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Know Your Rights: Interpretation of Severance Pay

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Employment Relations Officers Karine Pelletier (left) and Denise Giroux handled the individual and policy grievances.

In 1969, the member began 14 years of service with the Canadian Armed Forces. Upon being released, he was entitled to 50% of his severance pay for having left prior to attaining 20 years in the Armed Forces. Therefore, instead of being paid 14 weeks’ severance, which would have represented one week severance per year of service, he was paid 7 weeks’ severance.

In 1983, the member began work as an engineer in a federal department. With more than 36 years of continuous service, he retired in 2006 at which time he was employed as a Project Manager/Engineer (ENG 05) covered by the Architecture, Engineering and Land Survey (NR) Collective Agreement.

Prior to his retirement, the member received a letter from the department’s compensation advisor informing him that, as of the date of his retirement, he would be entitled to 16 weeks’ severance, representing 30 weeks, minus the period of service for which a severance had already been paid. This announcement came as a surprise as he had anticipated receiving 22 weeks’ severance pay, representing 36 weeks pay minus the 14 weeks’ severance he had been paid upon leaving the Canadian Armed Forces.

In June 2006, the Institute filed both an individual and a policy grievance relating to the interpretation of Article 19 of the collective agreement. In dispute was the manner in which the department interpreted and applied Articles 19.01 and 19.02 of the agreement, particularly as it relates to the calculation of severance upon retirement, and the maximum number of years of continuous employment to 30 years, rather than the maximum amount of severance pay to 30 weeks. In doing so, the employer was paying the member a severance payment which was less than that to which he should be entitled.

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Article 19.01 provides that, on retirement, an employee will be entitled to be paid by way of severance one week’s pay per year of continuous service, to a maximum of 30 weeks’ pay. Article 19.02 further stipulates that “severance benefits payable to an employee under this article shall be reduced by any period of continuous employment in respect of which the employee was already granted severance pay”.

In reading Articles 19.01 and 19.02, an employee will be entitled to count all of his years of continuous service towards his severance payments, but will be deducted severance pay for any period of continuous employment for which an employee has already been paid, as long as such amount does not exceed 30 weeks.

The collective agreement does not provide that the maximum number of years of continuous employment for the purposes of the calculation of severance pay be limited to 30 years. Rather, the agreement reads that the maximum amount of severance benefits payable will be limited to 30 weeks’ pay.

The Institute submitted that the member should be entitled to count his 36 years of continuous employment with the public service, and subtract from that amount the 14 years of continuous employment for which he had already been paid by Canadian Armed Forces. This would result in the payment of 22 weeks’ severance pay, rather than the 16 weeks which the department is alleging is the correct amount to be paid to the member.

The employer’s response to the policy grievance recognized that its method of calculating did not take into account the complete period of continuous employment, but rather used as a starting point the maximum allowed for payment of a severance pay benefit as stipulated in 19.02. The decision confirmed that the collective agreement requires that the benefit be calculated by:

  1. determining the circumstance of complete or partial years of employment
  2. subtracting from the continuous employment any periods for which the employee has already received severance pay
  3. completing the calculations and capping the payments to the set limits outlined in the Collective Agreement (ie. 30 weeks) if applicable.

The employer granted the policy grievance and advised that they would ensure proper application of Articles 19.01 and 19.02 of the NR Collective Agreeement from now on. Treasury Board will be advising the departments shortly.


Publish Date: 12-JUL-2007 03:09 PM