Severance Pay Calculation Under Employment Standards Act based on Ontario Payroll says OLRB

Feb 14, 2019

Under section 64 of the Employment Standards Act (“ESA”), an employee with five years’ service is entitled to one week severance pay for each year of service (to a maximum of 26 weeks) in addition to notice of termination if “the employer has a payroll of $2.5 million or more.”

Decision Counting Non-Ontario Payroll

Since a 2014 decision of the Ontario Superior Court, Paquette v. Quadraspec Inc.,  there has been uncertainty as to whether the word payroll means Ontario payroll or the employer’s total payroll in all jurisdictions. In this decision, the court considered the employer’s Canadian payroll. This meant the employee was entitled to severance pay.

Decision Not Counting Non-Ontario Payroll

In a recent decision, Doug Hawkes v. Max Aicher (North America) Limited, the Ontario Labour Relations Board (the “OLRB”)  refused to follow this 2014 decision and followed earlier decisions and concluded that the word “payroll” in the severance pay provision of the ESA means Ontario payroll and not the employer’s global payroll. This meant the employee was not entitled to severance pay.

A Possible Solution

In 2015, after and because of the uncertainty created by the Pacquette decision, I recommended that the definition of payroll be clarified with an amendment to the ESA to the Special Advisors who were reviewing the Employment Standards Act. No such amendment was included in the recent changes to the ESA (i.e., Bills 148 or 47).

The Current State of the Law

Because the Pacquette and Hawkes decisions are at odds, it is difficult for employment lawyers to advise on this issue other than to say the OLRB has one interpretation of payroll, and the Ontario Superior Court has conflicting decisions on this issue.

If your organization’s payroll in Ontario is under $ 2.5 M but you have payroll in other jurisdictions that would bring your total payroll over $ 2.5M, then consider calling an Ontario employment lawyer to find out the current state of the law on this issue.

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

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