2.5 million problems - Ontario Divisional Court finds that global payroll is relevant to determining eligibility for statutory severance pay

Ontario employers with a payroll of $2.5 million or more are required under Section 64 of the Ontario Employment Standards Act, 2000 (the “ESA”) to pay statutory severance pay to employees whose employment is severed after completing five years of employment.

In Hawkes v. Max Aicher (North America) Limited, 2021 ONSC 4290 (“Hawkes”), the Ontario Divisional Court found that the $2.5 million threshold is calculated based on an employer’s global payroll.  Hawkes contradicts a number of recent decisions of the Ontario Labour Relations Board (OLRB) which found that the $2.5 million threshold was limited to an employer’s Ontario payroll.  

The implications of Hawkes can be far-reaching, particularly given that “related employers” are treated as one employer under Section 4 of the ESA if those “related employers” carry on associated or related activities or businesses, including through multiple affiliated global entities. In addition, Hawkes suggests that an Employment Standards Officer investigating a claim under the ESA will have the right to issue orders to obtain “necessary payroll information” from any “related employer” globally.

Multinational employers with a relatively small number of Ontario employees should pay close attention to Hawkes, particularly if such multinational employers have been operating under the assumption that the $2.5 million threshold in Section 64 of the ESA is limited to their Ontario payroll.