In Ontario, a severance package structured as salary continuance is generally treated as ongoing income for the purpose of calculating child and spousal support. If it is paid as a lump sum before the date of separation, it may instead be treated as property and divided, which requires careful legal handling to avoid unfair “double-dipping.”
Losing your job is a highly stressful event, and the complexity only deepens when you are navigating family law obligations. 💼 When a Canadian employer terminates a worker without cause, they typically offer a severance package. The way this severance is structured-either as a single lump-sum payment or as an ongoing salary continuance-drastically alters how it is viewed by the family courts.
Understanding the distinction between income and property is crucial for anyone going through a separation. In Ontario, child support and spousal support are based on your total income line reported to the CRA. However, if your severance is classified as property under the Family Law Act, it becomes subject to the equalization of net family property. We will break down exactly how these different structures impact your legal responsibilities.
Step-by-Step Process in Ontario
Navigating severance issues during a divorce requires a methodical approach. Whether your legal matters are being handled in a local courthouse in Toronto, London, or Sudbury, the Superior Court of Justice generally looks at the same core principles regarding income and property division. 📍
Step 1: Reviewing the Severance Agreement Terms
The first step is to carefully examine the termination letter from your employer. Does the agreement specify that you will remain on the payroll for a set number of months (salary continuance), or does it state you will receive a one-time payout within a few weeks? Salary continuance often means your benefits, pension contributions, and regular tax deductions continue as normal.
Step 2: Updating Your Financial Disclosure
Full financial disclosure is mandatory in Ontario family law. 📝 You must update your Form 13 or Form 13.1 (Financial Statement) to reflect your change in employment. If you are receiving salary continuance, you will list this under your ongoing income. If you received a lump sum prior to your separation date, it must be listed as an asset on the date of valuation.
Step 3: Analysing the Risk of Double-Dipping
Double-dipping occurs when a single financial resource is treated as property and divided during the equalization process, and then later treated as income to calculate spousal support. Courts in Ontario generally try to avoid this unfair outcome. It is possible to negotiate a separation agreement that explicitly shields a divided lump-sum severance from being used again for support calculations.
Step 4: Negotiating Support Adjustments
If your severance (whether lump-sum or continuance) results in an overall drop in your annual income compared to your previous salary, you may need to renegotiate your support terms. 🤝 Most applicants in this province choose to resolve this through mediation or negotiation with a law firm, updating their separation agreement to reflect the temporary income reality.
Step 5: Filing a Motion to Change (If Necessary)
If negotiation fails and your ex-spouse demands support based on your old salary, you may have to file a Motion to Change with the local family court. You will need to demonstrate that the loss of your job and the specific structure of your severance package constitute a material change in your financial circumstances.
How Much Does it Cost in Ontario?
Dealing with severance and support issues involves navigating both employment law and family law. 💰 Here are the typical costs you might encounter:
- Employment Lawyer Consultation: To review the fairness of the severance package itself, expect to pay $300 CAD to $600 CAD for an initial review.
- Family Law Firm Fees: Negotiating a new support agreement usually costs between $2,500 CAD to $5,000 CAD.
- Court Litigation: In Ontario, filing a Motion to Change or any other family law motion is completely free, with no court filing fees, though legal representation for a contested motion can easily exceed $7,500 CAD.
How Long Does the Process Take?
The timeline heavily depends on whether you and your ex-spouse can agree. 📅 A negotiated update to a separation agreement can be finalized in 4 to 8 weeks. If you must go through the Superior Court of Justice to change a support order, it commonly takes 4 to 9 months to reach a resolution.
Frequently Asked Questions (FAQ)
Does salary continuance stop if I find a new job?
In employment law, many salary continuance agreements have a “clawback” or “mitigation” clause, meaning payments drop by 50% or stop entirely when you secure new employment. In family law, your support obligations would then be recalculated based on your new salary.
Is a lump-sum severance considered income for child support?
Generally, yes. Even if paid as a lump sum, the CRA taxes it as income, and the Family Responsibility Office (FRO) and courts usually view it as income for the year it was received for the purposes of the Child Support Guidelines.
Can I hide my severance package from my ex-spouse?
Absolutely not. Hiding financial assets or income changes during a family law proceeding can lead to severe penalties from the court, including having legal costs awarded against you. Full disclosure is a strict legal requirement in Canada.
How does this affect my decision-making responsibility and parenting time?
A change in income or a job loss typically does not directly affect parenting time or decision-making responsibility (formerly known as custody). Family courts evaluate parenting arrangements based solely on the best interests of the child, completely separate from financial disputes.
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