What is a Terminated Employee Entitled To? Compensation During the Notice Period
Employees often have several different types of compensation, and their entitlement to these various forms of compensation after they are terminated can be contentious.
Entitlements During the Statutory Notice Period
When an employee is terminated without cause – which they almost always are – typically they are entitled to be made whole during their notice period. This is especially the case when we are considering their entitlements during any period of statutory notice. For example, employees accrue paid vacation and are entitled to full benefits coverage during their statutory notice period. Their compensation during the statutory notice period generally cannot legally differ from their compensation during their employment.
Entitlements During the Common Law Notice Period
Entitlements can become a little more fuzzy during any period of notice that is beyond the statutory entitlement. But, as a starting point, terminated employees will continue to be entitled to be made whole, in other words, receive the same compensation as they would have if they actually were working. Legally, an employer can give an employee working notice as opposed to pay in lieu of notice. If you think about these two things as legally equivalent, it makes sense that an employee would be entitled to all of their normal compensation during a notice period.
Compensation Plans
Employers can restrict an employee’s entitlement to various forms of compensation during the notice period. To do this, they need very clearly worded policies, and the policies will also have to have been brought to the employee’s attention. Courts have used many creative arguments to find restrictive bonus plans unenforceable and consequently find employees entitled to their bonus compensation during a notice period.
Take Aways
If you are an employee who has been terminated, think about what you might be leaving on the table if your employer is not providing you with your total compensation during the notice period.
If you are an employer paying various forms of compensation, it’s a good idea to have a lawyer review your compensation plan language at least annually in order to ensure that it will be enforceable if you have to rely on it.
If you have questions about notice compensation, please get in touch.
