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Michael’s soapbox

2018-11-16T07:52:26-05:00 November 16, 2018|Employment Standards|

What is a $2.5 Million Payroll under the Employment Standards Act, 2000?

The Ontario Labour Relations Board (“OLRB”) considered this question in Kastriot Gremi v. International Distribution Network Canada Ltd., 2018 CanLII 107738 (ON LRB).  More to the point, the issue in this case was whether the payroll of employees outside Ontario should be included in the calculation of the payroll under section 64 of the Act.  Subsection 64(1)(b) of the Employment Standards Act, 2000 provides:

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,

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

The ESA does not specify the location of the payroll.  The Employment Standard’s Officer concluded that the employee was not entitled to severance pay by application of section 64(2) of the Act, having found that the Employer’s annual payroll in Ontario was less than $2.5 million.  The employee appealed to the OLRB.

The employer argued that payroll needs to be confined by provincial borders – in other words, only the employers’ Ontario payroll is used to calculate whether the $2.5 million severance pay threshold has been met.  Its Ontario payroll was less than $2.5 million.

The employee argued that Canadian payroll had to be used as the basis for calculation.  He argued that his duties involved completing payrolls for the responding party across Canada, which payrolls nationally exceeded the threshold of $2.5 million.  As such, he believed that he was owed severance pay.

The OLRB considered the cases, and section 3 of the ESA which states that the employment standards in the Act apply to an employee and his employer if the work is performed in Ontario, or if work performed outside Ontario is a continuation of work performed in Ontario.  The ESA is directed towards Ontario based employment.  The Court in Tullett and Tokyo Forex (Canada) Ltd. v. Singer, [1998] O.J. No. 2248 stated:

The Ontario legislature has no authority to legislate concerning the payrolls of other provinces. It has legislative authority with respect to business operating in Ontario. It is the payroll of an employer’s operation in Ontario which is relevant for the purposes of the Act. Just as an employee’s period of work outside of Ontario cannot be taken into account in the calculation of the severance pay due to them (unless that work were incidental to their work in Ontario), so an employer’s payroll is restricted to those employed in Ontario.

Similarly, Arbitrator Knopf in Genesta Inc. (c.o.b. as Spectrus) v. Union of Needletrades, Industrial and Textile Employees (Ontario Council), Local 2508G (Severance Pay Grievance), [2007] O.L.A.A. No. 9 relied on the OLRB decision in Northland Superior Supply Co., [2004] OLRB Rep. March/April 384 to conclude that:

While an employer may have operations and payrolls outside of the province, it is only the Ontario based employment that is caught by and relevant to section 3 and therefore section 64 of the ESA.

The OLRB in Gremi agreed stating:

The applicant was employed in Ontario.  The Act applies to Ontario-based employment.  The payroll in Ontario is undisputedly less than $2.5 million. That is the payroll that is relevant to the application of section 64(1). As such, the applicant is not entitled to severance pay.

These cases are certainly of interest to employers who have “smaller” Ontario operations but “larger” Canadian operations where combined payrolls kick the payroll over the $2.5 million severance pay threshold.