Global Payroll Used to Determine Statutory Severance Pay

Written by on August 10, 2021 in Employment Law Blog, Focus on Canadian Cases

By Kyle Burgis

The Divisional Court of Ontario recently ruled that a company’s global payroll will be considered when determining whether statutory severance pay is owed to an employee.

In accordance with section 64 of the Employment Standards Act, 2000 (“ESA”):

“64 (1) An employer who severs an employment relationship with an employee shall pay severance pay to the employee if the employee was employed by the employer for five years or more and,

(a)  the severance occurred because of a permanent discontinuance of all or part of the employer’s business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or

(b)  the employer has a payroll of $2.5 million or more.”

Section 64 of the ESA continues by stating the following:

“(2) For the purposes of subsection (1), an employer shall be considered to have a payroll of $2.5 million or more if,

(a)  the total wages earned by all of the employer’s employees in the four weeks that ended with the last day of the last pay period completed prior to the severance of an employee’s employment, when multiplied by 13, was $2.5 million or more; or

(b)  the total wages earned by all of the employer’s employees in the last or second-last fiscal year of the employer prior to the severance of an employee’s employment was $2.5 million or more.”

In the recent decision of Hawkes v. Max Aicher (North America) Limited, the question before the Divisional Court of Ontario was “whether the calculation of payroll under s. 64 of the ESA is restricted to Ontario employment, or whether employment outside of Ontario should be included.” In conclusion, the Court determined that the calculation of payroll for the purpose of statutory severance pay pursuant to the ESA is not limited to just an employer’s Ontario payroll. The Court further determined that it is also not limited to just the employer’s Canadian payroll either. Rather, the Court found “The calculation of payroll under s. 64 of the ESA is not restricted to Ontario employment; employment outside of Ontario, including employment outside of Canada, must be included.”

The effect of this decision will be felt by both employers and employees. Employers who have always only considered their Ontario payroll, or Canadian payroll, when determining whether an employee is entitled to statutory severance pay will now need to consider their global payroll to ensure that statutory entitlements are provided. Similarly, employees who are terminated from their employment may now be entitled to more statutory severance pay then what would have previously been provided. For both of these reasons, employers and employees should seek the assistance of an Employment Lawyer to help determine and ensure that statutory minimum entitlements are being provided.

Should you have any specific questions relating to a similar or other situation at your workplace, we are happy to help. Contact us today or call us at 905-477-7011 for assistance prior to taking any steps that may expose you to legal liability.

At Minken Employment Lawyers, we can review the facts to recommend the best course of action to ensure your legal protection.

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Please note that this article is for informational purposes only and does not constitute legal advice.

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