The calendar has now changed over to 2015, and with the New Year
comes an interesting legal situation for certain employers.
Most employees in Canada are paid biweekly. However, years
do not divide perfectly into biweekly segments. Once every 13
years, an employee paid on a biweekly basis will receive 27
paycheques, rather than 26 (an "extra paycheque
In 2015 employees who are paid biweekly and are scheduled to
receive paycheques on Wednesday, January 1, will receive this extra
This raises a conundrum for employers with salaried employees:
should they maintain the paycheque of the employee at the same
level (resulting in additional pay to employees for the extra
paycheque year) or can they reduce the gross amount of each
paycheque so that the same annual salary is ultimately reached?
Recalculating the same annual salary over 27 paycheques as
opposed to 26 leads to a reduction in the gross wages paid per
paycheque of roughly 3.7%. Maintaining the gross per
paycheque salary results in a similar sized bonus to the
An employer looking to deal with the extra paycheque year should
refer first and foremost to the overriding maxim of employment law
– look at the contract. If a contract stipulates what
an employee is to be paid weekly or per biweekly period, an
employer would be in breach of contract if it were to reduce the
gross wages per paycheque.
If an employee's contract specifically stipulates that they
are to be paid a set gross sum annually, then the employer may be
able to reduce the per paycheque gross pay for an extra paycheque
year without breaching the contract.
If there is no written contract, then the terms of the
employment contract have to be determined by practice. In
such a case, the employee's employment contact would likely be
considered to be that the employee will receive the established pay
amount every bi-weekly pay period. Reducing it would likely
be considered a breach of the contract.
If an employer plans to reduce an employee's biweekly pay so
as to avoid paying more than the employee's annual salary, we
recommend that the employee be given advance notice.
The Ontario Labour Relations Board addressed an analogous
Rowell v Sudbury Racetrack Slots. In Rowell, the employer
changed payroll practices mid-year, resulting in an adjustment of
an employee's gross pay per paycheque. Moreover, the
changes resulted in the final paycheque being delivered several
days after the end of the service year. The employee argued that as
a result of the change he had not received what was guaranteed to
him under the contract for that time period.
The Board found that the change did not contravene the
Employment Standards Act or the employment contract, since the
employee still received the wage entitlement set out in the
employment contract. The contract only stipulated the salary
that would accrue on an annual basis, and not the manner in which
it was to be paid out. In fact, the change resulted in the
employee being paid more than his annual salary for the particular
Despite the employer's success, Rowell highlights the risks
faced by employers dealing with the extra paycheque year. If
an employee believes the employer has breached the contract by
reducing the biweekly pay to even the pay out on an annual basis,
he or she may bring a complaint to the Ministry of Labour under the
Employment Standards Act, 2000. The complaint would allege
that the employee was not paid wages that were earned.
Such a complaint comes at no risk to the employee and can be
filed without severing the employment relationship. The
success of a complaint would of course be specific to the
particular relationship and any applicable contractual
language. In our view, the Ministry of Labour would look
skeptically at any scheme which appears to reduce the wages paid to
an employee under a contract.
This past year has been marked with significant changes to employment legislation, and watershed decisions that will affect employers for years to come. We've designed this year's conference to deliver a practical and digestible review of what you need to know to manage your employees effectively.
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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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