Section 64(1)(b) of the Employment Standards Act, 2000 (“ESA”) provides that a terminated employee with 5 or more years of service is entitled to statutory severance pay (in addition to notice or pay in lieu of notice) if the employer has a payroll of $2.5 million or more.
Up until a 2014 decision of the Ontario Superior Court of Justice called Pacquette v. Quadraspec Inc. (“Pacquette”), typically only an employer’s Ontario payroll was considered in determining whether that $2.5 million threshold was met. This was because section 3 of the ESA specifies that the ESA applies to employees who work in Ontario (or whose work outside Ontario is a continuation of work performed in Ontario).
The 2014 decision of Pacquette changed things.
In Pacquette, the Court determined that an employer with operations in Ontario and Quebec had to consider the payroll in both provinces in determining whether it was obligated to pay ESA severance pay. The decision did not consider whether section 3 of the ESA limited the analysis to Ontario payroll only.
However, in a decision before Vice-Chair Gita Anand that was released at the end of December 2018, the Ontario Labour Relations Board (“OLRB”) reverted to the pre-Paquette line of reasoning. In this case, the employer (which operated in Ontario) was a subsidiary of a larger global corporation. An Employment Standards Officer (“ESO”) ruled that a terminated Ontario employee was not entitled to ESA severance pay because the employer’s Ontario payroll was less than $2.5 million. The employee applied for a review of that decision, relying on Paquette, but the OLRB upheld the ESO’s decision finding that:
- The facts of Paquette are distinguishable.
- The Court in Paquette failed to address the interaction of section 3 of the ESA (limiting the applicability of the ESA to employees who work in Ontario or whose work outside of Ontario is a continuation of work performed inside Ontario).
- There is no reason to depart from the pre-Paquette line of cases.
If you are an Ontario employer and unsure of your obligation to pay ESA severance pay to a terminated employee, please contact us.