Is Your Ex Entitled to Your Severance Package in Ontario?

After years of hard work, your company is laying you off. You’re upset and frustrated, but at least you’ll be getting severance pay. What if you’re going through a divorce around the same time – does your ex get to keep any part of your Ontario severance package? Read on to learn about laws in Ontario regarding severance pay, divorce, and property.

Divorce in Ontario: Some Important Definitions

In Ontario, the courts recognize the equal contributions of each part to a marriage when it ends.

Under Ontario’s laws, the value of any property that was acquired by a spouse during the marriage and still exists at the time of separation must be divided equally between the spouses. Furthermore, the increase in the value of a property owned by one of the spouses at the date of the marriage must also be shared.

It’s important to note that these laws only apply to couples who are legally married. They don’t apply to couples who live in a common-law relationship (meaning they live together as a couple but have never been legally married).

What about Severance Pay?

The term “severance pay” refers to compensation paid to an employee whose employment is “severed.” “Severed” employment means that the employee loses his or her job under a certain set of circumstances.

For example, when a company has to let an employee go because it’s going through bankruptcy, the employee would be entitled to severance. Constructive dismissal (when the employer changes the terms of the employment without the worker’s consent and gives the worker the option of quitting or being fired in response) is another situation in which an employee would receive severance pay. And if a firm lays off an employee for a period of 35 weeks or more over the course of 52 consecutive weeks, he or she should receive severance pay.

Whether your spouse is legally entitled to receive your severance pay as a result of your divorce depends on a few factors. A 2012 Ontario court case set an important legal precedent about severance pay and distribution of property upon divorce.

Dembeck v. Wright

Ella Dembeck and Terence Wright married at the end of 1998. At the time of the marriage, Wright worked for a firm which was later acquired by the multinational firm Unilever.

Over the next nine years, Wright rose through the ranks to obtain a senior position within Unilever. In April 2007, Unilever terminated Wright. He accepted a severance package and payout of his pension. The total severance package was $190,000.

Three days after Wright’s termination, Dembeck and Wright separated. The couple went to court to distribute their marital property. Wright requested that the judge deduct over $35,000 (eight weeks’ pay under Ontario’s Employment Standards Act, known as the ESA). The judge granted his request.

Dembeck appealed the judge’s decision. Her lawyers argued that Wright shouldn’t have received that deduction because he didn’t own that property until Unilever fired him, right before the couple separated.

An appeals court accepted part of Dembeck’s argument. The court ruled that the trial judge erred. The severance package wasn’t property at the date of the marriage because Wright had no entitlement to it until he was fired (shortly before the couple’s separation). Moreover, the trial judge should not have concluded that the husband’s severance pay under the ESA was his property at the date of the marriage. If something isn’t property when the parties marry, the courts can’t reclassify it as property retroactively, even if an event such as termination causes the property in question to become a “sure thing.”

Turn to a Divorce Law Expert with Questions about Property Division

If you’re getting a divorce and have questions about how Ontario’s divorce courts define marital property, you need to speak to an experienced divorce lawyer. Divorce law experts are familiar with the latest court rulings and fight for your rights.

Fine & Associates Professional Corporation is a well-respected Toronto Law Firm that prides itself on providing quality personal service and favourable outcomes in Family Law and Divorce Law.

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