are entitled to.

If you’re facing a termination — or you’re an employer preparing a severance package — professional advice is essential. At Libra Law, we ensure your rights are protected and obligations are met.

Book a consultation with our Employment Law team today to review your severance situation.

NOT LEGAL ADVICE. This article is for general informational purposes only and does not constitute legal advice. To obtain advice specific to your situation, please consult a lawyer or qualified professional.