More Ontario employers may face liability for severance pay
after a recent decision cast doubt on the meaning of
"payroll" under the Employment Standards Act,
2000 (the "ESA"). On April 17, 2014, the Ontario
Superior Court of Justice released Paquette v Quadraspec
Inc. ("Paquette"), a French language decision that is largely
inconsistent with previous practice and case law.
Departure from Preceding Practice and Case Law
Where an employer's annual payroll is larger than $2.5
million, an employee with at least five years of service is
entitled to severance pay. At issue in Paquette was
whether or not the court should consider payroll outside of Ontario
when determining the size of an employer's payroll.
Quadraspec's Ontario payroll did not meet the $2.5 million
threshold on its own but, when combined with their Québec
payroll, it did.
Prior to Paquette, the $2.5 million threshold applied
only to Ontario payroll. This view was consistently endorsed by the
Ontario Ministry of Labour and Ontario Labour Relations Board, and
was applied as recently as the 2011 decision of the Ontario
Superior Court of Justice in Altman v Steve's
In Paquette, Justice Paul Kane compared the language in
the ESA to the language in the Pay Equity Act, where
"payroll" is explicitly defined as the "total wages
and salaries paid to employees of the employer in
Ontario [emphasis added]." Justice Kane found that if
a similar intention had been present in drafting the ESA
provisions, Parliament would have expressed such an intent
Impact on Employer Obligations
The implications of this reasoning could be significant for
employers in Ontario with operations elsewhere. If payroll is not
restricted to Ontario, where does the new boundary lie? Of
particular concern is the potential impact on employers who not
only have operations in other provinces but also have international
operations. A large company with only one employee in Ontario could
now face severance obligations if they terminate that employee.
This could translate to an unexpected financial obligation of up to
26 weeks of pay (one week's worth for every year of
employment), which may amount to a significant figure.
Further, employers may have to think twice when applying the
terms of employment agreements that restrict entitlements on
termination to ESA minimums. Employers may lose the benefit of
these agreements if they fail to pay severance pay because their
Ontario payroll is less than $2.5 million, but the threshold is met
when national or international payroll is included.
Given that the decision deviates from established jurisprudence
and practice, the issue will likely need to be dealt with on
appeal. We will also need to see whether the position of the
Ontario Ministry of Labour and the Labour Relations Board will
change as a result of this decision. In the interim, it will be
important for employers to track the progression of the case.
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
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.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).