The recent decision of Justice Kane in Paquette v.
Quadraspec Inc., 2014 ONCS 2431
("Paquette") has arguably changed employees'
entitlement to severance pay on the termination of
Severance pay is distinct from termination pay and is meant to
award long-term employees for their service and to compensate them
for their loss of seniority and the value of their
employer-specific skills. An employee entitled to severance pay
will receive one weeks' wages per year of service, prorated for
partial years of service, and capped to a maximum of 26 weeks.
Pursuant to the Ontario Employment Standards Act, 2000
(the "ESA"), an individual who was employed in
Ontario is generally entitled to severance pay on the termination
of employment when he or she has at least five years' service
with an employer that has a payroll of at least $2.5 million.
Although section 64 of the ESA provides some guidance
as to how to calculate an employer's payroll, it is silent as
to the geographic scope of the employer's payroll that ought to
be considered. Prior to Paquette, courts in Ontario had interpreted
section 64 such that only an employer's Ontario-based payroll
was relevant to the consideration of whether an employee was
entitled to severance pay.
As such, with the law largely settled, in cases where an employer
had a payroll of less than $2.5 million in Ontario, a dismissed
employee would not be entitled to severance pay even if the
employer had a payroll of greater than $2.5 million across
Paquette concerned just such an employer. The employer,
Quadraspec, operated in both Ontario and Quebec with a combined
payroll of $2.7 million, although its Ontario-based payroll was
less than $2.5 million. Quadraspec dismissed its employee Alain
Paquette, who was employed in Ontario. At issue was whether this
employee was entitled to severance pay.
Justice Kane distinguished the prior jurisprudence and
determined that Mr. Paquette was entitled to severance pay based on
the employer's national payroll. Justice Kane considered the
purpose of providing severance pay and applied rules of statutory
interpretation to conclude that the legislature did not intend to
limit the consideration of an employer's payroll to that in
It appears that the Paquette decision will not be appealed, but it
remains to be seen whether it will be followed. However, at least
for the time being, Ontario employers should be aware of the
financial implications of the Paquette decision when making
decisions concerning the dismissal of employees with more than five
Prepared with the kind assistance of articling student Julia
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