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The Severance Pay “Loophole” Issue

Howard Hampton, leader of the Ontario N.D.P. party introduced a private members bill today that would amend the Employment Standards Act to broaden the scope of employers required to pay “severance pay” when they terminate workers.   The current law is as follows:

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

All employees who have been employed for 3 months or more are entitled to “notice” pay under the ESA.  But “severance” pay is different, and in addition to notice, and it is limited to mass dismissals and/or large employers.   What do you think the policy rationale is for providing severance pay only in such narrow circumstances?


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