Where Is The Line? Extra-Provincial Payroll May Affect Ontario Severance Pay

More Ontario employers may face liability for severance pay after a recent decision cast doubt on the meaning of "payroll" under the Employment Standards Act, 2000 (the "ESA"). On April 17, 2014, the Ontario Superior Court of Justice released Paquette v Quadraspec Inc. ("Paquette"), a French language decision that is largely inconsistent with previous practice and case law.

Departure from Preceding Practice and Case Law

Where an employer's annual payroll is larger than $2.5 million, an employee with at least five years of service is entitled to severance pay. At issue in Paquette was whether or not the court should consider payroll outside of Ontario when determining the size of an employer's payroll. Quadraspec's Ontario payroll did not meet the $2.5 million threshold on its own but, when combined with their Québec payroll, it did.