Severance for more employees after Ontario court decision on global payroll

Hawkes v. Max Aicher (North America) Limited

When an employee is let go without cause, they are generally owed specific minimum entitlements under employment standards legislation. These entitlements include notice of termination, pay in lieu of this notice, and additional severance pay, provided certain criteria are met.

In Hawkes v. Max Aicher (North America) Limited (decision here), Ontario’s Divisional Court overruled an Ontario Labour Relations Board (OLRB) decision, concluding that an employer’s global payroll is considered when determining whether statutory severance pay is owed upon termination. This decision ultimately means that severance protections are extended to employees of small organizations that are a subsidiaries or affiliates of larger companies outside of Ontario.

Overview of the Case

Under Ontario’s employment standards legislation, an employee is entitled to additional (and potentially significant) severance pay in situations where the employer has a payroll of at least $2.5 million.

Prior to 2014, it was generally understood that only an employer’s Ontario payroll was to be considered in determining whether additional severance pay was owed under employment standards legislation. The reason for this stemmed, in part, from the fact that the legislation applied with respect to work performed in Ontario specifically.

In 2014, through the decision Paquette v. Quadraspec Inc., the Ontario Superior Court changed this understanding to include the employer’s national payroll when determining whether statutory severance is owed.

The OLRB Decision

Mr. Hawkes worked for Max Aicher (North America) Limited (“Aicher”) for around 38 years. Aicher is a steel company in Ontario, and is owned by a larger German company. At the time Mr. Hawkes’ employment was terminated, Aicher’s Ontario payroll was less than $2.5 million. The payroll of the parent, Germany company, however, exceeds $2.5 million.

Following his termination, Mr. Hawkes filed a complaint to the Ministry of Labour (MOL) claiming he was owed vacation pay, termination pay, and severance pay under employment standards legislation.

The MOL found that Mr. Hawkes was entitled to vacation pay and termination pay, but not severance pay. The reason for this was because the MOL found that Aicher did not have a payroll which exceeded $2.5 million. Mr. Hawkes appealed the MOL’s decision, arguing that Aicher’s global payroll exceeded $2.5 million and that this should be considered.

Upon consideration Mr. Hawkes’ argument, the OLRB decision held that global payroll was excluded from the determination of whether or not an employer’s payroll exceeded $2.5 million.

In response to the OLRB’s decision, Mr. Hawkes then requested that the decision be reviewed by a judge to determine whether or not payroll outside of Ontario should factor into the severance calculation.

The Court’s Findings

In overturning the OLRB’s decision, Ontario’s Divisional Court found that the OLRB was incorrect in that the calculation of payroll is not restricted to Ontario, and that payroll external to Ontario must be included.

The Divisional Court reached this conclusion, in part, based on its view that employment standards legislation (Ontario’s Employment Standards Act in particular) “ought to be interpreted in a broad and generous manner, and any doubt arising from difficulties of language should be resolved in favour of the [employee]”.

The Divisional Court found that the OLRB’s view of the matter was unnecessarily broad and that it allowed large, global companies to avoid paying severance pay to long-serving employees. The Divisional Court further confirmed that there was nothing in the language of the legislation that expressly restricted the calculation of payroll to just Ontario.

Takeaway for Employees

Learn about your employer

You will have a better understanding of your rights to statutory severance if you confirm the size of your employer’s payroll in Ontario, and if they are part of a larger operation outside of the province.

Maximum severance pay

In addition to statutory severance (your minimum severance pay), employees in Ontario have a right to common law severance (your maximum severance pay). We calculate this portion of severance by tallying your age, years of service and position, among other factors. Employee’s should always consider common law severance – which can total as much as 24 months’ pay – when they lose their job.

Talk to an Employment Lawyer

An employment lawyer at Samfiru Tumarkin LLP can assess your unique situation, and determine what your severance package should look like. Before you sign ANY severance offer, contact our team for expert advice. Remember: once you sign back a severance package, you lose your ability to pursue what you are legally owed.

Takeaway for Employers

Consider global payroll

Employers need to take into consideration their global payroll, not just Ontario, when determining how much severance is owed to an employee under employment standards legislation.  Companies that have a very small presence in Ontario, but much larger outside of Ontario, for example, should be paying particular attention to this case.