In Ontario employment law, the terms “notice” and “severance” are often used interchangeably.
Under the Ontario Employment Standards Act, 2000 (ESA), they refer to different concepts. It is critical to understand that these are two distinct entitlements under the ESA. An employee may be entitled to one, both, or neither, depending on the circumstances.
Notice of Termination (Section 57): This is the minimum amount of time (or pay in lieu) an employer must provide when ending an employment relationship without cause. It generally scales to one week per year of service, capped at 8 weeks.
Severance Pay (Section 64): This is a separate payment intended to compensate long-term employees for their service and the loss of seniority. Unlike notice, it is only mandatory if certain thresholds are met.
One key threshold the employer having a payroll of $2.5 million. Previously it unclear whether the “$2.5 million” apply only to the payroll in Ontario, or did it include the company’s operations worldwide? The landmark decision in Hawkes v. Max Aicher (North America) Limited, 2021 ONSC 4290, settled this once and for all.
The Ontario Divisional Court held that when calculating the $2.5 million threshold, an employer must include its global payroll. In Hawkes case, the employer was an Ontario subsidiary of a larger German corporation. While the Ontario payroll was well under the $2.5 million mark, the global payroll was significantly higher. The Court ruled that because the legislation does not explicitly limit the calculation to Ontario, the employee was entitled to his full statutory severance. The court followed the reasoning in Paquette v. Quadraspec Inc., 2014 ONSC 2431, where the court included an employer’s Quebec-based payroll to meet the Ontario threshold.
Depending on the payroll size of the company, you can be entitled to severance as well as notice. If you suspect that you are have been provided with an unfair severance offer, call us today, at no cost, to discuss potential next steps. There are no fees unless we get you money.