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In an encouraging decision for employers, the Ontario Court of Appeal clarified that a corporation is not a common employer just because it “owned, controlled or was affiliated with another corporation that had a direct employment relationship with the employee”. In O’Reilly v. ClearMRI Solutions Ltd., 2021 ONCA 385, the Court affirmed that the doctrine of common employer cannot be applied if there is no intention to create an employer/employee relationship between the individual and the related corporation.

Key Takeaways for Employers

Corporate entities often structure their businesses through multiple corporations for tax, liability or other strategic reasons. It’s essential employers consider common employer issues when designing a corporate structure. Further, employers must review these structures periodically as the structure changes or as employees, or the work they perform, are transferred between related corporate entities.

To limit the risk of a common employer finding, employers should bear the following in mind:

  • Employment contracts for non-unionized employees should set out the identity of the intended employer.
  • Administration of the employment relationship (i.e., payroll, tax remittances etc.) should be limited to the intended employer.
  • Control of an employee’s work, including hiring, training, supervision, discipline and termination, should be limited to the intended employer.
  • Employers should not rely on employee work to support the functions of multiple business entities, unless employers intend those entities to be a common employer.

Case Background

In ClearMRI, the appellant, Tornado Medical Systems, Inc., was a majority shareholder of ClearMRI Solutions Ltd. (”ClearMRI Canada”), which itself had a wholly owned subsidiary, ClearMRI Solutions, Inc. (”ClearMRI US”). The respondent, William O’Reilly, was the former Chief Executive Officer of ClearMRI Canada and ClearMRI US. His written employment agreement was with ClearMRI US, but he reported to, and his performance goals were set by, the board of directors of ClearMRI Canada.

Mr. O’Reilly sued Tornado, ClearMRI Canada and ClearMRI US and Dr. Jae Kim, a director for both Tornado and the ClearMRI companies, for salary and other entitlements allegedly owed when his employment ended. While Mr. O’Reilly did not have a formal position or written agreement with Tornado, he alleged that it, along with the ClearMRI companies, were his common employers. Mr. O’Reilly obtained a default judgment against the ClearMRI companies and a summary judgment against Tornado and Dr. Kim. Tornado and Dr. Kim appealed the summary judgment decision.

The Court’s Analysis

On appeal, a unanimous panel of the Court of Appeal held that the motion judge failed to apply the correct test, and accordingly overturned the lower court’s decision and found that Tornado was not liable under the common employer doctrine.

The Court of Appeal emphasized the concept of corporate separateness ¾ the principle that control by one corporation over another, on its own, does not make the controlling corporation liable for the obligations of the controlled corporation. Corporate separateness has exceptions — the court may pierce the corporate veil and hold a parent corporation liable for obligations nominally incurred by a subsidiary corporation that is a mere façade. But in such a case, a fraudulent or improper purpose must be present. The common employer doctrine does not involve piercing the corporate veil or ignoring separate legal personality of each corporation.

The Legal Test for Common Employers

A court should not hold a corporation liable under the common employer doctrine just 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 is a common employer only where the employee can prove that there was an intention to create an employer/employee relationship between the individual and the related corporation.

The key question is, 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 the obligations it has undertaken.

A variety of conduct may be relevant to the question of intent; two types of conduct are important:

  1. Conduct that reveals where effective control over the employee resided, and
  2. The existence of an agreement specifying an employer other than the alleged common employer(s).

In ClearMRI, the Court concluded that Tornado had little involvement and control over Mr. O’Reilly’s employment duties. Mr. O’Reilly’s employment agreement did not list Tornado as his employer. There was no evidence supporting the notion that Tornado had intended to create an employment agreement with Mr. O’Reilly. As a result, the Court of Appeal concluded that Tornado was not a common employer of Mr. O’Reilly.

Conclusion

ClearMRI makes clear that courts will strictly construe the application of common employer liability to guard against conflating the existence of intercorporate relationships as evidence of a common employer relationship.

 

 

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On June 24, 2021, the Ontario government announced that the province will enter Step Two of the Roadmap to Reopen two days earlier than expected, at 12:01 a.m. on Wednesday, June 30, 2021. Under Step Two, the following is permitted to operate:

  • essential and other select retail at 50% capacity;
  • non-essential retail at 25% capacity;
  • personal care services where face coverings can be worn at all times and with other restrictions, at 25% capacity; and
  • overnight camps for children, so long as they operate consistently with the safety guidelines provided by Ontario’s Chief Medical Officer of Health.

A number of other restrictions will be eased under Step Two. The province’s announcement along with a full list of permitted activities under Step Two can be found here.

The province may remain in Step Two for 21 days to evaluate any impacts on public health. However, Ontario has already surpassed the vaccination targets required for Step Three. You can find our blog post on the province’s three-step Roadmap to Reopen here.

Employers should continue to pay close attention to the latest public health restrictions to understand how they affect their business. If you have any questions about what the current restrictions mean for your business, please contact our team.

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On June 7, 2021, the Government of Ontario filed amendments to several Regulations made under the Occupational Health and Safety Act (“OHSA”). The majority of the amendments relate to the reporting of workplace accidents.

Employers in Ontario should review their current incident reporting policies and procedures regarding critical injury or fatalities in the workplace to determine what, if any, changes need to be made to current practices, policies and procedures. To ensure compliance, employers should update existing policies and take steps to implement any necessary changes without delay.

Consolidation of Notice of Death and Critical Injury Requirements

The amendments to the Regulations under OHSA relate to the reporting of workplace accidents and consolidate the notice of death or critical injury requirements that are found in several Regulations into a single Regulation – O. Reg. 420/21: Notices and Reports Under Sections 51 to 53.1 of the Act – Fatalities, Critical Injuries, Occupational Illnesses and Other Incidents.

In particular, the section 51 – 53 notice and/or reporting requirements under OHSA, as may be applicable, have been revoked in the following regulations:

O. Reg. 420/21: Key Highlights

O. Reg. 420/21 applies to all workplaces that are covered by OHSA, with the exception of where a worker is killed, critically injured, disabled from performing their usual work or requires medical attention as a result of collisions on highways as defined under the Highway Traffic Act or Highway 407 Act.

Other key changes include:

  • Defines Critically Injured: Reg. 420/21 revokes Reg. 834: Critical Injury – Defined and replaces the definition of critically injured. “Critically injured” is defined as an injury of a serious nature, that a) places life in jeopardy; b) produces unconsciousness; c) results in a substantial loss of blood; d) involves the fracture of a leg or arm but not a finger or toe; e) involves the amputation of a leg, arm, hand or foot but not a finger or toe; f) consists of burns to a major portion of the body; or g) causes the loss of sight in an eye.
  • Retention of Copy or Written Notice: Section 6 of O. Reg. 420/21 provides that the employer or constructor shall retain a copy of a written notice or report required under sections 51 to 53.1 of OHSA for at least three years after the date the notice or report is made and notices may be sent electronically.
  • Written Reports or Notice: It also prescribes the information that an employer must provide in a written report or written notice of a workplace accident under sections 51 to 53 of OHSA. The Regulation also prescribes additional notice requirements for mines and construction sites.

Changes Applicable to Industrial Establishments

O. Reg. 421/21: Industrial Establishments amends Reg. 851: Industrial Establishments to add a new record-keeping requirement to workplaces that use lifting devices. Where a record is required to be kept, it shall be kept for a) a period of at least one year; or b) such period as is necessary to ensure that at least the two most recent records are kept.

O. Reg. 434/21: Industrial Establishments amends Reg. 851: Industrial Establishments to revoke and replace the pre-start health and safety review provisions.

Key Takeaways

The amendments come into force on July 1, 2021, except for O. Reg. 434/21: Industrial Establishments,  which comes into force on January 1, 2022.

Employers are required to inform the Ministry of Labour, Training and Skills Development if a workplace hazard caused anybody to be killed or critically injured at the workplace. Generally, the notice and reporting requirements will depend on the type of workplace. It is important that employers review the requirements under O. Reg. 420/21 to determine what information must be included when reporting an injury or death at the workplace to the Ministry. It is also crucial to assess critical injuries or deaths at the workplace to determine if the hazard that caused an incident could pose an ongoing risk to worker health and safety.

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On June 4, 2021, the Ontario Government announced that the “COVID-19 Period” and the temporary measures introduced by O. Reg. 228/20: Infectious Disease Emergency Leave (the “Regulation”) under the Employment Standards Act, 2000 (the “ESA”) have been extended until September 25, 2021.

The Regulation, which was first introduced in May 2020, provides employers with temporary relief from the notice of termination and severance pay obligations under the ESA during the “COVID-19 Period”. That is, non-union employees who were not performing their duties, working reduced hours, or receiving reduced wages (at the employer’s discretion) are deemed to be on an Infectious Disease Emergency Leave (“IDEL”) during the designated “COVID-19 Period”.

When first introduced, the Regulation defined the “COVID-19 Period” as March 1, 2020 to September 4, 2020. Subsequent Regulations have extended the “COVID-19 Period” to January 2, 2021, then to July 3, 2021, and now again to September 25, 2021. This means that non-union employees who are not performing their duties, working reduced hours, or receiving reduced wages because of the pandemic can continue to be on an IDEL until September 25, 2021, without triggering termination and severance pay obligations under the ESA. 

Once the extended COVID-19 Period comes to an end on September 25, 2021, the usual ESA rules related to layoffs and constructive dismissal will be re-engaged. Employers who are not able to fully resume operations by that time will need to carefully consider how they will address their ongoing employment issues. Employers should note that this Regulation amends the ESA rules related to layoffs and constructive dismissal. However, it may not displace an employee’s right to pursue a common law claim for constructive dismissal based on a temporary layoff or reduced hours/wages.

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In light of recent social justice movements, businesses are increasingly aware of issues pertaining to diversity and inclusion, making it essential for employers to take proactive steps to address inequality in the workplace. Our presenters explore how to set up special programs under human rights legislation, and discuss best practices for advancing substantive equality in Canada.

Click here to watch the video.

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In a recent decision, the British Columbia Supreme Court (“BC Court“) ruled that Canada Emergency Response Benefit (“CERB”) payments earned during the notice period would be deducted from wrongful dismissal damages. This decision stands in stark contrast to that recently issued in Ontario, where the Superior Court of Justice (“Ontario Court“) refused to deduct CERB benefits from a damages award. The apparent inconsistency between the cases will have to be resolved in future litigation. In the meantime, employers should consider in each case whether it is appropriate to adopt the approach in Hogan when structuring severance packages.

The BC Decision

In Hogan v. 1187938 B.C. Ltd, 2021 BCSC 1021 (“Hogan“), Mr. Hogan was temporarily laid off and subsequently terminated from his employment with an automotive dealership. Mr. Hogan sued the dealership for constructive dismissal.

The BC Court held that the dealership’s unilateral decision to layoff Mr. Hogan amounted to a constructive dismissal, and as a result, he was entitled to pay in lieu of 22 months of reasonable notice. The dealership argued that all CERB benefits earned by Mr. Hogan during the notice period should be deducted from the damages it was ordered to pay.

The BC Court agreed with the dealership. CERB is not a private insurance benefit for which the employee paid premiums. Further, unlike Employment Insurance benefits, which are subject to repayment following receipt of a severance payment, there is no evidence to suggest that CERB benefits will need to be repaid. Therefore, if Mr. Hogan received both CERB benefits and wrongful dismissal damages during the reasonable notice period, he would end up in a better position than he would have been had he been given advance notice of termination.

Applying the general rule of damages for breach of contract, the BC Court found that Mr. Hogan should be put in the same position he would have been in had the dealership not breached the employment contract. This requires deducting CERB benefits from the damages ultimately awarded.

The Ontario Decision

The Ontario Superior Court of Justice took a seemingly different approach in Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998 (“Iriotakis“). In that case, the Ontario Court refused to deduct CERB benefits from wrongful dismissal damages. The Ontario Court looked at the disparity between the CERB benefits the employee earned, and the overall amount of money the employee lost as a result of being terminated. A large portion of the employee’s earnings were based on commissions, most of which he was not entitled to during the reasonable notice period. As a result, the Ontario Court determined that it would not be equitable to reduce the employee’s damages by the CERB benefits he earned during that time. In Iriotakis, the Ontario Court emphasized that their decision was specific to the facts of the particular case—facts which were distinguished from Hogan.

Key Takeaways

To date, Hogan and Iriotakis are the only two decisions in Canada on the issue of whether CERB benefits should be deducted from wrongful dismissal damages. Although the two cases are factually distinct, the principles set out in these cases are difficult to reconcile. The BC Court took a principled approach, ensuring the plaintiff was not put in a better position than he would have been had the defendant complied with its common law obligation to provide him with reasonable notice (or payment in lieu). Conversely, the Ontario Court took a fact-based approach, and decided it would not be fair to deduct CERB benefits from the plaintiff’s damages, given the plaintiff’s limited entitlements from the employer post-termination, relative to his actual pre-termination earnings.

It will be interesting to see how courts across Canada continue to address this issue, particularly in light of the discrepancy between the different approaches taken in British Columbia and Ontario. Given the volume of employment litigation arising from the pandemic, we suspect that there will be many more decisions on this issue.

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Special thanks to moderator Benjamin Ho and presenters Liliana Hernandez-Salgado (Mexico City), Leticia Ribeiro (Sao Paulo – Trench Rossi Watanabe), Maria Cecilia Reyes (Bogota) and Matias Herrero (Buenos Aires).

Our four-part Global Guided Tour for US Multinational Employers webinar series is your passport to ensure that your organization is up to speed on the key labor and employment issues affecting business operations in Europe, the Americas, Asia Pacific, and the Middle East and Africa.

During the Americas stop on our tour, moderated by Ben Ho, Baker McKenzie’s in-market presenters discussed the most recent developments and challenges impacting employers and shared legal updates, practical tips and takeaways for companies to action now.

Please click here to view a recording of the webinar highlighting the Americas.

Join us at the upcoming sessions applicable to your organization:

ASIA PACIFIC, Wednesday, June 16, 3pm PT / 6pm ET

MIDDLE EAST AND AFRICA, Wednesday, June 23, 9am PT / 12pm ET

Click here to view the program details, to register and to view recordings of any sessions you may have missed.

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We are pleased to share with you the BNN Bloomberg interview, “Workers will be required to return to the office if their employer wants them to.” Kevin Coon discusses the realities of bringing people back into the workplace post the COVID-19 pandemic. He notes a hybrid model is likely to be put in place as most employers now see the benefits of flexible work practices.

Click here here to watch the interview.

This interview was originally posted in BNN Bloomberg.

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The provincial stay-at-home order expired on June 2, 2021. However, as of June 7, 2021, all measures which were in place under the province-wide emergency break continue to remain in effect, including restrictions on gatherings, businesses, services and activities. You can find a list of the current restrictions under the emergency break here.

On June 7, 2021, the Ontario government announced that the province will enter Step 1 of the Roadmap to Reopen at 12:01 a.m. on Friday, June 11, 2021. Under Step 1, non-essential retail will be permitted to operate at 15% capacity, and essential and other select retail will be permitted at 25% capacity. Restrictions regarding the sale of certain goods will be lifted for both essential and non-essential retail. Children’s day camps will also be permitted to operate in a manner consistent with safety guidelines from the Chief Medical Officer of Health.

The province will remain in Step 1 for at least 21 days to evaluate any impacts on public health. If certain public health conditions are met, the province will move to Step 2 of the Roadmap. You can find our blog post on the province’s three-step Roadmap to Reopen here.

Employers should continue to pay close attention to the latest public health restrictions to understand how they affect their business. If you have any questions about what the current restrictions mean for your business, please contact our team.

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On May 20, 2021, the government of British Columbia passed Bill 13, Employment Standards Amendment Act (No. 2), 2021, which amends the Employment Standards Act, 1996 to provide employees with three days of paid sick leave for reasons related to COVID-19, as well as a permanent paid sick leave for any illness or injury.

Eligibility for Paid Leave for Reasons Related to COVID-19

Full-time and part-time employees are eligible for up to three days of paid sick leave if they are unable to work for the following reasons related to COVID-19:

  • the employee is diagnosed with COVID-19 and is acting in accordance with an order or instructions of a medical health officer or advice of a medical practitioner, nurse practitioner or registered nurse;
  • the employee is in quarantine or self-isolated as required by law; and/or
  • the employee is being directed to stay home by their employer due to exposure-related risks.

Employers will be required to pay employees their full wages for the duration of the leave. Employers without an existing paid sick leave program/policy will be able to seek reimbursement of up to $200 per employee per day from the government. Employers with employees earning more than $200 per day will be responsible for covering the excess daily wages.

This leave is in addition to the three days of unpaid leave that are already available to workers under the ESA, is separate from the workers’ compensation system and will not impact WorkSafeBC’s employer premiums or its accident fund. It will only be in effect until December 31, 2021. WorkSafe BC will administer the reimbursement program. Details on this program and how employers can register will be made available in June.

Permanent Paid Sick Leave Day

Bill 13 also introduces provisions for a permanent paid sick leave program for workers who cannot work due to any illness or injury starting January 1, 2022. While Bill 13 does not provide any further details relating to the number of paid days and other supports for this permanent leave, the Government of British Columbia has announced that details will be determined following consultations with relevant stakeholders over the next several months. We will continue to monitor for further information.

Key Takeaways

Employers should review the amendments to the ESA and review existing policies and practices to address the availability of this leave. Eligible employers should also monitor WorkSafe BC’s website for details on the reimbursement program and how to register and apply for a reimbursement.

Because employees are not required to provide a doctor’s note in order to take a COVID-19 related sick day, employers should train human resources staff on validating and managing COVID-related leave requests and remind staff about the sensitive nature of the information being collected and the need to maintain privacy and confidentiality.

Governments across Canada are rapidly responding to the impact that COVID-19 continues to have on economic and employment life. The provinces and territories are regularly amending COVID-19 related economic measures and extending minimum protections and other provinces have started to introduce paid sick days for reasons related to COVID-19. For example, the Ontario government passed Bill 284, COVID-19 Putting Workers First Act, 2021 amending the Employment Standards Act, 2000 (the “ESA“) to require employers to provide employees with up to three days of paid leave if they miss work for reasons related to COVID-19. Similarly, provinces such as Manitoba, have added a paid leave for COVID-19 vaccinations. We continue to monitor changes as other provinces and territories introduce similar leaves.