An employee with 5 years service is entitled to one week severance pay for each year of service to a maximum of 26 weeks severance pay under the Employment Standards Act (ESA) IF the employer’s payroll exceeds $ 2.5M.
In 2014, Ontario’s Superior Court of Justice concluded payroll is not limited to Ontario payroll but the Ontario Labour Relations Board has not followed this decision and has subsequently concluded that payroll is limited to Ontario payroll.
When the Ontario government did a comprehensive review of the ESA, I made submissions asking the government to clarify this issue. When I raised it with one of the two people conducting this review he said it was obvious that payroll meant Ontario payroll. In any event, the government decided not to clarify the issue when it made comprehensive changes to the ESA in 2018.
In a June 15, 2021 decision Hawkes v. Max Aicher (North America) Limited, 2021 ONSC 4290 (CanLII), the Ontario’s Superior Court of Justice (Divisional Court) overturned an OLRB decision concluding payroll meant Ontario payroll and upheld the 2014 decision on this issue.
I suspect the appeal courts will need to resolve the issue of whether payroll means Ontario payroll for the purpose of determining eligibility to severance pay under the ESA.
In the meantime, employees working for employers with operations in multiple jurisdictions with a combined payroll in excess of $ 2.5M will be seeking severance pay under the ESA. This is a significant benefit to employees who are unemployed for a short period of time because severance pay must be paid whether or not an employee quickly secures alternative employment. So an employee could be 26 weeks pay richer as a result of this decision.
For over 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416 317-9894 or at [email protected]