Tuesday, November 23, 2010

Ontario Employment Law: Wrongful Dismissal and the Common Employer Doctrine

Under the Ontario Employment Standards Act, related or associated companies are deemed to be "one employer" for the purpose of protecting the benefits to which employees are entitled to under the Act.

In practical terms, this means that multiple companies can be jointly and severally liable for severance and termination payments upon a without-cause dismissal. In this way, the Act adopts and "statutizes" what in the common law context is known as the common employer doctrine.

In Ontario, the common law's common employer doctrine has been considered in several wrongful dismissal cases.

In Gray v. Standard Trustco (Trustee of) (1994), 8 C.C.E.L. (2d) 46 (Ont. Gen. Div.) Ground J. said:
... it seems clear that for purposes of a wrongful dismissal claim, an individual may be held to be an employee of more than one corporation in a related group of corporations. One must find evidence of an intention to create an employer/employee relationship between the individual and the respective corporations within the group.
To ensure recovery in a wrongful dismissal action, employees may have to go beyond suing only the "paymaster company," or the company whose name appears on their paycheques. An empolyee may need to consider adding related companies and in some cases, the main principals of related companies, as defendants.

In Downtown Eatery Ltd. v. Ontario, an employee sued his "paymaster company" for wrongful dismissal. Following a trial, he was awarded substantial damages. However, as it turned out, the defendant company had no assets. As a result, the employee had to take a subsequent action against all the related companies and the two main principals of all the companies in an effort to widen his net of potential sources of recovery.

If you have been wrongfully dismissed, you should consult a lawyer who can consider with you whether you were employed by more than one company for the purposes of determing the contractual and fiduciary obligations which are owed by the employer under both the Employment Standards Act and at common law.

These factors will guide determinations as to which related companies and controlling individuals should be named as defendants in a wrongful dismissal action.
- Robert Tanha, Toronto

Visit our Toronto Law Firm website: www.wiselaw.net

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