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Apr 4, 2005

Ontario Court of Appeal Unanimously Affirms Ontario Nurses’ Association Position that the Denial of Severance Pay to Disabled Employees under the Employment Standards Act is Discriminatory and Unconstitutional

By Liz McIntyre and Amanda Pask

This appeal considered the constitutionality of a section of Ontario’s Employment Standards Act that denied severance pay to employees whose contracts have been frustrated by illness or injury.

In January 2004 a panel of Ontario’s Divisional Court issued a unanimous decision that this provision was contrary to the equality provisions of the Charter of Rights and Freedoms, and ordered the payment of the severance benefit to a nurse who had been terminated for innocent absenteeism as a result of her health.

The Divisional Court had reviewed the legislative history of the ESA’s severance pay provisions to conclude that "severance pay.... is an earned benefit that compensates long-serving employees for their past services and for their investment in the employers’ business" and "is properly payable or any non-culpable cessation of employment". The Divisional Court concluded that "the denial of the benefit to a group already disadvantaged by their disability and the loss of their employment by reason of their disability is discriminatory and not demonstrably justifiable. As such subsection 58(5)(c) cannot withstand constitutional scrutiny."

The employer appealed this decision to the Ontario Court of Appeal, which, on May 4, 2005 issued a unanimous ruling upholding the decision of the Divisional Court.

At the Court of Appeal the Employer and the Attorney-General took the position that the dominant purpose of severance pay was not to compensate for past services, but rather to compensate for capital losses going forward into new employment, and argued that “since employees whose contracts have been frustrated due to illness or injury are unlikely to re-enter the workforce, denying them severance pay is not discriminatory”. The Court of Appeal rejected this argument, stating that, even assuming “for the sake of argument”, that the dominant purpose of severance pay was as suggested by the Employer and the Attorney-General, their defence of the legislation failed because of its reliance on treating employees whose contracts were frustrated due to illness or injury as employees who will not work again.

In the unanimous decision written by Justice Jurianz, the Court held that the approach of the Employer and Attorney-General was based on impermissible stereotyping of disabled persons as being unable to fully participate in the workforce. The Court further commented that this generalization was “not true”, because employees with severe and prolonged disabilities, while unable to be employed in one workplace, may yet be able to be employed elsewhere, and further, because disabilities, the skills of employees with permanent disabilities, and the ability of society to accommodate disabilities are all are subject to change.

The Court also held that the fact that the exclusion is inconsistent with other purposes of severance pay (such as compensation for past service) would have been sufficient to ground a s.15 breach, stating: “In my view, where a statute has several purposes, adverse differential treatment in light of one purpose is sufficient to establish a prima facie breach of s.15".

The Court went on to rule that the provision was not saved under section 1 as a reasonable limit in a free and democratic society, and therefore upheld the decision of the Divisional Court declaring the provision to be unconstitutional and of no force and effect.

While this decision concerns predecessor legislation to the current Employment Standards Act, 2000, the legislation has changed only in form and not in substance. The new provisions denying severance pay to employees whose contract of employment is frustrated by illness or disability are found in section 9 of Ontario Regulation 288/01 under the ESA, 2000.

This decision will be of considerable significance to those seeking to uphold the rights of ill and disabled employees to receive severance benefits. In addition, the Court’s finding that differential treatment in light of one of the purposes of a multiple purpose statute is sufficient to demonstrate a breach of s.15, is a significant development in equality rights jurisprudence.

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