The Human Rights Tribunal of Ontario has denied Octapharma Canada Inc.’s request to offset statutory severance pay against monetary compensation awarded to former employee, affirming that severance pay serves a distinct purpose and should not reduce damages for discrimination under the Human Rights Code.
In a reconsideration decision, adjudicator Denise Ghanam upheld the original awards for loss of salary, allowances and benefits, and annual bonus to L.C., who was found to have been terminated in breach of the Human Rights Code. The employer had argued that these amounts should be reduced by nearly $28,000 to account for statutory severance pay already provided.
“The applicant had no ability to mitigate the loss of those intangible benefits,” the Tribunal stated, emphasizing that severance pay compensates for factors such as seniority and investment in the employer’s business. “To do otherwise would not fully compensate the applicant for the loss arising out of the infringement of her rights.”
Employer’s request for reconsideration
Octapharma Canada Inc. filed a Request for Reconsideration focusing on three specific monetary awards from the original decision:
- Salary compensation for a 17-day period
- Allowances and benefits compensation
- Annual bonus compensation
The employer contended that these amounts should be offset by the statutory severance pay already paid to L.C., asserting that failing to do so would result in a “punitive” award rather than a compensatory one.
They also argued that L.C.’s new employment, which included a higher annual bonus, should mitigate the bonus awarded by the Tribunal, effectively reducing it to zero.
Tribunal’s analysis and findings
The Tribunal considered the employer’s request under section 45.7 of the Human Rights Code and Rule 26 of the Tribunal’s Rules of Procedure, which govern requests for reconsideration. The Tribunal emphasized that reconsideration is a discretionary remedy and not an appeal or a hearing de novo.
Addressing the employer’s argument regarding the annual bonus, it noted that the bonus awarded was for work L.C. performed for Octapharma Canada Inc. in 2020, nearly 95 per cent of which was completed at the time of her termination. The bonus from her new employment in 2021 was deemed irrelevant to the calculation.
“Given that the bonuses relate to different time periods and companies, regardless of the value of the new annual bonus, it has no applicability in the calculation of the bonus awarded by the Tribunal,” the Tribunal wrote.
Regarding the request to offset the awarded amounts with the statutory severance pay, the Tribunal delved into the distinct purposes of termination pay and severance pay under the Ontario Employment Standards Act, 2000 (ESA).
Distinction between termination pay and severance pay
Termination pay under the ESA compensates employees for the loss of wages during the notice period when they are terminated without cause. In this case, the Tribunal fully offset the termination pay against L.C.’s loss of salary, awarding compensation only for the 17-day gap until she secured new employment.
Severance pay, however, serves a different purpose. It compensates long-serving employees for their years of service and the loss of intangible benefits such as seniority, organizational influence, and investment in the workplace.
“Severance pay recognizes that an employee does make an investment in [their] employer’s business—the extent of this investment being directly related to the length of the employee’s service,” the Tribunal cited from previous jurisprudence.
The Tribunal referred to several legal precedents, including the Supreme Court of Canada’s decision in Rizzo & Rizzo Shoes Ltd., which affirmed that severance pay acts to compensate for special losses employees suffer upon termination.
For more information, see Cosentino v. Octapharma Canada Inc., 2024 HRTO 1331 (CanLII).
