In its decision in King v. 1416088 Ontario Ltd., the Ontario Superior Court of Justice (the Court) recently reaffirmed a common law doctrine of “common employer.” 

In particular, the Court found a number of related corporate defendants to be jointly and severally liable to a plaintiff for reasonable notice of termination and pension benefits even though such plaintiff had not actually been employed by a number of such defendants.

Background:

For over 38 years, the plaintiff (Mr. King) worked as a bookkeeper for a number of entities in the auctioneering and liquidation industry operating under the trade name, “Danbury.” Specifically, from 1973 until his termination in 2011, Mr. King’s compensation records showed that he worked for five (5) different Danbury entities, at times providing services to multiple entities concurrently.  Such entities were all owned and/or operated by the same family. 

In 2011, Mr. King’s then employer, 1416088 Ontario Ltd. (operating as Danbury Industrial) ceased to carry on business due to financial constraints and terminated all of its employees.  Mr. King was not provided any severance in connection with such termination. Although shortly thereafter a number of former Danbury Industrial employees were offered employment by yet another related company, 986866 Ontario Ltd. (which then began operating as DSL Commercial), Mr. King was not.  Notably, DSL Commercial traded in the same lines of business, from the same premises, and used the same contact information as Danbury Industrial.

Mr. King subsequently commenced a wrongful dismissal action against a number of Danbury entities, including DSL Commercial.  In particular, Mr. King claimed for pay in lieu of reasonable notice of termination at common law as well as pension benefits pursuant to a “Retirement Compensation Agreement” he signed in 1981.  Such agreement provided that Mr. King would receive monthly pension payments to the extent he continued in employment with his then Danbury employer (including its successors) until the age of 65. 

Although Mr. King was never formally employed by DSL Commercial, he argued that he should be treated as such because: i) during his tenure with Danbury Industrial he had performed services for 986866 Ontario Ltd. (prior to it operating as DSL Commercial); and ii) DSL Commercial was a common employer (in addition to the other Danbury entities that had either formally employed him or he had performed work for) and/or was the successor to the Danbury companies that employed him. 

Decision of the Court:

After reviewing the facts and applicable case law, the Court ultimately agreed with Mr. King and held all the Danbury defendants jointly and severally liable for the damages as claimed.  In coming to such conclusion, the Court reaffirmed the general principle as outlined by Ontario’s Court of Appeal in Downtown Eatery (1993) Ltd. v. Ontario.  In particular, the Court of Appeal held that, “as long as there exists a sufficient degree of relationship between the different legal entities who apparently compete for the role of employer, there is no reason in law or in equity why they ought not all to be regarded as one for the purpose of determining liability for obligations owed to those employees who, in effect, have served all without regard for any precise notion of to whom they were bound in contract.” What constitutes a “sufficient degree of relationship” in each case will depend on the facts including the relationship at issue and the amount of common control between such entities.

The Court relied on the following facts in determining that DSL Commercial was not a separate entity from Danbury Industrial:

  • DSL Commercial used the same premises, supplies, telephone system, and website as had Danbury Industrial.  Such website also referred to DSL Commercial’s corporate history as having spanned over 54 years;
  • Prior to his termination, Mr. King carried out a number of preparatory tasks needed for DSL Commercial to commence business (including setting up its payroll, WSIB and employer health tax account, and banking resolutions) and also monitored its bank account;
  • Although DSL Commercial formally had the license to use the “Danbury” name and logo, Danbury Industrial had also used the same name from May 2010 through October 2011; and
  • The operating name, “DSL Commercial” was based on the old corporate entity “Danbury Sales Ltd.,” an employer of Mr. King in the 1980s.

While the Court was satisfied that liability could be grounded based on the relationship between Danbury Industrial and DSL Commercial alone, it also noted that the remaining Danbury entities were sufficiently interconnected such they could also be said to have employed Mr. King pursuant to the common employer doctrine. 

In light of such findings, the Court granted Mr. King 24 months’ pay in lieu of notice of termination as well as pre-judgment interest on such amount. With respect to his pension benefits claim, Mr. King was awarded the value of such benefits retroactive to the date of his termination (plus pre-judgment interest on such amount) as well as a declaration confirming his entitlement to receive future payments under the 1981 agreement. 

Our views:

For businesses operating through interconnected entities, the Court’s decision serves as yet another example whereby the courts will not hesitate to pierce the corporate veil and hold multiple companies jointly and severally liable for obligations owing to employees if the circumstances so warrant.  As demonstrated by this decision, such liability can even extend to corporations that were not actively conducting business during a plaintiff’s employment.