HomeEmploymentCompensatory Indemnity (Explained: All You Need To Know)

Compensatory Indemnity (Explained: All You Need To Know)

Under Quebec labour laws, a compensatory indemnity refers to an amount of money employers pay employees when terminating the employment contract.

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What Is A Compensatory Indemnity

A compensatory indemnity in Quebec labour laws refers to an amount of money employers are required to pay employees to terminate their employment contract instead of advance notice.

In fact, employers in Quebec are required by law to provide advance notice to their employees when they are looking to put an end to the person’s employment contract.

For instance, under the Labour Standards Act in Quebec, an employee having between 1 and 5 years seniority must be given a two weeks advance notice.

However, instead of advance notice, an employer can choose to pay an employee a compensatory indemnity equivalent to the employee’s regular wages for the advance notice period.

For example, if Mary was employed for three years and her employer decides to terminate her employment contract, her employer must give her a two weeks advance notice or terminate her immediately by giving her a compensatory indemnity equivalent to two weeks of her regular wages.

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How Is Compensatory Indemnity Determined

Under the Quebec Labour Standards Act, the compensatory indemnity is paid at the time the employment contract is terminated or from the time the employee is laid off.

The compensatory indemnity is calculated by taking the employee’s regular pay, excluding overtime, for the period equal to the advance notice period or the period remaining to which the employee was entitled to.

For example, if John is entitled to a two weeks advance notice and he is terminated on July 1st, the compensatory indemnity should cover the following two weeks.

Alternatively, if John is notified of his termination and works for one week, the employer will then have to pay the remaining one week as compensatory indemnity.

Employees that earn all or part of their wages by commission will be entitled to a compensatory indemnity equivalent to the average of their weekly wage calculated using the three months preceding the termination of the employment contract.

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Injury For Insufficient Notice

Employers are required to observe the requirements of the Quebec Labour Standards and Civil Code of Quebec when terminating an employment contract.

In some cases, employers may be exposed to liability if they fail to provide their employees with sufficient advance notice or cause injuries to the employee as a result of the insufficient notice.

Article 2092 of the Civil Code of Quebec states that “the employee may not renounce his right to obtain an indemnity for any injury he suffers where insufficient notice of termination is given or where the manner of resiliation is abusive.”

In other words, the employee cannot be forced to renounce to injuries suffered as a result of the employer’s failure to respect the legal requirements when terminating a contract of employment.

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Compensatory Indemnity vs Advance Notice

What is the difference between compensatory indemnity and advance notice?

A compensatory indemnity is an amount that an employer can pay an employee to terminate the employee’s employment contract without giving any advance notice or giving notice for a period less than required by law.

In other words, your employer can financially compensate you to terminate your employment contract by letting you go without notice or with short notice.

On the other hand, and advance notice is when an employer or employee notifies the other that it is looking to put an end to an employment contract.

Both employers and employees are required to notify the other that they intend to terminate the employment contract (although there are some exceptions).

The advance notice is therefore the formal notification that one party is ending the contract of employment effective as of a certain date.

Both a compensatory indemnity and advance notice relating to the termination of an employment contract in Quebec.

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So there you have it folks!

What is a compensatory indemnity in Quebec labour laws?

In a nutshell, a compensatory indemnity is a financial compensation employers can pay to employees instead of giving them advance notice to terminate their contract of employment.

Typically, it’s the employer that is required to pay the compensatory indemnity to the employee and not the other way around.

When employers give insufficient advance notice or no advance notice at all, they can substitute that for a compensatory indemnity which is financial compensation to the employee.

If you are dealing with the termination of an employment contract or you need to assess your legal rights and obligations, employers and employees should consult with a qualified employment lawyer.

Good luck!

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