Do construction workers get severance pay in Ontario?

Construction workers, like any other non-unionized employee in Ontario, get severance pay when they lose their job.

Severance and the Construction Industry (Ontario)

The Ontario Employment Standards Act was constructed in part to promote the fair treatment of both employers and employees with respect to provincially regulated businesses. But does that mean that all employees in Ontario are covered by all aspects of the province’s employment laws? Not quite. As is the case with law generally, nothing is ever black and white. It most always depends on the particular circumstances. In this case, there are a number of exceptions and exemptions when it comes to those covered by the Employment Standards Act, especially for construction workers in Canada.

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One notable exemption has to do with “construction employees” and the concept of notice and severance pay following a termination of employment. Before we delve into this issue, however, we need to first ask ourselves, what is a “construction employee” under the Employment Standards Act?

What is a “Construction Employee?”

Under the Employment Standards Act, and more specifically according to Ontario Regulation 285/01, a “construction employee” is defined as the following:

• An employee employed at the site in any of the activities described in the definition of “construction industry”, or

• An employee who is engaged in off-site work, in whole or in part, but is commonly associated in work or collective bargaining with an employee described in clause (a)

Furthermore, a “construction industry” is defined as:

The businesses that are engaged in constructing, altering, decorating, repairing or demolishing buildings, structures, roads, sewers, water or gas mains, pipe lines, tunnels, bridges, canals or other works at the site.

How are my Rights as a Construction Employee Affected by the Employment Standards Act?

In light of the task-based and temporary nature of the construction industry, and in an effort to allow construction employers the ability to respond to constantly changing circumstances in the industry, a construction employee is not entitled to notice of termination, or pay in lieu thereof, nor severance pay under the Employment Standards Act. This exemption is referred to under subsection 64(3) of the Employment Standards Act and Ontario Regulation 288/01, section 9.

Construction Workers and Severance Pay

Despite the exclusions in the Employment Standards Act and its regulations, the courts in Ontario have not outright dismissed the idea that construction employees may still be entitled to severance pay under the common law. This can potentially result in significantly higher compensation when compared to the minimum obligations employers have to their employees under the Employment Standards Act.

In the 1999 Ontario Court of Appeal case of Scapillati v Potvin Construction, the court held that a construction employee is not entitled to reasonable notice. However, the Court of Appeal referred to the transient and short-term nature of the construction industry and the Legislature’s decision to exclude construction employees from notice and severance pay under the Employment Standards Act as only some of the factors to consider when assessing reasonable notice and/or pay in lieu thereof.

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Given the Court of Appeal’s open-ended decision in Scapillati, courts have been willing to find that, in some situations, the parties contracted to provide more than just the minimum obligations referenced in the Employment Standards Act. In several cases since then, courts have seized on the open-endedness of Scapillati and have held that construction employees were entitled to reasonable notice at common law, despite the fact that construction employees are not entitled to any notice or severance under the Employment Standards Act and despite the idea that there is a customary practice within the industry to terminate employment contracts without any notice.

Examples of such cases include the decision of McClelland v. King Coating Roofing Inc. (2016 CarswellOnt 12017) and Kuntz v. Dordan Mechanical Inc. (2014 CarswellOnt 433).

The construction industry, unlike many other industries, is an industry in which written contracts of employment are less common, relatively speaking. That said, a well-drafted employment contract which includes an enforceable termination clause limiting an employee’s entitlements following termination could remove much of the risk construction employers face when considering issues of notice and severance for their employees. Accordingly, if there ever was an industry in which a written employment contract could play a significant role in deciding these issues one way or another, construction is definitely one.

If you are an Ontario construction employer or employee and are involved in a situation where you are unsure as to the appropriate course of action regarding termination and notice/severance pay, it would be prudent to seek out a legal opinion before taking action.