When an employer terminates an employee’s job without cause, it will generally be required to either provide notice or termination pay in lieu of notice. Depending on the length of employment and the size of the employer, the employee may also be entitled to severance pay.

In accordance with section 64 of the Employment Standards Act (the “ESA”), employees are entitled to severance pay if they have been employed for at least 5 years, and they are one of 50 or more employees to have been terminated over a six-month period, or the employer has a payroll of $2.5 million or more.

Whether employers have the requisite level of payroll to be required to pay severance pay to its employees was historically assessed with regard to the employer’s Ontario payroll only, even where the employer operated on a national or international capacity.

The Divisional Court, on appeal from a decision of the Ontario Labour Relations Board (OLRB), in Hawkes v. Max Aicher (North America) Limited (Hawkes), recently held that when calculating an employers’ payroll, for the purpose of determining employee’s entitlement to severance pay, the global payroll of the employer must be taken into account.

This overturned the previous decision of the OLRB in Hawkes.

Section 64(2) of the Employment Standards Act (ESA)indicates how payroll is to be calculated to determine if an employer meets the $2.5 million threshold to be required to pay severance to certain employees upon termination of their employment. Although s. 64(2) does not itself restrict the calculation of the employer’s payroll to its operations in Ontario, the OLRB held in Hawkes, that when read in conjunction with s. 3(1) of the ESA, s.64(2) is restricted to an employer’s payroll in Ontario.

Section 3(1) of the ESA reads as follows:

To whom Act applies

3 (1) Subject to subsections (2) to (5), the employment standards set out in this Act apply with respect to an employee and his or her employer if,

(a) the employee’s work is to be performed in Ontario; or

(b) the employee’s work is to be performed in Ontario and outside Ontario but the work performed outside Ontario is a continuation of work performed in Ontario.  2000, c. 41, s. 3 (1).

The OLRB held that, since the legislature limited the applicability of the employment standards in the ESA, to employees whose work was performed in Ontario or whose work is a continuation of work performed in Ontario, there must also be an intention to limit the payroll calculation to payroll in Ontario, for the purpose of severance. However, the Divisional Court overturned this finding, and held instead that, when interpreting a statute, the inclusion of words of limitation in one part of the act and not in another, such as the inclusion of the words “in Ontario”, is seen as deliberate and meaningful.

The Divisional Court further held that there is no jurisdictional hurdle for the Province of Ontario to legislate that an assessment of an employer’s ability to pay severance should consider the overall size of the employer, not just its size in Ontario.

Accordingly, the Divisional Court allowed the applicant’s appeal in Hawkes and remitted the matter back to the OLRB for a determination of all remaining issues, directing that the OLRB must take into account that the calculation of payroll, for the purpose of severance, is not limited to Ontario or Canadian payroll.

The field of employment law is constantly evolving. It is important to consult an employment lawyer to help determine your rights upon termination. As lawyers with expertise in this area, we advise our clients often on their entitlements under the ESA and at common law, taking into account the most up to date state of the law.

You may contact us at any time for assistance.