|
Employment - Building Service Providers (BSPs). Kondaj v. Crossbridge Condominium Services Ltd.
In Kondaj v. Crossbridge Condominium Services Ltd. (Ont CA, 2026) the Ontario Court of Appeal dismissed an appeal, here brought against the motion judge's decision that the new building service provider was liable for not only ESA termination pay of a terminated BSP employee, but also for common law wrongful dismissal damages.
This case is useful due to the unique situation of BSP employment - which essentially places the new BSP in the shoes of the old for ESA purposes - but is silent wrt common law wrongful dismissal damages:[5] The question on this appeal is: when a new building services provider decides not to continue the employment of an old services provider’s employee, who is responsible for paying the employee’s common law notice entitlements? Is it the old building services provider or the new one? This involves the interpretation of ss. 56 and 75 of the Act.
....
THE LEGISLATIVE PROVISIONS
[25] Part XV of the Act governs the termination and severance of employment in Ontario. Section 56, which is part of Part XV, provides that an employee is terminated if “the employer dismisses the employee or otherwise refuses or is unable to continue employing him or her” (emphasis added). Part XV of the Act also includes s. 54, which requires employers to give employees notice before termination, and s. 61, which governs payments in lieu of notice.
[26] Part XIX of the Act establishes distinct rules for building services providers like Duka and Crossbridge. Part XIX includes s. 75 of the Act, which governs termination when a building services provider is replaced. If a new provider chooses not to continue the employment of the old provider’s employee, s. 75 deems the new provider to have employed them for the purposes of their termination and severance pay under Part XV of the Act. Section 75 reads as follows:New provider
75. (1) This Part applies if a building services provider for a building is replaced by a new provider.
Termination and severance pay
(2) The new provider shall comply with Part XV (Termination and Severance of Employment) with respect to every employee of the replaced provider who is engaged in providing services at the premises and whom the new provider does not employ as if the new provider had terminated and severed the employee's employment.
Same
(3) The new provider shall be deemed to have been the employee's employer for the purpose of subsection (2). [Emphasis added.] [27] Although s. 75(2) refers expressly to statutory “termination and severance pay”, it makes no reference to the payment of common law entitlements.
....
1. Whether the motion judge’s interpretation is consistent with the intention of the legislature
[30] The first issue is whether the motion judge’s decision is consistent with the intention of the legislature.
a. The motion judge’s decision
[31] There is no dispute that in enacting s. 75 of the Act and its forerunners, the legislature generally intended to promote continuous employment for building services employees given that contracts for building services providers change hands frequently.
[32] The motion judge held that imposing common law notice obligations on the new provider would be more consistent with the legislative intention for three reasons.
[33] First, placing the burden on the former provider “may incentivize the new provider to terminate existing employees”, contrary to the intention of the legislature, because as the motion judge noted at para. 34 of these reasons:If the new provider takes on existing employees and terminates them at some later point, there is no doubt that the new provider would be liable for common law notice. Subsection 10(2) of the Act requires notice be calculated in a way which includes the employee’s service with the old provider. If Duka were correct, the new provider could avoid that risk by simply paying statutory termination and severance, amounts that are typically much lower than common law notice, thereby avoiding the risk of common law notice if it had to terminate those employees at a later point in time. [34] Second, he held at para. 35 that:[S]uch an arrangement could be exploited to harm competitors: a new provider could force the former provider to bear the cost of common law notice, even when the contract was lost through no fault of the old provider. This would undermine employment stability in the building services sector, an outcome clearly at odds with the legislator’s intention. [35] Third, the motion judge held that requiring an employee to seek statutory termination and severance pay from the new provider and common law notice from the old provider would create a confusing and complex regime at odds with the statute’s purpose of protecting those employees.
....
c. The motion judge’s conclusion is consistent with the intention of the legislature
[40] As noted above, the parties agree that Part XIX of the Act is employee protection legislation. However, the motion judge correctly held that Duka’s interpretation would provide an incentive to new providers to terminate the old provider’s employees. Termination of the old provider’s employees would minimize the new provider’s costs as the new provider would not have to pay common law entitlements. At the same time, it would maximize the costs of the old provider as they would have to pay the common law entitlements.
[41] Duka’s interpretation would also, through immediate termination, allow new providers to avoid the risk of ever paying significant common law entitlements to employees largely unknown to them. Incentivizing employee termination in this manner would be contrary to legislative intent.
[42] In addition, assigning common law notice liability to the new provider does not defeat the legislature’s intention in the 1995 amendments to offer employers more flexibility.
[43] A brief review of the legislative history is instructive. In 1992, the Ontario Legislature amended the Act to require successive building services providers to offer employment to past employees who provided services on-site. If the provider did not, they were required both to comply with Part XIV of the Act (now Part XV) and to pay the employee’s wages and benefits lost as a result of their not receiving the required offer (as determined by an employment standards officer): Labour Relations and Employment Statute Law Amendment Act, 1992, SO 1992, c 21, ss. 58-59.
[44] The pertinent 1995 amendments (s. 13.1, largely carried forward into the modern s. 75) were twofold. First, the new provider is no longer required to offer to continue the employment of an old provider’s employee. Second, if they elect not to, they are no longer obligated to pay the employee’s resulting lost wages and benefits at the discretion of an employment standards officer: Labour Relations and Employment Statute Law Amendment Act, 1995, SO 1995, c 1, ss. 71-73. These amendments therefore give building services providers more flexibility.
[45] This flexibility exists regardless of who must pay common law reasonable notice entitlements. Making the new provider liable for common law notice entitlements if they do not hire the employee simply adds a variable to the employer’s re-hiring decision, albeit one that weighs in favour of rehiring the employee (by deferring payment of common law notice obligations until a possible later termination). It would not, however, require new providers to offer to continue past employees’ employment, nor would it make them responsible for lost wages and benefits if they do not extend an offer.
[46] Contrary to Duka’s submission, the intention of the legislature in enacting these provisions was not to decide who is responsible for paying common law entitlements but, rather, to create limited flexibility within a system that minimizes the chances of vulnerable employees’ termination.
[47] For these reasons, I see no error in the motion judge’s analysis or conclusion that holding Duka responsible for the payment of common law entitlements is consistent with the intention of the legislature.
2. Whether the motion judge’s order is consistent with the scheme of the Act
[48] The second issue is whether the motion judge’s decision to impose liability for common law notice on the new building services provider is consistent with the scheme of the Act.
....
a. The motion judge’s decision
[49] The motion judge held that assigning liability to the new provider is consistent with the scheme of the Act because:(a) Employees’ statutory and common law entitlements are intertwined; they are not two independent regimes. The Act simply provides a floor from which common law protections operate. To suggest otherwise would contravene Elsegood v. Cambridge Spring Service 2001 Ltd., 2011 ONCA 831, 109 O.R. 3d 143, and Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986; and
(b) Under s. 77 of the Act, a party seeking to become a building services provider may obtain information about the terms and conditions of employment contracts from the existing provider before bidding on the project. This enables new providers to assess the common law notice they might be responsible for with respect to existing employees. ....
c. The motion judge’s interpretation is consistent with the scheme of the Act
[54] I agree with the motion judge that the common law does not operate independently of the Act.
[55] First, employees’ statutory and common law entitlements are intertwined: Elsegood, at para. 5. Statutory and common law entitlements both arise from the same act of termination (or, in this case, Duka’s refusal to continue Mr. Kondaj’s employment) and address the obligations that arise from it. Common law obligations can be shaped by statutory provisions even absent explicit language tying the two together: Elsegood at paras. 6-12.
[56] Where the common law continues to apply, it provides entitlements in addition to statutory notice or pay in lieu entitlements: Elsegood at para. 11, Machtinger at pp. 999-1000.[2] As such, the employer may have to pay more than the minimum payments for employees provided for in the Act, depending on the common law notice requirements for the particular employee.
[57] Second, holding Duka responsible for paying common law benefits would not modify common law concepts of privity of contract beyond what is already contemplated by the Act.
[58] Section 75(3) of the Act deems Duka to have been Mr. Kondaj’s employer from the commencement of his employment for the purposes of termination. Even if, as Duka submits, s. 5(2) of the Act requires a statute or contract to import a common law benefit, I am satisfied that s. 75(3) deems a contract to exist to ensure that vulnerable employees are protected.
[59] Moreover, s. 10(2) of the Act provides that:The employment of the employee shall be deemed not to have been terminated or severed for the purposes of this Act and his or her employment with the replaced provider shall be deemed to have been employment with the new provider for the purpose of any subsequent calculation of the employee’s length or period of employment. [Emphasis added.] [60] Interpreting s. 75 of the Act to hold a successor provider responsible for common law notice entitlements harmonizes the consequences under the Act when an employee is both hired (under s. 10) and not hired (under s. 75) by a successor provider.
[61] Third, s. 77(1) of the Act provides sufficient information to enable potential new providers to assess their common law obligations. It provides that:Where a person is seeking to become the new provider at a premises, the owner or manager of the premises shall upon request give to that person the prescribed information about the employees who on the date of the request are engaged in providing services at the premises. [62] Section 77 enables prospective providers like Duka to obtain employment details before they take on a building services provider contract so that they can assess and plan for liability. As noted in Supreme General Services v. Klean U Services Inc., 2015 CanLII 58346 (ON LRB), at para. 19, s. 77 “mandates the three-way sharing of employee information – name, status, length of service, terms and conditions of work, etc.”, enabling the new building services provider to “make a rational business decision” regarding employee retention.
[63] For these reasons, I see no error in the motion judge’s conclusion that holding Duka responsible for Mr. Kondaj’s common law entitlements is consistent with the scheme of the Act.
3. Whether the motion judge’s decision is consistent with the wording of the provision
[64] The third issue is whether holding Duka liable for the payment of common law entitlements is consistent with the wording in ss. 56 and 75 of the Act.
a. The motion judge’s decision
[65] The motion judge held that the ordinary meaning of the words in ss. 56 and 75, when read in the context of the Act as a whole, is consistent with holding Duka liable for the payment of common law entitlements.
[66] Section 56 of the Act provides that “an employer terminates an employee” if, among other things, “the employer dismisses the employee or otherwise refuses or is unable to continue employing him or her”. This court held in Elsegood, at para. 5, that “s. 56(1) of the ESA operates to terminate an employee's employment in law so that the employee may claim for common law wrongful dismissal damages” (emphasis added).
[67] Section 75(2) requires the new provider to comply with Part XV, which includes s. 56(1), “as if the new provider had terminated and severed the employee’s employment”.
[68] The motion judge therefore found that in this case, as part of Part XV, s. 56 operates to ensure that Mr. Kondaj can obtain common law damages in lieu of notice from Duka.
....
c. The motion judge’s decision is consistent with the wording in the Act
[70] First, while s. 56 of the Act describes the ways in which an employee can be terminated “for purposes of section 54” of the Act, the definitions of termination in s. 56 also apply at common law, “because [s. 56] applies generally in all cases to require the employer to give notice whenever an employee is terminated”: Elsegood at para 8. Likewise, the statute deeming a new provider to have been the employee’s employer under s. 75(3) “for the purposes of subsection (2)” does not preclude a similar deeming for the purposes of the common law.
[71] Second, by incorporating s. 56, s. 75(2) imposes common law reasonable notice provisions on new providers. The chain of reasoning is as follows: (i) Mr. Kondaj’s employment was “terminated” for the purpose of s. 56 when Duka refused to continue to employ him; (ii) s. 75 deems Duka, as the new provider, to have been Mr. Kondaj’s employer for the purpose of termination as if Duka had terminated and severed Mr. Kondaj’s employment; (iii) s. 75 requires the new provider to comply with s. 56(1); and (iv) as in Elsegood, s. 56(1) allows an employee who has been terminated to claim common law damages.
[72] As such, reading the words in ss. 56 and 75 of the Act together, Duka is responsible for paying Mr. Kondaj’s common law entitlements.
[73] Nor, as submitted by Duka, is Elsegood distinguishable on the grounds that in this case there was no employment relationship. Section 75 provides the necessary employment relationship. By refusing to continue Mr. Kondaj’s employment, Duka was deemed to have dismissed Mr. Kondaj from employment, thereby triggering the termination obligations that include common law entitlements.
[74] For these reasons, I see no error in the motion judge’s decision that holding Duka liable for the payment of common law entitlements is consistent with the wording of the Act.
CONCLUSION ON THE INTERPRETATION OF THE ACT
[75] For the above reasons, I see no error in the motion judge’s interpretation of the Act and I would dismiss the appeal.
|
