In the current economy, it is becoming more common for people to hold more than one job to make ends meet. This is facilitated by the increase in remote work opportunities for those looking for extra income.
There are times when employees are employed by two employers in the same job. When an employee has two employers in common for the same job, it can make it difficult to determine what they are entitled to on termination.
Motion judge dismisses the action against the employer and orders the employee to pay costs
In a recent case, the employee had been employed with CannonDesign for over four years. When she was terminated without cause, she was given four weeks’ base salary in lieu of notice. The employee brought an action for wrongful dismissal against CannonDesign, her Canadian-incorporated employer, and its principal corporation, The Cannon Corporation, which was incorporated in Delaware. She had signed an employment contract with each entity. The employee asked for a summary judgment declaring that her employment contracts with the defendants were void for conflicting with the provisions of the Employment Standards Act.
The judge at the initial hearing found that the provisions were in compliance with the Employment Standards Act. Therefore, they applied to the employee’s termination. The judge also determined that the employee was only employed by CannonDesign alone and not The Cannon Corporation. The employee was ordered to pay costs of $80,000. The employee appealed the decision to the Ontario Court of Appeal.
What termination entitlements do employees have under the Employment Standards Act?
An employee’s employment is terminated under the Employment Standards Act in three scenarios:
- The employer stops the employment, including for reasons of bankruptcy or insolvency of the employer.
- The employee is “constructively dismissed”. In other words, the employer changes the employee’s job so much to the point the employee is effectively forced out of the job.
- The employer lays the employee off for a prolonged period of time that exceeds a temporary layoff.
Generally, an employer must give employees who have been employed continuously for three months either: written notice in advance of the effective termination, termination pay, or a combination of both notice and pay. Employers need not provide a reason why termination is occurring in this case.
The Employment Standards Act also sets out the required length of notice and amount of termination pay. The length of notice required corresponds with the length of employment. Generally, employees employed for less than a year are entitled to a week’s notice; another week is added per additional year worked. Termination pay is paid in a lump sum and must be equal to the wages earned for a regular work week that the employee otherwise would have worked if they received the requisite notice of termination.
Employers cannot contract out of employee termination entitlements
In this case, there were two “just cause” provisions in the employment contracts signed by the employee. It read:
“CannonDesign maintains the right to terminate your employment at any time and without notice or payment in lieu thereof, if you engage in conduct that constitutes just cause for summary dismissal.”
At the initial hearing, the employee was deemed sophisticated enough to understand the just cause provision for several reasons. She had obtained independent legal advice and was the corporation’s most senior Canadian employee.
The Court of Appeal disagreed with this characterization. The judge should only have considered the wording of the provision in determining whether it contravened the Employment Standards Act obligations.
Under the Employment Standards Act, notice and termination pay are required for all terminations, including those for just cause. The wording of the provision in the employment contract does not mention that it only applies to wilful misconduct, which effectively means the employer gave itself the right to terminate the employment for no reason at all. Moreover, section 5 of the Employment Standards Act prohibits employers from contracting out of its minimum standards. The just cause provision was therefore deemed void.
What is the “common employer” doctrine?
The common employer doctrine exists to recognize employees who may have more than one employer at once. The court in O’Reilly v. ClearMRI Solutions Ltd. explained:
“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.”
The determining conduct that indicates a common employer is an intention to have an employment relationship with two or more members of a corporate group where those members have control over that employee.
The employee was commonly employed by both the principal and its subsidiary
The judge at the initial hearing determined that CannonDesign was the sole employer because it was the only one to offer her employment and was the only entity to pay her. The Court of Appeal determined that this finding had to be set aside.
The employee signed two employment contracts that clearly indicated different employers. One Offer Letter read “CANNONDESIGN” on the letterhead. The second agreement signed by the employee was entitled “THE CANNON CORPORATION SENIOR VICE PRESIDENT AND PRINCIPAL OFFICER AGREEMENT” and discusses an agreement between the employee and “The Cannon Corporation and its subsidiary companies.”
In fact, all offers of employment were sent to her by representatives of The Cannon Corporation. Furthermore, The Cannon Corporation played a role in determining the employee’s compensation, and it administered her payment. When a pay cut was imposed across The Cannon Corporation, the employee’s base pay was lowered as well. The employee was directly managed by senior managers of The Cannon Corporation as well as by CannonDesign. Each of the corporate group’s offices worked interdependently and the employee regularly attended meetings with other managers of The Cannon Corporation.
It is important to uphold the minimum entitlements for employees
By all indications, in this case, both entities were found to be common employers. The termination clauses in the contracts signed by the employee were deemed void and the matter was remitted to the Superior Court to determine the amount of damages for the failure to provide notice.
The important takeaway here for employees and employers alike is to carefully review employment contracts before signing them. The case is also a reminder to employers that they cannot contract out of the minimum requirements of the Employment Standards Act.
Contact Guelph Employment Lawyer Peter A. McSherry for Guidance on Wrongful Dismissals
Peter A. McSherry assists employees and employers on termination, wrongful dismissal and severance issues. We regularly assist employees and provide guidance during difficult times. For employers, we can help you understand your legal obligations and provide advice on managing the legal and reputational risk that occurs when making these difficult decisions that impact employment. Contact us online or by phone at 519-821-5465 to schedule a consultation.