Law Times

Law Times • July 7, 2014 Page 3 www.lawtimesnews.com Employment law decision turns heads Ruling bases severance obligations on nationwide payroll By Julius Melnitzer For Law Times ustice Paul Kane of the Ontario Superior Court of Justice has challenged existing jurisprudential wisdom by holding that the payroll used for determining an employer's liability for statutory severance should be calculated with reference to all of a com- pany's Canadian operations. "The ruling is contrary to ev- eryone's belief as to how payroll is determined in this context and may even suggest that U.S. payrolls should be taken into account," says Jeff Goodman of Hicks Morley Hamilton Stewart Storie LLP's Toronto office. Paquette v. Quadraspec Inc. involved an employee who started working for one of Qua- draspec's predecessors in 1983 and continued to work for oth- er predecessor companies. In 1988, he signed a new employ- ment contract as general direc- tor of Placage Inc.'s operations in Oakville, Ont. Eleven years later, Qua- draspec merged with Placage and terminated Paquette. The new company operated in On- tario and Quebec. The Ontario payroll was less than $1.5 mil- lion, but its Quebec payroll was double that amount. The employment contract limited Paquette's severance, but he brought a motion for a determination that the docu- ment was void. In the alterna- tive, Paquette argued he should receive severance pay pursuant to s. 64 of the Employment Stan- dards Act. Section 64 requires employ- ers with a payroll of $2.5 mil- lion or more to pay severance to employees who have at least five years' service. The practice has been to take into account only payroll arising out of Ontario operations. Both the Ontario Ministry of Labour and the On- tario Labour Relations Board have consistently approved this approach. But Kane held that the leg- islature didn't intend to limit the payroll calculation in that way. He noted that the Hansard debates of 1987 that led to the $2.5-million threshold dem- onstrated that the purpose of the provision was to protect workers who worked for a company "that is part of a larger enterprise." Kane also noted s. 64 doesn't specifically limit the calculation to a company's Ontario payroll. By way of contrast, for example, the Pay Equity Act defines payroll as the "total of all wages and salaries payable to the em- ployees in Ontario of the em- ployer." While the legislature was free to use similar limit- ing language in the Employ- ment Standards Act, it hadn't done so. In Kane's view, previous decisions limiting the act's application to workers in On- tario weren't relevant to the case at hand. He concluded s. 64 doesn't govern payrolls in other provinces. Rather, the On- tario legislature, which clearly has authority to legislate with regards to employers that oper- ate in this province, could also legislate with regards to the im- pact of their overall payrolls on Ontario employees. Paul Boniferro of McCar- thy Tétrault LLP's Toronto office says f latly that Qua- draspec is wrong in law. "From a constitutional perspective, provincial stat- utes attach only to labour relations with the province," he says. "If you can reach outside the jurisdiction to determine severance pay, why couldn't a union certification issued by the Ontario Labour Rela- tions Board also apply to the operations of the same com- pany outside Ontario's bor- ders?" According to Boniferro, regulations and interpreta- tion guidelines under the Employment Standards Act have gone so far as to limit s. 64 payroll calculations to individu- al establishments of a company operating at more than one location in the province. "There are cases that say that a company does not meet the $2.5-million standard because an establishment in one part of the province is very differ- ent from an establishment else- where in the province," he says. "If the payroll calculation can be so limited, it doesn't make sense that it could be expanded beyond the Ontario border." Ottawa lawyer Sean Bawden, writing in Kelly Santini LLP's employment law blog, noted the new approach could be "huge" for Ontario employers with op- erations outside the province. It could, for example, catch an employer whose operations in Ontario are relatively minor but whose total Canadian pay- roll exceeds $2.5 million. Qua- draspec, Bawden concluded, "has the very real potential to increase" employers' contingent labour costs. LT NEWS MATTER CREDENTIALS TORONTO I BARRIE I HAMILTON I KITCHENER 1-866-685-3311 I www.mcleishorlando.com A Noticeable Difference ™ Proud Member Choosing a personal injury lawyer is one of the most important decisions an injured person will make. Help your client ask the right questions: Is the lawyer? jÒSELECTEDÒBYÒPEERSÒFORÒINCLUSIONÒINÒ"ESTÒ,AWYERSÒINÒ#ANADA jÒRATEDÒÒOUTÒOFÒÒ!6Ò0REEMINENTÒÒ-ARTINDALEÒ(UBBELL jÒSELECTEDÒBYÒPEERSÒFORÒINCLUSIONÒINÒ,EXPERTÒ#ANADAgSÒ,EGALÒ,EXPERTÒ$IRECTORY jÒAÒ$IRECTORÒORÒ0ASTÒ0RESIDENTÒOFÒTHEÒ/NTARIOÒ4RIALÒ,AWYERSÒ!SSOCIATION jÒAÒ#ERTIFIEDÒ3PECIALISTÒINÒ#IVILÒ,ITIGATION Untitled-3 1 14-06-09 5:55 PM J 'The ruling is contrary to everyone's belief as to how payroll is determined in this context and may even suggest that U.S. payrolls should be taken into account,' says Jeff Goodman.

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