Court Awards 26 Weeks Severance Pay In Addition to 54 Weeks of Working Notice Already Provided

In Mattiassi v. Hathro Management Partnership the Ontario Superior Court of Justice reinforced that severance pay must be paid in lump sum no matter how much working notice an employee has received.

Background

The Employee, Ms. Shirley Mattiassi, was employed by the Employer, Hathro Management Partnership, for approximately 26 years. On November 16, 2009, the Employee received notice of termination indicating that she was being terminated and would be provided with 54 weeks of working notice, which would cease on November 30, 2010.

Following receipt of her termination letter, the Employee worked the 54 weeks of working notice and received her regular pay throughout this time.

On November 19, 2010, the Employer provided the Employee with a letter reminding her that her employment would officially come to an end on November 30, 2010. Additionally, this letter included a cheque in the sum of $8,041.67, less statutory deductions, representing an amount equal to approximately 2 months of the Employee’s regular pay. This gratuitous payment of approximately 2 months brought the total amount of notice provided by the Employer to approximately 62 weeks. The Employee did not receive any further amounts of money from the Employer.

On November 30, 2010, the Employee completed her last day of work with the Employer, following which her employment with the Employer was terminated. Thereafter, the Employee brought an action against the Employer seeking payment of her severance pay in accordance with the Employment Standards Act, 2000.

Ontario Superior Court of Justice’s Decision

The Employee argued that she was entitled to both termination pay and severance pay in accordance with the Employment Standards Act, 2000. However, the Employer argued that the total amount of notice provided to the Employee, being 54 weeks working notice and an additional 2 months in lump sum, were in excess of the combined requirements for both termination pay and severance pay required by the Employment Standards Act, 2000, and should therefore disentitle the Employee to any further payments.

The Court did not accept the position argued by the Employer and stated that the Employment Standards Act, 2000 “has clearly set up two distinct and separate entitlements” and that “[e]ach provision stands on its own, serves a different purpose and provides different and distinct benefits or entitlements to the employee”.

Additionally, the Court indicated that the Employment Standards Act, 2000 “requires payment in lieu of notice only in the event of failure to give the required notice of termination. On the other hand, payment of severance pay is mandatory. It cannot be avoided by giving notice.”

Therefore, the Court determined that the Employee was entitled to receive the 26 weeks of severance pay claimed, indicating that the working notice provided to the Employee could not reduce the severance pay owed to the Employee. Severance pay must be paid separately from any working notice provided, given that working notice is “earned pay” and severance pay is provided as “compensation”.

Points of Interest

The above case highlights the necessity to ensure that both the correct amounts of statutory payments are made and that such payments are provided in the correct manner upon termination. Failure to do so may result in costly litigation to determine whether the requirements under the Employment Standards Act, 2000 have been fulfilled and may result in the Employer being obligated to provide more notice that would have been required had the severance been paid in the correct manner. Therefore, both Employees and Employers should be aware of the above decision and ensure that the Employment Standards Act, 2000 requirements are always fulfilled.

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See also, 26 weeks severance added to 54 weeks working notice published in Canadian Employment Law Today and  HR Matters — HRPA Toronto Chapter Newsletter. Also, Moneyville’s related blog article: “She got a year’s notice, plus 6 months severance” by Sheryl Smolkin.