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Employment - Severance Pay

. Stock Transportation Ltd. v. Llanos

In Stock Transportation Ltd. v. Llanos (Div Court, 2023) the Divisional Court considered an employee's right to severance pay, here on the argument (upheld) that no business sale had occured and thus the ESA [s.9] 'continuity of employment' provisions did not operate:
[2] According to the Appellant, the Deputy Judge erred in law when he found that section 9 of the Employment Standards Act, 2000 (“ESA”), which provides for continuity of employment where there is the "sale of a business", did not apply to the facts of the case, with the result that the Respondent was entitled to severance pay from Stock pursuant to s. 64 of the ESA. ....

[5] Stock is a company that provides school bus and other bus services within the Province of Ontario. Stock is a statutory severance employer, pursuant to s. 64 of the ESA. Under the ESA, where statutory severance pay is applicable, it must be paid either seven days after the employee's employment is severed, or on what would have been the employee's next regular pay day, whichever is later.

....

Was the Decision of the Deputy Judge Correct

[20] The parties agree that the relevant statutory provisions are section 1(1), 9(1) and 9(3) of the ESA and that the correct test for determining whether a sale has occurred within the meaning of section 9 of the ESA is found in Abbott v. Bombardier Inc., 2007 ONCA 233.

[21] Section 9(1) of the ESA provides:
If an employer sells a business or a part of a business and the purchaser employs an employee of the seller, the employment of the employee shall be deemed not to have been terminated or severed for the purposes of this Act and his or her employment with the seller shall be deemed to have been employment with the purchaser for the purpose of any subsequent calculation of the employee's length or period of employment.
[22] Section 9(3) of the ESA defines "sells" as “includes leases, transfers or disposes of in any other manner” and defines "sale" as having a corresponding meaning.

[23] Section 1(1) of the ESA defines "business" as “includes an activity, trade or undertaking; (‘enterprise’)”.

[24] In Abbott v. Bombardier Inc., 2007 ONCA 233, the Plaintiffs were previously employed by Bombardier in its Information Technology Services ("ITS") Group. Bombardier entered into an agreement with CGI to transfer its ITS Group to CGI. CGI agreed to recognize each of the affected employee's original date of hire with Bombardier both for the purpose of determining notice of termination and severance pay under the applicable employment standards legislation and for common law purposes. The Plaintiffs were given notice of termination by Bombardier and accepted offers of employment from CGI. They brought an action against Bombardier claiming severance pay pursuant to the ESA. Bombardier moved successfully for summary judgment dismissing the claim. The Plaintiffs appealed, arguing that the motion judge erred in failing to apply the "going concern" test for determining whether the Bombardier / CGI transaction constituted a sale of a part of a business within the meaning of s. 9 of the ESA. In determining the issues in Abbot, the Court of Appeal set out a framework for the interpretation of s. 9 of the ESA, stating in part as follows:
[17] …the ESA is remedial legislation intended to set minimum standards for terms of employment. As such, in accordance with the provisions of s. 10 of the Interpretation Act, R.S.O. 1990, c. I.11, it should be given a "fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Act according to its true intent, meaning and spirit".

[18] Viewed in the context of the entire statute, in our view, the purpose of s. 9 of the ESA is to protect minimum statutory entitlements that are related to length of employment where the purchaser of a business, or part of a business, continues to employ the employees of the vendor following the sale. Such entitlements include: vacation entitlements, entitlements to pregnancy and parental leaves, as well as entitlement to notice of termination or pay in lieu of notice and severance pay. In our view, this statutory purpose is apparent from the expansive definitions of business and sale that are included in the ESA, the nature of the protections the ESA provides, and the wording of s. 9 of the ESA.
[25] The Court of Appeal relied on the principle in the Supreme Court of Canada decision of Machtinger v. HOJ Industries Ltd. 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, that an interpretation of s. 13 (now s. 9) of the ESA that extended protection to as many employees as possible is to be favoured over an interpretation that does not, and that applying the “going concern test” would have the opposite result. (para 19). The Court further stated:
[20] ... while the "going concern" test has been used by the Ontario Labour Relations Board in decisions dealing with the meaning of sale of a business under the OLRA, we are not persuaded that that means that it is appropriate that the same test should be used under the ESA. We note that "business" is not defined in the OLRA, whereas it is broadly defined in the ESA. More importantly, the two legislative regimes target different issues. As noted in Metropolitan Parking, the OLRA regime is aimed, at least in part, at providing for the continuity of relationships between unions and employers in the context of the sale of a business. By way of contrast, the purpose of the ESA regime is to protect individual rights and to preserve continuity of seniority. Viewed in this context, in our view, the meaning of business in s. 9 of the ESA is to be given an expansive interpretation.
[26] The Court in Abbott accepted the lower court's reliance on the 1987 decision in Re Merrill Lynch Canada Inc., August 7, 1987, E.S.C. 2256, which found that the outsourcing of keypunch operations constituted a sale of a business, because the services clearly fell within the definition of "activity" and "undertaking". In particular, where there was a transfer of a specific bundle of tasks and functions performed by an identifiable group of employees, this fell within the definition of a sale of a business. (para 21)

[27] Ultimately, the Court of Appeal upheld the motion judge, in other words, section 9 applied, and no severance was payable. It must be noted that in Abbot, the parties agreed to the "transfer" of employees that were part of the "identifiable group employees" that performed the bundle of tasks and functions that was being disposed of by Bombardier and assumed by CGI, and further agreed that their original hire date with Bombardier would be recognized by CGI (which the Court of Appeal found to be "significant"). The Court did not indicate whether this aspect of the outsourcing agreements was necessary to find that s.9 of the ESA applied.
. Hawkes v. Max Aicher (North America) Limited

In Hawkes v. Max Aicher (North America) Limited (Div Ct, 2021) the Divisional Court held on a judicial review application that the OLRB erred in law (on a reasonableness standard) when it held that the $2.5 million payroll requirement in the ESA's severance pay provision referred only to the employer's Ontario payroll.


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Last modified: 26-01-24
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