As a result of subsection 64(1) of the Ontario Employment
Standards Act, 2000, certain circumstances of a dismissal
trigger an obligation on the employer to provide an employee with
severance pay. The most common threshold test is that an employee
must have at least five years of service at the end of the
statutory notice period and the employer must have an annual
payroll of at least $2.5 million.
The common interpretation of this subsection, one which has been
consistently endorsed by the Ontario Ministry of Labour and the
Ontario Labour Relations Board, is that only the payroll of the
employer arising out of its operations in Ontario shall be included
in the calculation of the employer's payroll for the purposes
of s. 64(1). The rationale behind this analysis is that the
Province of Ontario only has the authority to make legislation
pertaining to the operations of businesses within Ontario.
In a recent French-language decision, Paquette v Quadraspec Inc., the
Ontario Superior Court has determined that all of an employer's
payroll, both inside of Ontario and outside of Ontario, shall be
included in the determination as to whether the severance pay
threshold has been met. This decision, if followed in other
decisions and most importantly if followed by the Ministry of
Labour and the Ontario Labour Relations Board, could have far
reaching implications for Ontario employers whose operations spread
into other provinces within Canada.
In this case, an Ontario employee was dismissed without cause
after more than 26 years of employment. A written employment
contract governed his employment. That contract, among other
things, purported to determine his entitlement to payment to him in
the event of termination of his employment without cause. The
termination clause was found to violate the Employment
Standards Act, 2000. While it is not our intention to examine
this portion of the decision at length, it is a useful case to
demonstrate the importance of careful contract drafting. An
effective and enforceable termination clause may well have averted
a trial in this case.
The employer's annual payroll in Ontario was less than $1.5
million. In Quebec, the same employer's annual payroll was more
than $3 million. Combined, the annual payroll more than exceeded
the severance pay threshold in the Employment Standards Act,
2000. Looking at the Ontario payroll alone, the annual payroll
was more than $1 million short of that threshold.
Ultimately, the termination clause was found to be void for
reasons unrelated to the determination of the severance pay issue.
Had the contract been drafted in a manner that was enforceable,
however, the severance pay threshold would have been key to a
determination of whether the employer had complied with the
contract. In other cases where an employee brings a claim to the
Ministry of Labour under the Act, this is a critical determination
as to the quantum of an employer's liability. A shift in the
interpretation of section 64(1) could give rise to significant
future liability on cases where a dismissal has already taken
place, without severance pay, and could significantly alter an
employer's decision about whether and how to proceed with a
dismissal of a long service employee.
We will monitor this decision in respect of any future appeals,
but also to gauge the application of the decision in future MOL and
OLRB proceedings, as well as similar wrongful dismissal actions in
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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