Simon's Megalomaniacal Legal Resources

Employment - Employees and Insolvency

. Antchipalovskaia v. Guestlogix Inc.

In Antchipalovskaia v. Guestlogix Inc. (Ont CA, 2022) the Court of Appeal considered the duration of an employees employment when insolvency proceedings intervened:

(1) Legal principles applicable to calculating the notice period

[38] It is well established that a common law notice period is to be based on the guidance in Bardal v. Globe & Mail Ltd., (1960), 1960 CanLII 294 (ON SC), 24 D.L.R. (2d) 140 (Ont. H.C.). In Bardal, the court provided a non-exhaustive list of factors to be considered in deciding the appropriate notice period. These factors include, but are not limited to, the length of employment:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant. [Emphasis added.]

[39] Accordingly, while an employee’s length of employment is not determinative of the common law notice period, it is one of the relevant Bardal factors. Therefore, in cases where there has been an interruption in an employee’s employment due to the sale of the business, the court must decide whether and to what extent the interruption in employment affects the determination of the notice period.

[40] Under s. 9(1) of the ESA, if an employer sells a business and the purchaser continues to employ an employee of the seller “the employee shall be deemed not to have been terminated or severed for the purpose of this Act and his or her employment with the seller shall be deemed to have been employed with the purchaser for the purpose of any subsequent calculation of the employee’s length or period of employment” [emphasis added].

[41] However, as recently held by this court in Manthadi v. ASCO Manufacturing, 2020 ONCA 485, at para. 48, there is a “sharp distinction” between the rights of employees under the ESA and under the common law when the ownership of a business changes. In Manthadi, at para. 48, Juriansz J.A. described the nature and extent of this distinction. He wrote:

[A] sharp distinction must be drawn between termination of employment by a successor employer under the ESA and under the common law. While the ESA is clear that the employment of employees of the vendor of a business who are employed by the purchaser is deemed not to be terminated for the purposes of the ESA, the common law is equally clear that such employees are terminated (by constructive dismissal) when their employer sells the business and there is a change in the identity of the employer. Dubin J.A. stated the common law in Addison v. M. Loeb Ltd. (1986), 1986 CanLII 2474 (ON CA), 25 D.L.R. (4th) 151 (Ont. C.A.), at pp. 152-53, as follows:

At common law, since a contract of personal services cannot be assigned to a new employer without the consent of the parties, the sale of the business, if it results in the change of the legal identity of the employer, constitutes a constructive termination of the employment.

...

If the employee is offered and accepts employment by his new employer, a new contract of employment is entered into. [Emphasis added.]

[42] In Manthadi, at paras. 51-53, this court discussed the challenges for long service employees who are terminated upon the sale of a business and offered employment by the new owner. As Juriansz J.A. explained, at para. 53, often the only meaningful option that these employees are left with is accepting the offer from the new owner. He wrote:

Employees terminated by the sale of a business often have no realistic option other than to accept the offer of a new contract of employment with the purchaser if such is offered. If they are subsequently terminated by the purchaser, the new start date of their term of service weighs in favour of a shorter notice period than had the business not been sold.

[43] Relying on an earlier decision from this court, Addison v. M. Loeb Ltd., (1986), 1986 CanLII 2474 (ON CA), 25 D.L.R. (4th) 151 (Ont. C.A.), Juriansz J.A. went on to state that, even where an employee starts a new period of employment with a successor employer, that employee’s prior years of employment can be taken into account in determining the appropriate notice period upon a subsequent termination. This is because the experience a long serving employee brings to a new owner is relevant when applying the Bardal factors. Specifically, at para. 58, Juriansz J.A. explained that a “purchaser of an ongoing business who takes on the vendor's employees avoids the burden, cost, and time of having to recruit a new employment force that is unfamiliar with the work, the working environment, and one another”.

[44] In Manthadi, this court explained that the application of the Bardal factors in a successor employer situation gives courts the necessary flexibility to deal with the unique circumstances of each case. Juriansz J.A. wrote, at paras. 66-67:

A trial judge applying the Bardal factors is able to craft an appropriate award in a successor employer case without stitching together the employee’s two terms of service. The Addison approach does not use a notional length of service as the yardstick of appropriate notice. The Addison approach has the advantage of flexibility. Its flexibility enables the court to deal fairly with the endless variety of circumstances in which an employee’s claim may be presented. The court is able to recognize, under the rubric of experience, the equivalent of all or some of an employee’s service with the vendor employer in order to arrive at a fair result.

The fair result need not devalue the employee’s past service. The notice periods awarded in both Addison and Bardal were no less than had length of service been used as the yardstick. The appropriate notice period is assessed taking into consideration all of the circumstances. [Emphasis added]

[45] In Manthadi, at paras. 73-76, this court also held that a settlement reached with the prior employer, including the effect of a release and the receipt of a payment, is another relevant, but not determinative, factor in deciding on the appropriate notice period.

[46] Accordingly, where an employee is dismissed and rehired in the context of a change in ownership, the length of employment at common law is not deemed to be continuous as it is under the ESA. Nevertheless, the employee’s years of employment with the previous owner may still be relevant to determining the appropriate notice period given that the employee’s past experience brings value to the new employer.

There is related reasoning at para 47-61.