Court File and Parties

CITATION: Hawkes v. Max Aicher (North America) Limited, 2021 ONSC 4290

DIVISIONAL COURT FILE NO.: DC-19-249-0000-JR

DATE: 20210615

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Dambrot, Lederer and Favreau J.J.

BETWEEN:

DOUG HAWKES

Applicant

– and –

MAX AICHER (NORTH AMERICA) LIMITED

Respondent

– and –

DIRECTOR OF EMPLOYMENT STANDARDS

Respondent

– and –

ONTARIO LABOUR RELATIONS BOARD

Respondent

Counsel:

Wade Poziomka and Andrew Astritis, for the Applicant

Kim Nusbaum and Stephen A. MacArthur, for Max Aicher (North America) Limited

Terry Wong and Evan Schiller, for the Director of Employment Standards

Aaron Hart and Lindsay Lawrence, for the Ontario Labour Relations Board

HEARD by videoconference at Toronto: May 17, 2021

Reasons for Decision

Dambrot J.:

[1] Doug Hawkes brings this application for judicial review of a decision of the Ontario Labour Relations Board (the “Board”) determining that he was not entitled to severance pay from his former employer, Max Aicher (North America) Limited (“Aicher”), under the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”).

[2] Section 64(1)(b) of the ESA requires an employer who severs an employment relationship with an employee to pay severance pay to the employee if the employee was employed by the employer for five years or more and the employer has a payroll of $2.5 million or more. The Board determined that although Aicher’s global payroll far exceeded $2.5 million, it was not obliged to pay severance pay to Mr. Hawkes because its payroll in Ontario was slightly less than $2.5 million. The Board concluded that the calculation of payroll to determine entitlement to severance pay is restricted to payroll in Ontario.

BACKGROUND

[3] Aicher is a wholly owned subsidiary of Max Aicher GmbH & Co KG (“MAG”), a steel company headquartered in Bavaria, Germany. From 1977 to 2010, Mr. Hawkes worked for US Steel and its predecessor, Stelco, as Maintenance Manager. In November 2010, Aicher purchased the assets of US Steel. Following an offer of continued employment, Mr. Hawkes worked at Aicher as Maintenance Manager until his employment was terminated on October 7, 2015.

[4] Following his termination, Mr. Hawkes filed a complaint with the Ministry of Labour alleging that he was entitled to termination, vacation, and severance pay. On January 25, 2017, an employment standards officer (“ESO”) determined that Mr. Hawkes was entitled to termination and vacation pay, but not to severance pay. The ESO concluded that Mr. Hawkes did not meet the requirements for severance pay set out under s. 64 of the ESA because Aicher did not have a payroll of $2.5 million or more. In reaching this conclusion, the ESO found that only salaries under Ontario jurisdiction factor into the calculation of the payroll threshold.

[5] Mr. Hawkes applied to have this decision reviewed by the Board pursuant to s. 116(3) of the ESA. The Board held a hearing to decide whether the payroll calculation should include Aicher’s global payroll, or whether it should be restricted to Aicher’s Ontario operations. For the purposes of this review, the Board assumed that Aicher and MAG were related businesses pursuant to s. 4 of the ESA. Section 4 provides that if associated or related activities or businesses are carried on by or through an employer and one or more other persons, the employer and the other person or persons shall all be treated as one employer for the purposes of the ESA.

[6] Mr. Hawkes submitted, and it is not disputed, that MAG’s global payroll far exceeded the $2.5 million threshold, even if Aicher’s Ontario payroll did not. He argued that both should be considered under s. 64, relying on the decision of the Superior Court of Justice in Paquette v. Quadraspec Inc., 2014 150116 (ON SC), 2014 ONSC 2431, which held that an employer’s national payroll must be considered under s. 64. He argued that the reasoning applies equally to global payroll. He also argued that s. 3(1) of the ESA, which provides that the employment standards set out in the ESA apply to work performed in Ontario, and to work performed outside Ontario that is a continuation of work performed in Ontario, did not limit his entitlement to severance, again relying on Paquette. He said that he worked in Ontario for an Ontario employer, so his employment relationship met the requirements in s. 3(1). He disputed the contention that s. 3(1)’s reach extended to impose a geographic limit on s. 64, which does not specify that payroll means “Ontario payroll”.

[7] In response, Aicher argued that s. 3(1) sets the scope of all provisions under the ESA. Even though s. 64 does not explicitly reference payroll “in Ontario”, that limit is implicit because the boundaries of s. 64 are set by s. 3(1). It also argued that Paquette is distinguishable as it considers national, not global, payroll. Aicher relied on a line of earlier decisions that limit threshold payroll calculations to Ontario employment and operations. It also emphasized the practical difficulties of factoring global payroll into severance considerations.

[8] The Board released its decision on December 27, 2018. It affirmed that global payroll is excluded from the s. 64 calculation. In its reasons, the Board noted that s. 64 was generally interpreted with regard to the limits imposed by s. 3(1). The Board found that Paquette is factually distinguishable and preferred to rely on the earlier case law. In its reasons, the Board wrote:

In this case, the applicant was employed in Ontario by a company operating in Ontario. In my view, having regard to the Act as a whole, while an employer may have operations and payrolls outside Ontario, it is only Ontario-based employment and operations that is captured by section 3 and therefore section 64 of the Act. The absence of the words “in Ontario” in section 64 does not mean that the provisions are unrestricted. The words “in Ontario” are found in section 3 and their effect is to apply to employers whose employees perform work in Ontario (or whose work is a continuation of work performed in Ontario). It does not make sense to presume that provincial legislation could affect employment or operations anywhere but in Ontario.

THE ISSUE

[9] The sole issue on this application is whether the calculation of payroll under s. 64 of the ESA is restricted to Ontario employment, or whether employment outside of Ontario should be included.

STANDARD OF REVIEW

[10] The parties agree that the standard of review is reasonableness: see Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65. This accords with the long-standing commitment of Ontario courts to afford to the Board the highest levels of judicial deference on matters within their exclusive jurisdiction: see Maystar General Contractors Inc. v. International Union of Painters and Allied Trades, Local 1819, 2008 ONCA 265, at para. 42. It is also statutorily mandated by s. 119(14) of the ESA, which directs a reviewing court to apply a standard of reasonableness to a decision of the Board concerning the interpretation of the ESA.

ANALYSIS

[11] The Board was called upon to interpret s. 64 of the ESA and determine whether the calculation of payroll under that section is restricted to Ontario employment. In reviewing the Board’s conclusion, it is useful to begin by reproducing s. 64 and s. 3 of the ESA.

[12] Section 64 provides:

Entitlement to severance pay

64 (1) An employer who severs an employment relationship with an employee shall pay severance pay to the employee if the employee was employed by the employer for five years or more and,

(a) the severance occurred because of a permanent discontinuance of all or part of the employer’s business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or

(b) the employer has a payroll of $2.5 million or more.

Payroll

(2) For the purposes of subsection (1), an employer shall be considered to have a payroll of $2.5 million or more if,

(a) the total wages earned by all of the employer’s employees in the four weeks that ended with the last day of the last pay period completed prior to the severance of an employee’s employment, when multiplied by 13, was $2.5 million or more; or

(b) the total wages earned by all of the employer’s employees in the last or second-last fiscal year of the employer prior to the severance of an employee’s employment was $2.5 million or more.

[13] Section 3 provides:

To whom Act applies

3 (1) Subject to subsections (2) to (5), the employment standards set out in this Act apply with respect to an employee and his or her employer if,

(a) the employee’s work is to be performed in Ontario; or

(b) 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.

[14] In assessing the reasonableness of the Board’s exercise of statutory construction, we are guided by Vavilov. We bear in mind that as a reviewing court, we must respect the specialized expertise of the Board and focus not on how we would resolve the issue, but rather on whether the Board’s decision is unreasonable: see Vavilov, at para. 75. More particularly, our focus must be on both the Board’s reasoning process and the outcome. We must consider all relevant circumstances in order to determine whether the decision made by the Board – including the rationale for the decision and the outcome to which it led – is unreasonable: see Vavilov, at para. 83.

[15] In carrying out this inquiry, the reviewing court must first examine the reasons for the decision provided by the Board with “respectful attention” and attempt to understand its reasoning process. In the end, a reasonable decision is one that is based on an internally coherent and rational chain of analysis and that is justified in relation to the facts and law that constrain the decisionmaker. Reasonableness is concerned with the existence of justification, transparency, and intelligibility within the decision-making process, as well as with whether the decision falls within a range of possible, acceptable outcomes that are defensible in respect of the facts and law. The outcome of a decision must be both justifiable and justified: see Vavilov, at paras. 84-86.

[16] The burden is on the party challenging the decision to show that it is unreasonable. Before a decision can be set aside on this basis, the reviewing court must be satisfied that there are sufficiently serious shortcomings in the decision such that it cannot be said to exhibit the requisite degree of justification, intelligibility, and transparency. Any alleged flaws or shortcomings must be more than merely superficial or peripheral to the merits of the decision. They must be central or significant to render the decision unreasonable: see Vavilov, at para. 100.

[17] In this case, we are concerned exclusively with statutory construction. Matters of statutory interpretation, like other questions of law, are evaluated on a reasonableness standard. As a reviewing court, in accordance with the guidance of Vavilov on the application of the reasonableness standard, we do not undertake a de novo analysis of the question. Instead, we must examine the administrative decision as a whole, including the reasons provided by the decisionmaker and the outcome that was reached: see Vavilov, at para. 116. In doing so, we apply the “modern principle” of statutory interpretation; that is, that the words of a statute must be read “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: Vavilov, at para. 117, citing Rizzo & Rizzo Shoes Ltd. (Re), 1998 837 (SCC), [1998] 1 S.C.R. 27, at para. 21; Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, at para. 26; and E. Driedger, Construction of Statutes (2nd ed. 1983), at p. 87.

[18] As a result, the merits of an administrative decisionmaker’s interpretation of a statutory provision must be consistent with the text, context, and purpose of the provision. Where an administrative decisionmaker fails to consider a key element of a statutory provision’s text, context, or purpose, and may well have arrived at a different result if it had done so, its failure to consider that element would be indefensible, and unreasonable in the circumstances. The key question is whether the omitted aspect of the analysis causes the reviewing court to lose confidence in the outcome reached by the decisionmaker: see Vavilov, at para. 122.

[19] There may be times when it becomes clear, after analyzing an administrative decisionmaker’s reasons for their interpretation of a statutory provision, not only that the decisionmaker’s interpretation is unreasonable, but that the interplay of text, context, and purpose leaves room for a single reasonable interpretation of the provision in issue. In such a case, it would serve no useful purpose to remit the interpretative question to the original decisionmaker, and the court, after approaching the issue with caution, may definitively pronounce upon the interpretation of a provision entrusted to an administrative decisionmaker: see Vavilov, at para. 124.

[20] With these principles in mind, I begin my inquiry into the reasonableness of the Board’s interpretation of the statutory provision by examining the reasons for its decision with respectful attention in an effort to understand its reasoning process. It is apparent that the Board’s decision stands on the following three legs.

[21] First, the Board concluded, as a matter of statutory construction, that the fact that s. 3(1) of the ESA is directed to Ontario-based employment in turn restricts the reference to an employer’s payroll in s. 64(2) of the ESA to its payroll in Ontario.

[22] Second, the Board concluded that the decision of the Superior Court of Justice in Paquette was distinguishable because it was “factually different” and because it did not address the interaction of s. 3(1) and s. 64 of the ESA.

[23] Third, the Board saw no reason to depart from pre-Paquette decisions of the Board.

[24] As will be seen, I consider each of these considerations illogical and the Board’s analysis flawed. The analysis does not exhibit the degree of justification and intelligibility required to make the decision reasonable. Moreover, I consider the Board’s interpretation of s. 64(2) to fall well short of the mandate of the modern principle of statutory construction. Far from demonstrating that it was alive to the essential elements of statutory construction, the Board reached a conclusion that is inconsistent with the text, context, and purpose of the provision. I will examine the Board’s considerations in the order I have listed them.

[25] First, I will consider the Board’s assertion that, as a matter of statutory construction, the fact that s. 3(1) of the ESA is directed to Ontario-based employment in turn restricts the reference to an employer’s payroll in s. 64(2) of the ESA to its payroll in Ontario. It is, of course, apparent that the words of s. 64(2) do not of themselves restrict the calculation of an employer’s payroll to its payroll in Ontario. The legislature is not unfamiliar with explicitly spelling out provincial geographical limits when imposing obligations on large employers. For example, where the Pay Equity Act, R.S.O. 1990, c. P.7, places obligations on employers by reference to a particular number of employees, s. 1(4) deems this to be a reference to “employees employed in Ontario by the employer”. Similarly, the Regulations under the Accessibility for Ontarians with Disabilities Act, 2005, S.O. 2005, c. 11, specify that an organization's size is to be assessed based on the number of “employees in Ontario”.

[26] Here, however, the Board reasoned that by limiting the availability of the various employment standards in the ESA, including severance pay, to employees whose work is performed in Ontario or is a continuation of such work when performed outside Ontario, the legislature must have intended to limit the obligation to pay severance to companies whose payroll in Ontario was $2.5 million or more.

[27] I consider this reasoning to be illogical. First, when interpreting a statute, ordinarily the inclusion of words of limitation in one part of the act and not in another is seen as deliberate and meaningful. The Board’s approach turns this commonsense proposition on its head. It treats the inclusion of the words “in Ontario” in s. 3 in relation to work and their exclusion in s. 64 in reference to payroll as meaningless. In addition, the Board’s view that it does not make sense to presume that provincial legislation would define payroll to include wages outside Ontario is itself illogical. On the contrary, it makes perfect sense for the legislature to limit the right to severance pay to employees who perform work in Ontario, while exempting small employers from paying severance on the basis of their overall payroll, in and outside Ontario. It is hard to imagine how Ontario could, or why Ontario would, legislate entitlement to severance with respect to work performed outside Ontario; but it is easy to understand why Ontario would base the requirement to pay severance on the size of the payroll of an employer both within and outside the province.

[28] Furthermore, the suggestion in the Board’s reasons that Ontario has no authority to legislate concerning payrolls outside Ontario is simply wrong. There is no jurisdictional impediment to Ontario legislating that an assessment of an employer’s ability to pay severance should take into account the size of the employer outside Ontario. If authority is needed for this self-evident proposition, I refer to P.W. Hogg, Constitutional Law of Canada, 4th ed. (Toronto: Carswell, 1996) 13.3(d) n. 47, where the author states:

Where a provincial law is in relation to persons or property or transactions within the province, the law may take account of facts occurring outside the province. In Bank of Toronto v. Lambe (1887), 12 App. Cas. 575 … it was held that a tax on a person within the province could be computed by reference to facts outside the province; and in Re Legault (1975), 1975 706 (ON CA), 8 O.R. (2d) 585 (C.A.) and Re Underwood McLellan (1979), 1979 2222 (SK CA), 103 D.L.R. (3d) 268 (Sask. C.A.) it was held that the regulation of a profession within the province extended to the disciplining of licensed professionals (a lawyer and an engineer) for unprofessional conduct that took place outside the province. See also Global Securities Corp. v. B.C., 2000 SCC 21, [2000] 1 S.C.R. 494….

[29] It is important to emphasize that I am not saying that I would not interpret s. 3(1) of the ESA as restricting the meaning of payroll in s. 64(2) of the ESA (although clearly, I would not); I am saying that such an interpretation is indefensible, unreasonable, and unavailable.

[30] Second, I will consider the Board’s conclusion that the decision of the Superior Court of Justice in Paquette was distinguishable because it was “factually different” and did not address the interaction of s. 3(1) and s. 64 of the ESA.

[31] Paquette was a wrongful dismissal case. The plaintiff was dismissed by the defendant without notice and without just and sufficient cause. The plaintiff sued the employer. His claim included a claim for severance pay pursuant to s. 64 of the ESA. The employer was headquartered in Quebec and operated three plants, two in Quebec and one in Ontario. At the relevant time, its payroll in Ontario totaled less than $2.5 million, but its combined Quebec and Ontario payroll totaled more than $2.5 million. The plaintiff brought a motion under r. 21.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for determination of two questions of law, one of which was whether the words “in Ontario” should be read into s. 64 of the ESA.

[32] In a carefully crafted and persuasive decision, Kane J. determined that “in Ontario” should not be read into s. 64. He considered in detail the text, context, and purpose of the provision. He examined the intention of the legislature when it enacted the predecessor of s. 64 in the Employment Standards Amendment Act, 1981, S.O. 1981, c. 22, as well as the purpose of an amendment to that provision enacted in the Employment Standards Amendment Act, 1987, S.O. 1987, c. 30, that extended the obligation to pay severance to individuals who are terminated by employers with a payroll of $2.5 million or more and broadened the definition of employer to include associated or related employers. He also analyzed other Ontario legislation that imposed obligations according to an employer’s payroll. His analysis revealed that when the legislature intended to limit payroll to Ontario payroll only for calculation purposes, it did so clearly and explicitly. He also explained why the Board erred in an earlier decision in concluding that Ontario was without legislative authority to include wages paid outside Ontario in the calculation of payroll. As he put it, “In no way does s. 64 provide that the Ontario legislature govern ‘payrolls in other provinces’.… Section 64 does not concern, nor is it directed at, requirements placed upon employers by and in other jurisdictions.”

[33] While the Board was not bound by Paquette, it should have given it serious consideration, particularly in light of its careful analysis. Instead, the Board distinguished it on two grounds, one trivial and the other erroneous. As I noted, the Board first said that Paquette was factually different. By this, the Board could only have been referring to the fact that the total payroll of the employer in Paquette included wages paid in Quebec, while here the total payroll includes wages paid in Europe. This distinction does not rise to the level of principle. Ontario has no greater legislative authority outside Ontario but within Canada than it does in Europe. If Paquette was decided correctly, then its determination that Ontario has legislative authority to include wages paid outside Ontario in its calculation of an Ontario employer’s total payroll applies equally in this case.

[34] Second, the Board’s assertion that Paquette did not address the interaction of s. 3(1) and s. 64 of the ESA is wrong. Kane J. set out the language of s. 3(1), noted that it is directed to Ontario-based employment, and agreed that the Board is only given authority to award severance pay for employment in Ontario. Nonetheless, he said, “this does not address the matter covered by s. 64 … [which] does not concern, nor is it directed at, requirements placed upon employers by and in other jurisdictions.” Had the Board considered this reasoning, it likely would not have said that “it does not make sense” to presume that provincial legislation could affect employment or operations anywhere but in Ontario. As Kane J. explained, s. 64 does not place requirements on employers in other jurisdictions.

[35] Third, I turn to the Board’s position that it saw no reason to depart from its pre-Paquette position. In fact, there is strong reason to depart from it. It is a house of cards, built on a flimsy foundation – a misunderstanding of the decision of the Divisional Court in Tullett and Tokyo Forex (Canada) Ltd. v. Singer, [1998] O.J. No. 2248. In Tullett, an adjudicator awarded an employee severance pay on the basis that the employee was employed by the employer for five years or more. The Court granted an application for judicial review. The employee had worked for Tullett for only two years in Canada. Prior to that time, he worked for Tullett’s parent company in the United States for four years. The Court noted that s. 2(2), the predecessor of s. 3(1), was directed to work performed in Ontario, and only extended beyond where the work was both in and out of Ontario and the work out of Ontario was a continuation of the work in Ontario. The Court stated, “It would seem that the Adjudicator leapt over this hurdle without appreciating that it was a foundation element of the case.” The Court in Tullett simply applied the plain words of what is now s. 3(1) of the ESA to the circumstances covered by that section. It said nothing to suggest that the words of that section should be read into any other section. It certainly said nothing to suggest that the calculation of an employer’s payroll is limited to its payroll in Ontario.

[36] Although the Board said that it preferred the pre-Paquette decisions of the Board, it referred to only one such decision, Sheet Metal Workers’ International Association, Local 397 v. Northland Superior Supply Company Ltd., [2004] O.E.S.A.D. No. 307, and the parties referred to only one other: Genesta Inc. (c.o.b. as Spectrus) v. Union of Needletrades, Industrial and Textile Employees (Ontario Council), Local 2508G, [2007] O.L.A.A. No. 9.[^1]

[37] In Northland Superior, the Board relied on the reasoning in Tullett to conclude that the calculation of payroll under s. 64 of the ESA is restricted to Ontario employment. The entirety of the Board’s reasoning in Northland Superior on this issue is found in para. 15 of the decision:

The Ontario legislature has no authority to legislate concerning the payrolls of other provinces. It has legislative authority with respect to business operating in Ontario. It is the payroll of an employer’s operation in Ontario which is relevant for the purposes of the Act. Just as an employee's period of work outside of Ontario cannot be taken into account in the calculation of the severance pay due to them (unless that work were incidental to their work in Ontario), so an employer's payroll is restricted to those employed in Ontario (Tullett and Tokyo Forex (Canada) Ltd. v. Singer, [1988] O.J. No. 2248; Sheehan, [1996] O.E.S.A.D. No. 262; Carroll v. Stonhard Ltd., 2001 28023 (ON SC), 53 O.R. (3d) 175; Westinghouse Electric Corp., [1998] OLRB Rep. Jan./Feb. 128, at para. 31; Macleans Magazine, [1983] OLRB Rep. Mar. 401, at para. 13, para. 15; Halifax Shipyard And Marine, Office And Technical Employees Union, Local 28, (1997) 1997 25003 (NS LA), 68 L.A.C. (4th) 363). As the employers submit, the Board's jurisdiction is with respect to Ontario only. Although the Act is to be broadly and generously interpreted, I conclude that the payroll which applies is that of the two companies in their Ontario operations.

[38] None of the cases referred to by the Board in Northland Superior assert that only the payroll of an employer’s operation in Ontario is relevant for the purposes of the ESA, and none of them lend support to that position. In particular, for the reasons already stated, Tullett provides no support for this position and the Board in Northland Superior does not explain why it concluded otherwise. The decision is devoid of meaningful analysis on this issue.

[39] The decision in Genesta adds nothing to the analysis. The Board in Genesta simply adopts Northland Superior and concludes that: (1) since only Ontario-based employment is caught by and relevant to s. 3, the same is true of s. 64; and (2) the Ontario legislature has no authority to legislate concerning the payrolls of other provinces. The first of these conclusions is illogical and the second, as I have already explained, is wrong.

[40] In view of the foregoing, I am unable to say that the Board’s reasons are based on an internally coherent and rational chain of analysis. But there is an additional reason for concluding that the decision is unreasonable. Those who interpret the law – whether courts or administrative decisionmakers – must do so in a manner consistent with the modern principle of statutory interpretation: see Vavilov, at para. 118. For this reason, as I have already stated, the merits of an administrative decisionmaker’s interpretation of a statutory provision must be consistent with the text, context, and purpose of the provision. Where an administrative decisionmaker fails to consider a key element of a statutory provision’s text, context, or purpose, and may well have arrived at a different result if it had done so, its failure to consider that element would be indefensible, and unreasonable in the circumstances. In this case, while the Board noted Mr. Hawkes’ reliance on the remedial purpose of the ESA in its description of the submissions of the parties, it did not take it into consideration in its reasons. The purpose of the ESA, and the purpose of the severance pay provisions in particular, bear closer consideration.

[41] In Machtinger v. HOJ Industries Ltd., 1992 102 (SCC), [1992] 1 S.C.R. 986, at para. 31, the Supreme Court of Canada described the purpose of the ESA as follows:

The objective of the Act is to protect the interests of employees by requiring employers to comply with certain minimum standards, including minimum periods of notice of termination. To quote Conant Co. Ct. J. in Pickup, supra, at p. 274, “the general intention of this legislation [i.e. the Act] is the protection of employees, and to that end it institutes reasonable, fair and uniform minimum standards.” The harm which the Act seeks to remedy is that individual employees, and in particular non-unionized employees, are often in an unequal bargaining position in relation to their employers.

[42] Having regard to this purpose, the Court directed, at para. 32, that, “an interpretation of the Act which encourages employers to comply with the minimum requirements of the Act, and so extends its protections to as many employees as possible, is to be favoured over one that does not.”

[43] In Rizzo & Rizzo Shoes Ltd. (Re), at para. 40, the Supreme Court reaffirmed that the ESA should be characterized as benefits-conferring legislation. More specifically, at para. 26, the Court explained that severance pay acts to compensate long-serving employees for their years of service and investment in the employer’s business, and for the special losses they suffer when their employment terminates. This investment is the seniority that an employee builds up over time. Upon the severing of the employment relationship, this investment is lost. Severance pay compensates for this loss. As a result, the Court stated, the provisions of the ESA, including the severance pay provisions, ought to be interpreted in a broad and generous manner, and any doubt arising from difficulties of language should be resolved in favour of the claimant.

[44] In Paquette, the Court closely examined the purpose of the severance pay provisions. Kane J. stated the following:

[49] In Ontario, employers must pay severance pay since 1981; however, this obligation is limited to mass termination of 50 employees or more, as a result of a permanent discontinuance of all or part of the employer's business (Employment Standards Amendment Act, 1981, S.O. 1981, c. 22).

[50] In 1987, Ontario extended this obligation relating to severance pay and the right to individual termination to cases where the employer's payroll is $2.5 million or more (Employment Standards Amendment Act, 1981).

[51] When introducing this extension, the Minister of Labour stated to Parliament that, under s. 64(1)(b) [of the Act], this measure exempted smaller employers from the financial obligation of providing severance pay. The measure chosen targeted an employer's entire payroll.

[52] By amending the measure in 1987, Minister of Labour Wrye does not limit the payroll measure to wages paid only in Ontario, and he specified [in Ontario, Legislative Assembly, Official Report of Debates (Hansard), No. L027 (June 15, 1987) (Hon. Bill Wrye)]:

Severance pay recognizes that, over a period of years, a worker develops employer specific skills, substantial seniority and associated benefits. When a long-serving employee loses his or her job, those employer-specific skills become redundant and those associated benefits are lost. Severance pay is compensation for those losses. That is why, effective today, under this legislation, any individual worker with five years’ employment at an enterprise which has an annual payroll of at least $2.5 million would be eligible for severance pay in cases of termination or lengthy layoff.

By broadening the definition of the word employer to include a group of affiliated corporations with an annual payroll of $2.5 million, this legislation shall ensure payment of severance pay to a greater number of staff. This characteristic of the bill and the improvements to the Employment Standards Act, prove that our government recognizes the dignity and value of the men and women who work in this province.

The legislation would ensure protection for workers who are employed at a company that is part of a larger enterprise. For instance, if a worker was employed at a company with a payroll of only $2 million, the worker would be eligible for severance pay if the payroll of that company and related companies, combined, was at least $2.5 million.

[45] It is apparent that the underlying policy of the 1987 amendment to the severance pay provisions, and specifically to the calculation of payroll, was to better recognize the dignity and value of the people who work in this province by extending the protection of severance pay to as many employees as possible. True to the direction of the Supreme Court in Rizzo, Kane J. interpreted the severance pay provisions in a broad and generous manner and extended their protections to as many employees as possible.

[46] By way of contrast, the Board in this case saw ambiguity in the language of the Act where there is none, purported to distinguish Paquette, and favoured an interpretation of the ESA that accomplishes the opposite of what the Supreme Court directed. Instead of extending the protections of the ESA to as many employees as possible while remaining true to the words of the Act, the Board favoured an interpretation that directly undermines that purpose. Rather than narrowly interpreting the payroll exemption and limiting it to truly small enterprises, the Board interpreted it broadly, allowing some large national or multinational corporations to avoid paying severance pay to long-service employees.

[47] In support of the reasonableness of this interpretation, counsel for the respondent also raised an argument not relied on by the Board. He submitted that the proper interpretation of the word “payroll” should take into account the procedural issues that would arise if payroll were defined to extend beyond Ontario. Specifically, he argued that the Board would be unable “to compel production and to issue orders regarding foreign payrolls”.

[48] This argument is misconceived. The Board is not responsible for conducting investigations under the ESA. Rather, the Director of Employment Standards (“Director”), appointed by the Minister of Labour, is responsible for the administration of the ESA: ESA, ss. 84 and 85. The enforcement of the ESA is carried out by ESOs: ESA, s. 86. An ESO has ample power to obtain information regarding the foreign payroll of an employer in Ontario under s. 91 of the ESA. For example, s. 91(6) authorizes an ESO conducting an investigation or inspection to:

(a) examine a record or other thing that the officer thinks may be relevant to the investigation or inspection;

(b) require the production of a record or other thing that the officer thinks may be relevant to the investigation or inspection;

(c) remove for review and copying a record or other thing that the officer thinks may be relevant to the investigation or inspection;

(d) in order to produce a record in readable form, use data storage, information processing or retrieval devices or systems that are normally used in carrying on business in the place; and

(e) question any person on matters the officer thinks may be relevant to the investigation or inspection.

[49] Further, s. 91(12) prohibits the refusal to answer questions on matters that an ESO thinks may be relevant to an investigation or inspection. The fact that an employer in Ontario might have to obtain payroll information from its employees outside Canada cannot excuse the employer from answering. Accordingly, I do not see enforceability as an obstacle to interpreting payroll broadly.

[50] I am comforted in this conclusion by the submissions of the Director on this application. In oral argument, counsel for the Director disagreed with the position of the respondent employer on this issue and supported the view that an ESO could issue orders under the ESA to obtain the necessary payroll information, particularly in light of s. 4, which provides that related employers are to be treated as one employer for the purposes of the ESA.

[51] To repeat, a reasonable decision must be one that is both justifiable and justified: see Vavilov, at para. 86. The applicant has satisfied me that this decision is neither. Vavilov also explains, at para. 124, that even though the task of a court conducting a reasonableness review is not to perform a de novo analysis or to determine the “correct” interpretation of a disputed provision, it may sometimes become clear in the course of reviewing a decision that the interplay of text, context, and purpose leaves room for a single reasonable interpretation of the statutory provision. In such a case, after approaching the issue with caution, a court may definitively pronounce upon the interpretation of a provision entrusted to an administrative decisionmaker. This is such a case. The calculation of payroll under s. 64 of the ESA is not restricted to Ontario employment; employment outside of Ontario, including employment outside of Canada, must be included.

DISPOSITION

[52] The application is allowed, the decision of the Board is set aside, and the matter is remitted to the Board for a determination of entitlement and the resolution of any other remaining issues, with the direction that the calculation of payroll for the purpose of s. 64 of the ESA is not limited to either Ontario payroll or Canadian payroll.

COSTS

[53] The applicant and respondent employer agreed that as between them, costs should be awarded to the successful party in the amount of $7,500, all inclusive. We make that order against the respondent employer. No costs are awarded for or against the Board or the Director.

Dambrot J.

I agree _______________________________

Lederer J.

I agree _______________________________

Favreau J.

Released: June 15, 2021

CITATION: Hawkes v. Max Aicher (North America) Limited, 2021 ONSC 4290

DIVISIONAL COURT FILE NO.: DC-19-249-0000-JR

DATE: 20210615

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Dambrot, Lederer and Favreau J.J.

BETWEEN:

DOUG HAWKES

Applicant

– and –

MAX AICHER (NORTH AMERICA) LIMITED

Respondent

– and –

DIRECTOR OF EMPLOYMENT STANDARDS

Respondent

– and –

ONTARIO LABOUR RELATIONS BOARD

REASONS FOR DECISION

Dambrot J.

Released: June 15, 2021

[^1]: Aicher and the Director also referenced Altman v. Steve’s Music Store Inc., 2011 ONSC 1480, in their factums, a decision of this court that simply adopted Northland Superior without any analysis.