Ontario’s Divisional Court in Hawkes v. Max Aicher (North America) Limited, 2021 ONSC 4290 has ruled that employees are now entitled to severance pay even if the payroll used to determine if severance pay is appropriate is outside Ontario.

The applicant in this decision brought his application for judicial review of the decision of the Ontario Labour Relations Board (“OLRB”) that set out that he could not get severance pay from his former employer.

To remind our readers, Ontario’s Employment Standards Act (“ESA”) in section 64(1) sets out that employees are entitled to severance pay when the employer severs the employment relationship and if the employee was employed by the employer for 5 years or more. Additionally, and applicable to this case, is section 64(1)(b) which sets out that employees are entitled to severance pay only when the employer has a payroll of $2.5 million or more. Please read our blog entitled “Some Information About Severance Pay” if you want more information.

The applicant in this case was terminated from his employment in October 2015. Following his termination, the applicant filed a complaint with the Ministry of Labour and made a claim for severance pay. In January 2017, an employment standards officer determined that he was entitled to termination and vacation pay, but not severance pay. This was because the employer did not have a payroll of at least $2.5 million. The employment standards officer concluded that only the employer’s Ontario payroll would be included as part of the calculation of payroll under the ESA. It is important to note the employer’s global payroll exceeded the $2.5 million threshold.

The applicant then moved to have this decision reviewed by the OLRB. The OLRB sided with the employment standards officer and held that the employer’s global payroll should be excluded from the calculations under s. 64 of the ESA. The OLRB held that only payroll in Ontario will be used to calculate whether or not an employee is entitled to severance pay.

On judicial review the Divisional Court disagreed with the OLRB and held that section 64 of the ESA should not be restricted to the employer’s payroll in Ontario. Therefore, the severance pay entitlement has been expanded so that the employer will be obligated to pay severance pay whether or not their payroll is Ontario. The payroll only needs to be of $2.5 million or more.

Our Thoughts

Employers will now have to look at their total global payroll to determine whether they should pay the terminated employee severance pay. This is definitely a win for employees and should expand eligibility to other termination employees who would otherwise not have qualified for severance pay under the ESA.