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Statutory Severance Pay – More Employees Will Be Entitled

Statutory Severance Pay – More Employees Will Be Entitled

Pursuant to the Ontario Employment Standards Act, 2000 (“ESA”) which governs provincially regulated companies, where an employee is wrongfully terminated, the employee has “statutory rights”.

If an employee has been with a company for five years or more and the company has a 2.5 million dollar payroll, the employee is also entitled to statutory severance pay on top of statutory notice or pay in lieu.  

Statutory severance pay under the ESA is calculated based on one week per year of service up to a maximum of 26 weeks with a partial year calculated on a pro rata basis. The employee’s common law rights are inclusive of their ESA entitlements.

In a very recent decision (June 2021), the Ontario Superior Court of Justice, (Divisional Court) overturned the Ontario Labour Relations Board on a judicial review, stating:

“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.”

Ontario Superior Court of Justice (Divisional Court), June 2021

In other words, if the company is related or associated with another company outside of Ontario, the payroll of that other company(s) will also be included in the calculation of “payroll” for the purposes of determining the Ontario employee’s entitlement to statutory severance pay under the ESA.

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