Many companies rehire employees who have worked for them in the past. Typically, they have a “Re-employment Policy” which details the privileges that will be re-instated (i.e. benefits, vacation, and seniority). However, they may not have considered the obligation regarding severance pay should the renewed relationship not work out.
The company is required to pay severance for broken periods of service when they add up to five (5) years or more (if severance is applicable). For example, if an employee had worked previously for the company for 2 years, resigned and was away for 2 years, rehired and worked for another 4 years and then the employee is terminated, he/she would be entitled to severance based on the combined service – therefore, 6 years (the 2 years previously employed plus the current 4 years of employment). Notice would just be required on the current employment period of 4 years (therefore, 4 weeks of working notice or pay). Under the Employment Standards Act, 2000 minimums, the total termination pay would be four (4) weeks of notice and six (6) weeks’ severance (if applicable). In addition, it doesn’t matter how long the break in service is or the reason the employee left initially (quit or termination). So rehiring an employee can mean taking on a potential severance liability.
Some suggestions when considering an employee for re-hire include:
- Insuring that the employee’s qualifications meet the requirements of the vacant position;
- Confirming that he/she had been in good standing at the time of departure;
- Reviewing the privileges you may consider reinstating (benefits, vacation, etc.) as there is no legal obligation to do so;
- Clearly outlining all terms in the new offer letter.