In Abbasbayli v. Fiera Fine Foods Company, the Ontario Court of Appeal recently clarified that corporate directors may be held personally liable for unpaid wages and vacation pay in a wrongful dismissal proceeding.
In Abbasbayli, a former employee brought legal action after his employer terminated his employment. The former employee sued three corporations he alleged to have been his common employer, and two individual corporate directors. In addition to claiming wrongful dismissal damages and punitive damages, the former employee specifically claimed the following against the corporate directors:
- Three weeks’ unpaid vacation pay under both s. 81 of the Ontario Employment Standards Act, 2000 (the “ESA”) and s. 131 of the Ontario Business Corporations Act (the “OBCA”) and
- Relief from oppression under s. 248 of the OBCA.
Motions Judge Decision
The motions judge struck both vacation pay claims under s. 81 of the ESA and s. 131 of the OBCA against the directors, finding that the claims were not supported by material facts and had no reasonable prospect of success. The motions judge also struck the plaintiff’s oppression claim under s. 248 of the OBCA, with leave to amend, finding that the former employee did not have standing to make a claim and did not plead the necessary material facts to support the claim.
The former employee appealed the motions judge’s decision.
Court of Appeal’s Decision
The Court of Appeal (the “Court”) upheld the motions judge’s decision to strike the former employee’s ESA claim for vacation pay, stating that it was “plain and obvious” the claim could not succeed as the former employee failed to prove the necessary facts to meet the statutory preconditions. However, the Court decided that the motions judge erred in striking s. 131 of the OBCA claim for unpaid wages. The Court also held that the motions judge had properly granted the former employee leave to amend his oppression claim under s. 248 of the OBCA.
In its analysis, the Court found that the former employee’s assertion that he was owed three weeks’ vacation pay was capable of supporting a claim against the corporation and the corporate directors under s. 131 of the OBCA. The Court noted that, “s. 131(2)(a) [of the OBCA] contemplates that the corporate employer will be sued in the same action as the director, although the director will not become liable to pay the accrued vacation pay until execution against the corporation is returned unsatisfied”.
In its reasoning, the Court analyzed several key points that have clarified the circumstances in which oppression claims under s. 248 may be brought by employees:
- Wrongful dismissal, by itself, will not often justify a finding of oppression;
- A terminated employee is not always a “complainant” who has standing to bring an oppression proceeding under s. 248 of the OBCA;
- It is not sufficient for a terminated employee to plead that the individual defendants:
- Acted oppressively as directors and claim all of their wrongful dismissal damages against such individuals, relying on s. 248 of the OBCA;
- Directed the employee’s termination; or
- Failed to ensure the employee received a Record of Employment on termination.
Abbasbayli serves as a warning for employers that their corporate directors are not necessarily shielded from liability in wrongful dismissal claims. Further, this case shows how a court may still permit an employee’s claim to unpaid wages and vacation pay to proceed under s. 131 of the OBCA, even if the same claims under s. 81 of the ESA fail.
Many thanks to Brittany Shales for her assistance in drafting this article.