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Limitation periods and statutory severance pay: an update

statutory severance payLast April, we wrote about an interesting decision from the Ontario Superior Court concerning when the limitations period begins to run for claims of wrongful dismissal and statutory severance pay. In that case, the Court held that the limitation period to claim unpaid statutory severance pay commences as soon as working notice of dismissal is issued to an employee.

In particular, the Court stated:

Mr. Bailey’s entitlement to severance arose when he was dismissed by the notice of termination received on March 18, 2013: see s. 63(1)(a), Employment Standards Act, s. 63(1)(a). It is on this date that the limitation period for this claim began to run.

I have considered but disagree with the plaintiff’s position that s. 65(1) of the Employment Standards Act indicates the severance date should be at the end of work. Section 65(1) is the calculation section, not the entitlement section. Entitlement is by reason of severance per s. 64(1) and severance is by dismissal per s. 63(1).

In sum, I find that the wrongful dismissal and severance pay claims arose on March 18, 2013, when the notice of termination was received by Mr. Bailey. The applicable limitation period commenced on this date. Because the statement of claim was filed after the expiry of the limitation period, the claims of wrongful dismissal and severance pay are statute-barred.

This decision caught a lot of employment lawyers (us included) by surprise. While most took no issue with the notion that the limitation period for wrongful dismissal arises upon the issuance of working notice, that the same rule applied to statutory severance pay seemed strange.

In our recap of the case in April, we expressed the following opinion:

With respect to the Court, this appears to be an erroneous result. Statutory severance pay pursuant to the Employment Standards Act, 2000, is designed to be paid out at the end of a worker’s employment (inclusive of any working notice period). It is for this reason that if an employer provides statutory pay-in-lieu of notice of termination these required weeks of notice are added to the length of employment used to calculate statutory severance entitlement (see s. 65(4)). Similarly, a close reading of ss. 11(5) and 63(1)(a) of the Act supports the same conclusion that severance pay is not to be issued until the working relationship formally ends.

Since that time, the Plaintiff brought his case for consideration at the Court of Appeal. While the Court of Appeal largely affirmed the motion decision below, notably it took a different view with respect to limitation periods and statutory severance pay.

The Court of Appeal held:

On appeal the appellant makes a novel and credible argument based on ss. 11(5), 63(1)(a), 64(1) and 65(1) of the Employment Standards Act that until employment is completed the claim for severance pay does not crystalize. There was no authority submitted by the parties that is contrary to this argument. In the circumstances, it is not plain and obvious that the limitation period for severance claim should not run from the date of completion of employment. We also do not accept the respondent’s submission that is plain and obvious that s. 63(1)(e) of the Employment Standards Act applies as opposed to s. 63(1)(a) as submitted by the appellant… The motion judge’s order striking the claim for severance pay is set aside. [emphasis added]

The takeaway

It is important to bear in mind that the Court of Appeal’s decision arose in the context of a motion to strike pleadings in a wrongful dismissal case. As such, the bar for success (e.g. being able to continue with the lawsuit) is lower than that of a final decision. The Court of Appeal correspondingly applied the traditional test for such motions: whether it is “plain and obvious” that due to the applicable limitations period the claim for statutory severance pay must fail. In that context, the Court of Appeal did not strictly rule that the correct application of the limitation period for statutory severance pay is to start the clock at the end of the employment relationship as opposed to when notice of dismissal is issued.

That said, the result reached by the Court of Appeal, and the language used (i.e. that such a position is a “credible argument”) lends considerable support to the view that statutory severance pay becomes due and owing only at the end of the employment relationship. Stay tuned and perhaps one day soon a court will provide a definitive answer to this question of law.

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Vey Willetts LLP

Employment and labour lawyers at Vey Willetts
Vey Willetts LLP is an Ottawa-based workplace law firm, serving individuals and employers across Eastern Ontario. They recognize that operating a business is complex and maintaining an efficient and legally-compliant workplace is a continuous challenge. The firm helps simplify legal workplace obligations so that employers can focus on what matters: their business. Learn more about Vey Willetts LLP by contacting Andrew Vey, or Paul Willetts or by visiting the firm’s website. Read more.
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