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Ontario Small Claims Court Makes Big Decision

An employer ordered by the Ontario Small Claims Court to pay severance despite having provided their former employee a total of sixty-two (62) weeks working notice and ex gratia payment upon termination. The court found that although the sixty-two (62) weeks exceeded the employee’s cumulative entitlements to severance and notice under the Employment Standards Act (“ESA”), severance cannot be offset against notice, requiring the employer to make an additional payment to satisfy their separate severance requirement under the ESA.

The Facts

The employee in this dispute had been working as a legal assistant with the defendant employer for twenty-six (26) years. Upon termination without cause, the employee was given fifty-four weeks working notice, in addition to an ex gratia payment of $8,041.67. Under the ESA, the employee was entitled to a total of thirty-four weeks: eight (8) weeks for notice of termination and twenty-six (26) weeks for severance pay. The Employer argued that they had fulfilled their requirements under the ESA by paying fifty-four (54) weeks, which, in total, amounted to more than the employee was entitled to under the ESA. The employee argued that money paid in lieu of notice could not be offset against severance pay. The court agreed with the employee.

Reviewing the ESA along with relevant case-law, the Court found that severance and notice are two, separate requirements that cannot be combined or offset against one another. Specifically, when an employer attempts to contract out of the common-law requirements for severance and notice, they must be able to establish that they have complied with both minimum standards in respect of severance and notice. Of importance is also the fact that the employee in this case was given working notice rather than a lump-sum payment in lieu of notice. Given that severance is supposed to be paid in lump-sum, the court reasoned that the fifty-four (54) weeks notice could not be used to satisfy the severance requirement because it did not ‘look’ like severance.

Our Thoughts

It will be interesting to see how the reasoning in Mattiassi will apply to future decisions. It has already become apparent that the reasoning in Mattiassi applies to situations where the employee is given a working notice. However, does this decision mean that employers will have to separate severance and notice payments completely? Or does this simply mean that employers will have to set out their calculations regarding the amount of money being given separately for notice and for severance.

See: Mattiassi v Hathro Management Partnership, 2011 Ontario Small Claims Court

The above article is for general information purposes only and does not constitute legal advice. If you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere.