Canadian Employment Law Today

CELT May 29 2013:celt 467.qxd 13-05-15 4:34 PM Page 2 May 29, 2013 Ask an Expert with Brian Kenny MacPherson Leslie and Tyerman, Regina Have a question for our experts? Email jeffrey.r.smith@thomsonreuters.com. ■ EMPLOYMENT STANDARDS: Determining a company's payroll Question: Under our employment standards legislation, a company doesn't have to pay severance to terminated employees if the total annual payroll is less than $2.5 million. However, some employees are paid by drawing from the firm's trust account and are responsible for all of their own deductions, such as CPP, EI and income tax, much as contractors would be. Should these employees be counted as part of the payroll when it comes to determining if severance must be paid? Answer: Questions related to an employee's entitlement to severance pay are governed by the applicable province's employment standards legislation. This question appears to be informed by Ontario's legislative regime and the following response will be focused on the rules governing Ontario. It is important to keep in mind that different rules apply in different provinces. "Severance pay" is compensation that is paid to a qualified employee who has her employment "severed." It compensates an employee for loss of seniority and job-related benefits. It also recognizes an employee's long service. Severance pay is not the same as termination pay, which is given in place of the 2 required notice of termination of employment. Pursuant to Ontario's Employment Standards Act, 2000, an employee qualifies for severance pay when her employment is severed and she: •has worked for the employer for five or more years (including all the time spent by the employee in employment with the employer, whether continuous or not and whether active or not); and •his or her employer: •has a payroll in Ontario of at least $2.5 million; or •severed the employment of 50 or more employees in a six-month period because all or part of the business closed. In Ontario, what constitutes an employer's payroll is informed by section 64(2) of the act. The emphasis is on the amount of wages earned by employees and not where the wages are drawn from. Therefore, an employer will be considered to have a payroll of $2.5 million or more if: •The total wages earned by all of the employees in the four week pay period preceding the severance, when multiplied by 13, comes to $2.5 million; or •The total wages earned by the employees in the last or second last fiscal year prior to severance. The Ontario legislative scheme also prescribes limits to the severance pay entitlements of employees including that certain employees are not entitled to severance: see Employment Standards Act, 2000, Regulation 288, s. 9. In calculating an employer's total annual payroll, one must consider whether an individual is engaged by the employer as an "employee" within the meaning of the act. Therefore, if certain service providers are not classified as "employees" within the meaning of the legislation, the amount of their remuneration will be excluded from the employer's payroll. This very issue came before the Ontario Superior Court in Pinard v. Unity Insurance Brokers (Windsor) Ltd. The issue was whether certain insurance brokers were "employees" for the purposes of calculating the $2.5 million threshold. The court examined the rela- tionship between the parties, noting the independence and level of discretion the brokers could exercise in carrying out their functions. There was no indication the employer exercised control and supervision over the brokers. As a result the court concluded the brokers were independent contractors and not "employees" under the legislation and, therefore, were not included in the calculation of the $2.5 million threshold. To assess whether workers are employees or independent contractors, a adjudicator will often consider more than just whether the individual is responsible for her own tax deductions. The fundamental question is: "Is the person who has engaged herself to perform these services performing them as a person in business on her own account?" The courts have held that no exhaustive list can be compiled of all considerations which are relevant to determining the question, nor can strict rules be laid down as to the relevant weight which the various considerations should carry in particular cases. However, the traditional point of departure in such an assessment is the application of the four-fold test involving control, ownership of tools, chance of profit, and risk of loss. If, after applying this test, the worker is considered an employee, then her wages should be included in the calculation of the total payroll. ■ EMPLOYMENT STANDARDS: Failure to return from leave Question: Is failure to return at the conclusion of an approved emergency leave just cause for dismissal? What if the employee notifies the employer he won't be returning yet despite the fact the employer hasn't approved additional leave? Answer: Employment legislation with respect to emergency leave varies throughout the country. In most Published by Canadian HR Reporter, a Thomson Reuters business 2013 Continued on page 7

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