In Taylor v British Columbia ( 2026 BCSC 1047 ) Justice Leblanc had a situation where a civil servant who was dismissed without cause was entitled to 24 months severance. This is what the Judge said on this issue
[182] It is not disputed that that defendant withheld the plaintiff’s severance payment for 15 months.
[183] Paragraph 4 of Employment Termination Standards, B.C. Reg 379/97 [“Termination Regulation”] provides that if an employer terminates employment without cause and excuses the employee from performing the employee’s duties under s. 3(1)(d), the employer, in its sole discretion, may provide the employee with severance. The severance must be in the form of periodic payments unless the employer, in its sole discretion, considers a lump payment to be more appropriate.
[184] In this case, the defendant exercised its discretion to make a lump sum payment. The amount of severance is established pursuant the Regulation and that amount is not in dispute.
[185] The defendant presented the plaintiff with release paperwork (the “Severance Release”) that it stated had to be signed and returned to receive the severance payment. In the ensuing months, the plaintiff sought to regain her employment which the defendant communicated was not available. The plaintiff in turn communicated that she would not sign the Severance Release. Notwithstanding these positions, it was not available to the defendant to withhold the plaintiff’s severance once it had exercised its absolute discretion to make a lump sum payment.
[186] Once the employer has exercised its discretion to pay severance, the Regulation does not prescribe terms that can attach to the payment of severance, other than the amount of the payment.
[187] Accordingly, I find the defendant breached the terms of the Termination Regulation when it asked the plaintiff to release the defendant from liability in exchange for payment of severance. This was a breach of the contractual duty owed to the plaintiff.
[188] Due to this contractual breach, the plaintiff’s source of income was abruptly stopped, and the plaintiff was forced to look for alternative income sources. The plaintiff exercised her pension early, which she testified had a negative impact on its value. While the plaintiff has not quantified the negative impact, I do accept the plaintiff’s evidence that she would not have relied on her pension at that time had she received the severance payment when she was terminated.
To punish this behaviour, the Judge awarded punitive damages of $200,000 . There were two matters that led to this award, by here I am only setting out what the Judge said about the delayed payment issue.
[226] I also find the defendant’s withholding of severance payments, without legal explanation, to be worthy of punishment that has not been compensated for in the aggravated damages award I have made. The defendant acted in a high-handed and arbitrary way.
[228] Further, while the defendant exercised its discretion to pay the plaintiff a lump sum, it was not then open to withhold the payment in exchange for the plaintiff agreeing not to commence legal action against it. Abruptly terminating the plaintiff and holding her severance payment ransom for a release of liability was high-handed, malicious, and arbitrary. It was also contrary to the statutory provisions on which the defendant sought to rely to limit the amount of severance payable.
My Comments:
It seems that this case could also be applicable where an employer refuses to pay a terminated employee certain amounts which are not in dispute in order to extract a release.
For instance, where an employment contract calls for a fixed termination payment but there is a dispute about an outstanding bonus earned prior to the termination, can the employer get into trouble if they refuse to pay the contractual termination payment without also resolving the bonus issue?
What about a situation where there is no dispute that the terminated employee is entitled to $10,000 in outstanding vacation pay but the parties cannot agree on what reasonable notice the employee is entitled to? Can the employer refuse to pay the vacation pay unless the entire dispute is resolved?
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