Although brevity is almost always better than wordiness, it would have been better if the legislature had used a few more words in the severance pay provisions of Ontario’s Employment Standards Act, 2000. Under the ESA, employers with a payroll of at least $2.5 million are required to provide statutory severance pay when dismissing an employee with 5 or more years of service. Unfortunately the provision is silent as to whether payroll within Ontario or, rather, global payroll is determinative. It would have been helpful if the drafters had indicated where, exactly, to draw the line.
The pendulum has swung back and forth on this issue. Most recently, the Ontario Labour Relations Board (“OLRB”) held that Ontario-only payroll is determinative, diverging from the direction previously taken by the Ontario Superior Court of Justice. We outline the key cases to date below.
Despite the OLRB’s decision, this area remains unsettled. Further, it is possible that different forums will continue to take different views as to the jurisdictions relevant to the payroll calculation. Except in the clearest of cases, employers should obtain legal advice before deciding to not provide severance pay on the basis that their payroll is less than the $2.5 million threshold.
As we explained in an earlier blog post, in 2011, the Superior Court in Altman v. Steve’s Music Store Inc held that severance pay was not owed despite the employer’s global payroll of over $2.5 million. The court determined that payroll was to be measured exclusively within Ontario and not the employer’s overall payroll across multiple jurisdictions.
However, in the 2014 decision in Paquette c. Quadraspec Inc., the Superior Court decided that the approach taken in Altman was incorrect. Instead, the court held that the employer’s payroll in both Ontario and Quebec was relevant in calculating payroll for the purpose of severance pay entitlement. The court was of the view that the legislature intended to identify employers whose payroll was at least $2.5 million in all of its jurisdictions. Justice Kane reasoned that if the legislators had intended to limit the ESA severance pay threshold to an employer’s Ontario payroll, they would have been more specific.
OLRB determines Ontario-only payroll should be considered
A recent OLRB decision reverts back to the Altman approach. In Hawkes v. Max Aicher (North America) Ltd. (2018), the OLRB considered Paquette but was not persuaded that a departure from prior jurisprudence was warranted. First, it deemed the facts from Paquette to be factually distinct from the applicant’s position. It also asserted that Paquette did not address the interaction of section 3(1) of the ESA, namely the scope of the ESA’s application, and section 64 (the severance pay provision) and referenced the Ontario Divisional Court’s 1998 decision in Singer v Tullett & Tokyo Forex, where this interaction was expressly considered. The OLRB also agreed with jurisprudence which held that the Ontario legislature had no authority to legislate with a view to the payroll of other provinces.
In Hawkes, the applicant was employed by Max Aicher (North America) Limited (“MANA”), a corporation operating in Ontario. MANA was a wholly owned subsidiary of Max Aicher GmbH & Co KG (“MAG”), headquartered in Germany. The applicant’s entitlement to severance pay was contested, as MANA took the position that it did not have a payroll of $2.5 million or more as per section 64(2)(a)(b) of the ESA.
The OLRB found that the applicant was employed in Ontario by a company operating in Ontario. More significantly, the OLRB found that MAG’s global payroll was not relevant for the purposes of calculating payroll under section 64 of the ESA. The calculation of payroll for the determination of entitlement to severance pay was therefore restricted to MANA’s Ontario payroll.
- Many thanks to Massimo Orsini for his assistance with this article.