OCA Rules on Notice Periods for Employees Who are Rehired After a CCAA Reorganization.

In Antchipalovskaia v. Guestlogix Inc., 2022 ONCA 454 Justice Favreau had a fact situation as follows:

The plaintiff worked for the Defendant from 2011 to 2019 at which time the Defendant obtained creditor protection under the Companies’ Creditors Arrangement Act. As a result of the CCAA proceeding the Plaintiffs employment was terminated and she became a creditor with regards to her severance entitlement. She ended up receiving 72% of her ESA entitlement. The court order under the CCAA contained a release of all claims upon payment to the creditor.

She was immediately rehired by the same Defendant. There was no share or asset sale as the owners simply worked their way out under the CCAA order. The new contract did make it clear that for all employment related purposes her new start date was 2019 and not 2011.

About 2.75 years later she was terminated without cause and was entitled to reasonable notice.

The trial judge considered her employment continuous both under the ESA and the common law. and awarded her 12 months.

The Court of Appeal said even though under the ESA this is true this is not the same under the common law. Her employment came to an end in 2016. She received some termination pay and most importantly she released all her claims by virtue of the CCAA court order.

However, in assessing the common law notice period the Court indicated that they can take into account the prior years of service as this provided a benefit to the Defendant that they would not have had if they had hired a new person off the street.

The Court of Appeal awarded 7 months notice for a 2.5 year Senior Business Analyst.

My Comments:
This case continues what I think is a unnecessary and unfair distinction between the manner in which companies are bought and sold and its effect on employees.
Simply put, if the company is sold by way of a share purchase, then there is continuity of employment because the employer has not changed ( the same corporation) as only the shareholders have changed.
However if the assets of the company are sold to a different legal entity, then the employee’s employment is terminated and, if done right, the new employer need not recognize the prior service, except for ESA purposes.
This can have a profound effect on an employee’s termination rights.
Imagine this situation.
Employee A and B work for ABC Corp, which has two divisions, Alpha and Beta. They have both been there 20 years and are both managers making the same money. Both employees are in their mid 50’s. A works for the Alpha Division and B works for Beta.
ABC decides to sell Alpha to Newco and, based on tax advice, it is done as a share sale.
ABC decides to also sell Beta to Newco but this  time, again for tax planning purposes, the sale is an asset sale.
Two years later, Newco terminates both A and B without cause.
A  gets his ESA entitlement of 30 weeks and little or no common law notice above that because he has  been employed by Newco for only 2 years.
Lucky B is now a 22 year employee of Newco and gets around 20 months notice.
Why the difference?
Simply because the two companies decided to arrange the two transactions differently, of course without the input or the knowledge of the employees. In fact the internal announcement to the employees at the time referred to both transactions simply as a “sale”.
Does this strike anyone as fair?

If you wish a copy of this case, email me at barry@barryfisher.ca