From time to time, judgments are rendered in other provinces in Canada which require our attention here in Quebec. The recent judgment by the Divisional Court of Ontario in Hawkes v. Max Aicher (North America) Limited, 2021 ONSC 4290 (Can LII), is one such case.
It is not at all peculiar to find companies operating through personnel who work from premises located outside the employer’s province. The pandemic, during which home offices proliferated, undoubtedly accentuated this phenomenon. The Ontario Employment Standards Act, 2000 [ESA] will apply if “the employee’s work is to be performed in Ontario and outside Ontario but the work performed outside Ontario is a continuation of work performed in Ontario” [para 3(1)(b) ESA].
It would seem that, given that paragraph, the impact of the ESA and its provisions over employees outside that province is fairly narrow. But is it?
The issue with respect to the severance obligations — obligations which are separate and additional to notice or pay in lieu thereof, covered by separate provisions of that statute — is another matter.
Whether or not a company is or is not subject to additional and distinct severance payments to employees terminated or laid off for a lengthy period of time, obligations which may run into rather serious coin may be dependent on the size of the employer’s payroll: this obligation may be triggered if “the employer has a payroll of $2.5 million or more” [para 64(1)(b) ESA]. But payroll where?
Paquette c. Quadraspec Inc., 2014 ONCS 2431 (CanLII) broke new ground and held that the employer’s total payroll across Canada (in that case, Ontario and Quebec) was to be taken into account in establishing the $2.5M dollar threshold. Paquette determined that Section 64 of the ESA that creates the obligation to pay severance in addition to notice pay:
[66] … does not provide for the Ontario legislature to regulate the “other provinces’ payrolls”. The legislature has competence to regulate the activities of employers who carry on business and hire personnel in Ontario. The requirements imposed upon employers by and in other jurisdictions are not the subject and scope of section 64. [67] The Ontario legislature has the legislative authority to enact the mechanism that will be used in the application of an Act in Ontario: more precisely, it can decide which Ontario employers are required to pay severance pay. Under section 64, the rule depends on the size of the employer and its staff, or that of its payroll. The scope and application depend on “the total wages earned by all of the employer’s employees”. The text of the Act is clear. The scope corresponds to the wages paid by the employer both within and outside Ontario. There is no legal justification or jurisdiction to interpret these provisions in such a way to apply restrictions not found in the law. [Our translation]
It seemed then that the matter was closed. Paquette however was ignored by subsequent jurisprudence and life went comfortably on in Ontario for the next six or seven years. Only a company’s Ontario payroll was deemed pertinent — woops — until now.
All that changed this past June. In Hawkes, a three-Justice panel of the Ontario Superior Court of Justice overruled the Ontario Labour Relations Board and held that any interpretation restricting the threshold of $2.5 million dollar payroll to Ontario activities was illogical and therefore unreasonable. Indeed, what the Superior Court took into account was not only the employer’s Canadian payroll but indeed its worldwide payroll since the company was European-based.
This judgment has broad implications, not only in terms of severance but in terms of the reach of Ontario law with respect to divulging “necessary payroll information” [Hawkes, par 50]. Under Hawkes since the world payroll is determinative of the threshold of application of Section 64 of the ESA then clearly the Ontario Ministry of Labour has authority to order production of information regarding the company’s worldwide payroll, a curious result given what are, at first blush, constitutional limitations of enforcement of provincial laws beyond that provinces borders. We can report that this case has made sufficient waves among Ontario’s senior management labour counsel that consideration is being given not only to an appeal but to attempts to convince the Ontario government to amend the law.
In the interim, if you are an employer and you have branch operations in Ontario that would not otherwise pass the Section 64 threshold for severance pay given your limited Ontario payroll, you should be advised that unless Hawkes is overturned, the cost of terminating employees may be a lot higher than you might otherwise believe.