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Employment - Common Employers. George v. 2411363 Ontario Inc. (Ontario Health Clinics Brantford FHO Inc.)
In George v. 2411363 Ontario Inc. (Ontario Health Clinics Brantford FHO Inc.) (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal of an "order dismissing her motion to add the three individual respondents as defendants in her wrongful dismissal action" (here on limitations ground), on the argument that they were 'common employees':[9] The material facts set out in the appellant’s affidavits are the kind of material facts that could support the application of the common employer doctrine. The doctrine may apply when there is conduct reflecting an intention to contract between the employee and the common employers, including effective control over the employee: O’Reilly v. ClearMRI Solutions Ltd., 2021 ONCA 385, 460 D.L.R. (4th) 487, at para. 53; Downtown Eatery (1993) Ltd. v. Ontario, 2001 CanLII 8538 (ON CA), 54 O.R. (3d) 161, at para. 33.
[10] For example, as the motion judge noted in his reasons, in her affidavit and reply affidavit, the appellant sets out first hand information that she had prior to her termination about her employment with essentially the same group of physicians for many years which ultimately included the individual respondents, and that the direction and management of the group’s employees, including her, came from the same common core of physicians. . Lemyre v. Residential Energy Saving Products Inc. et al
In Lemyre v. Residential Energy Saving Products Inc. et al (Div Court, 2022) the Divisional Court considered factors that indicate common employer status:[30] In his trial decision, reported at 2020 ONSC 7542, the trial judge focused on the relationship between the corporate entities in relation to the duties performed by Ms. Lemyre and the business in general. He relied on the decision of the Court of Appeal for Ontario in Downtown Eatery (1993) Ltd. v. Ontario (2001), 2001 CanLII 8538 (ON CA), 54 O.R. (3d) 161 (C.A.) (“Downtown Eatery”), at para. 36, where the court stated as follows:However, although an employer is entitled to establish complex corporate structures and relationships, the law should be vigilant to ensure that permissible complexity in corporate arrangements does not work an injustice in the realm of employment law. At the end of the day, Alouche’s situation is a simple, common and important one – he is a man who had a job, with a salary, benefits and duties. He was fired – wrongfully. His employer must meet its legal responsibility to compensate him for its unlawful conduct. The definition of “employer” in this simple and common scenario should be one that recognizes the complexity of modern corporate structures but does not permit that complexity to defeat the legitimate entitlements of wrongfully dismissed employees. [31] Notwithstanding that he had no evidence regarding the shareholders or directors of RESP, the trial judge relied on evidence of operational interaction between personnel and functions of the two entities and the nature of their enterprise to conclude they were a single business.
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[41] The appellant submits the lack of such evidence was fatal to a finding that RESP and BHCC were a common employer.
[42] The appellant relies on the decision in Downtown Eatery, where the Court of Appeal for Ontario, at para. 30, adopted the decision of the British Columbia Court of Appeal in Sinclair v. Dover Engineering Services Ltd. (1987), 11. B.C.L.R. (2d) 176 (S.C.), aff’d (1988), 1988 CanLII 3358 (BC CA), 49 D.L.R. (4th) 297 (B.C.C.A.), which stated in part, at p. 181:As long as there exists a sufficient degree of relationship between the different legal entities who apparently compete for the role of employer, there is no reason in law or in equity why they ought not all to be regarded as one for the purpose of determining liability for obligations owed to those employees who, in effect, have served all without regard for any precise notion of to whom they were bound in contract. What will constitute a sufficient degree of relationship will depend, in each case, on the details of such relationship, including such factors as individual shareholdings, corporate shareholdings, and interlocking directorships. The essence of that relationship will be the element of common control. . Rahman v. Cannon Design Architecture Inc.
In Rahman v. Cannon Design Architecture Inc. (Ont CA, 2022) the Court of Appeal considered the test for common employers:[41] The common employer doctrine was recently considered by this court in O’Reilly v. ClearMRI Solutions Ltd., 2021 ONCA 385, 460 D.L.R. (4th) 487, leave to appeal refused, [2021] S.C.C.A. No. 316. Zarnett J.A., writing for the court, explains, at para. 2, that the doctrine recognizes that an employee may simultaneously have more than one employer:If an employer is a member of an interrelated corporate group, one or more other corporations in the group may also have liability for the employment obligations. However, and importantly, they will only have liability if, on the evidence assessed objectively, there was an intention to create an employer/employee relationship between the employee and those related corporations. [42] At para. 54 of O’Reilly, Zarnett J.A. states that “[t]he conduct most germane to showing an intention that there was an employment relationship with two or more members of an interrelated corporate group is conduct which reveals that effective control over the employee resided with those members”. . O'Reilly v. ClearMRI Solutions Ltd.
In O'Reilly v. ClearMRI Solutions Ltd. (Ont CA, 2021) the Court of Appeal considered the common law issue of the common employer:The Common Employer Doctrine
[49] The common employer doctrine does not involve piercing the corporate veil or ignoring the separate legal personality of each corporation. It imposes liability on companies within a corporate group only if, and to the extent that, each can be said to have entered into a contract of employment with the employee: Sinclair v. Dover Engineering Services Ltd., 1988 CanLII 3358 (BC CA), 49 D.L.R. (4th) 297 (B.C.C.A.) (“Sinclair (BCCA)”), at para. 9.
[50] Thus, consistent with the doctrine of corporate separateness, a corporation is not held to be a common employer simply because it owned, controlled, or was affiliated with another corporation that had a direct employment relationship with the employee. Rather, a corporation related to the nominal employer will be found to be a common employer only where it is shown, on the evidence, that there was an intention to create an employer/employee relationship between the individual and the related corporation: Gray v. Standard Trustco Ltd. (1994), 1994 CanLII 7472 (ON SC), 8 C.C.E.L. (2d) 46 (Ont. Gen. Div.), at para. 3; Downtown Eatery (1993) Ltd. v. Her Majesty the Queen in Right of Ontario (2001), 2001 CanLII 8538 (ON CA), 54 O.R. (3d) 161 (C.A.), at paras. 31, 40, leave to appeal refused, [2002] 3 S.C.R. vi (note); Rowland v. VDC Manufacturing Inc., 2017 ONSC 3351, at paras. 12-13.
[51] As illustrated by the issue in this case, where Mr. O’Reilly alleges that Tornado is liable for specific employment obligations, the common employer question is one of contractual formation – did the employee and the corporation alleged to be a common employer intend to contract about employment with each other on the terms alleged? When such an intention is found to exist, no violence is done to the concept of corporate separateness because the corporation is held liable for obligations it has undertaken.
[52] To determine whether the required intention to contract was present, the parties’ subjective thoughts are irrelevant. Nor need the intention necessarily have been reflected in a written agreement. The common law’s approach to contractual formation is objective; intention to contract can be derived from conduct. As the Supreme Court has stated in a similar common law contractual formation context, what is relevant is “how each party’s conduct would appear to a reasonable person in the position of the other party”: Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp., 2020 SCC 29, 450 D.L.R. (4th) 105, at para. 33.
[53] A variety of conduct may be relevant to whether there was an intention to contract between the employee and the alleged common employer(s). As they bear upon this case, two types of conduct are important. One is conduct that reveals where effective control over the employee resided. The second is the existence of an agreement specifying an employer other than the alleged common employer(s).
[54] The conduct most germane to showing an intention that there was an employment relationship with two or more members of an interrelated corporate group is conduct which reveals that effective control over the employee resided with those members[4] : Downtown Eatery, at paras. 32-33. This is consistent with how the law distinguishes employment from other types of relationships. Control over such matters as the selection of employees, payment of wages or other remuneration, method of work, and ability to dismiss, can be important indicators of an employer/employee relationship: Baldwin v. Erin District High School Board, 1961 CanLII 213 (ON CA), 1961 O.R. 687, at para 11, aff’d 1962 CanLII 527 (SCC), 36 D.L.R. (2d) 244 (SCC); see also Bagby v. Gustavson International Drilling Co. Ltd., 1980 ABCA 227, 24 A.R. 181, at paras. 48-50.
[55] A written agreement that specifies an employer other than the corporation(s) alleged to be the common employers may also be relevant. The extent of its relevance depends on how the existence and terms of the written agreement, in light of the facts, informs the question of whether there was an intention that others were also employers.
[56] These points are illustrated in this court’s leading decision on common employer liability, Downtown Eatery, and the case law which has followed.
[57] In Downtown Eatery, the employee was the manager of a nightclub called “For Your Eyes Only”. The nightclub was operated together by a “highly integrated or seamless group of companies”. One corporation owned the premises; a second owned the trademark and held the liquor and entertainment licences; a third owned the chattels and equipment; and a fourth was the paymaster: at para. 34. The employee’s contract was with the business name For Your Eyes Only, which itself was not a legal entity: at paras. 38-40.
[58] The court held that an individual may be found to be an employee of more than one corporation in a related group of corporations, as long as the evidence shows an intention to create an employer/employee relationship between the individual and the respective corporations within the group: at para. 31. To determine that issue, the operative question raised by the facts was “where effective control over the employee resides”: at paras. 32-33.
[59] In Downtown Eatery, the answer to that question was that each of the commonly controlled corporations that was integrally and directly involved in owning and operating the nightclub, was exercising control over, and was therefore a common employer of, the manager.
[60] The court stated at para. 40:In conclusion, Alouche's true employer in 1993 was the consortium of Grad and Grosman companies which operated For Your Eyes Only. The contract of employment was between Alouche and For Your Eyes Only which was not a legal entity. Yet the contract specified that Alouche would be "entitled to the entire package of medical extended health care and insurance benefits as available in our sister organization". The sister organization was not identified. In these circumstances, and bearing in mind the important roles played by several companies in the operation of the nightclub, we conclude that Alouche's employer in June 1993 when he was wrongfully dismissed was all of Twin Peaks, The Landing Strip, Downtown Eatery and Best Beaver. This group of companies functioned as a single, integrated unit in relation to the operation of For Your Eyes Only. [Emphasis added.] [61] The two emphasized passages deserve amplification.
[62] First, the written contract of employment in Downtown Eatery, by not naming a legal entity, did not indicate a choice of one entity over another in terms of identifying the employer. Rather, it indicated the employer was the nightclub, a business operated by the four corporations. Although there was a written agreement, it begged, rather than answered, the question of who the parties intended the employer to be.
[63] Second, each of the corporations found to be a common employer was directly involved in the operation of the nightclub that employed the manager. The nightclub was each of their business. Each was thus in a direct relationship of control with the employee who had been hired to manage their business. None were held to be employers simply because they had a relationship with another corporation that was directly involved with the employee. As Hourigan J.A. noted in Yaiguaje, the conclusion in Downtown Eatery “rested more on the plaintiff’s relationship to the group of companies rather than the relationships among the companies in the group”: at para. 69.
[64] In other cases, a common employer allegation has failed due to the presence of a written employment agreement that specified that only one company within the corporate group was the employer: Dumbrell v. The Regional Group of Companies Inc., 2007 ONCA 59, 85 OR (3d) 616, at para. 83; Mazza v. Ornge Corporate Services, 2015 ONSC 7785, 52 B.L.R. (5th) 51 (“Mazza (ONSC)”), at paras. 93-99, aff’d 2016 ONCA 753, 62 B.L.R. (5th) 211 (“Mazza (ONCA)”). In each of these cases, the facts were such that the court could conclude that the employee knew the only entity to whom he could look for fulfillment of employment obligations: Dumbrell, at para. 83; Mazza (ONSC) at paras. 90, 93-94. As this court explained in Mazza (ONCA), the common employer claim was precluded because “[t]he Employment Agreement identified only one employer and contained an express release of claims against affiliated corporations”: at para. 8. In other words, the written agreements in those cases, in light of all the facts, did not permit the conclusion that there was an intention to create an employer/employee relationship with anyone beyond the employer specified in the written agreement.
[65] Nonetheless, as Downtown Eatery shows, a written agreement will not always preclude a finding of common employers. It depends on the terms of the written agreement, and the other facts of the case. The circumstances must reasonably permit the inference that there was an intention that the alleged common employers were also parties to the employment agreement. The inference is not available simply because the corporations are related: As Morgan J. explained in Rowland, at paras. 12-13:In order to establish that two or more legal entities are his common employer, the Plaintiff must demonstrate that he had a reasonable expectation that the Defendants were each a party to his employment contract…
Where the employee is aware that he was employed by a single employer, the fact of interlocking shareholders with his formal employer does not itself establish a common employer. The onus is on the Plaintiff to demonstrate that there was “effective control over the employee” by all of the alleged common employer companies. There must be evidence of an actual “intention to create an employer/employee relationship between the individual and the respective corporations within the group”. [Citations omitted.] To summarize, the doctrine of common employer liability exists consistently with the principle of corporate separateness because it holds related corporations liable for obligations they actually undertook to perform in favour of the employee. It does not hold them liable simply because they have a corporate relationship with the nominal employer. Whether the related corporations actually undertook to perform those obligations is a question of contractual formation – did the parties objectively act in a way that shows they intended to be parties to an employment contract with each other, on the terms alleged? Of central relevance to that question is where effective control over the employee resided. The existence of a written agreement specifying an employer other than the alleged common employer(s) will also be relevant; the extent of the relevance will depend on the terms and the factual context.
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