The issue of a common employer usually arises when the entity that is the obvious employer ( that is the one whose name is on the paycheque), is insolvent but a related company has assets to satisfy a judgement.
- In Freeman v PetroFrontier Corp ( 2017 ABQB 340 ) Justice Neufeld had a situation where the Plaintiff had two separate employment contracts with two interrelated companies, each responsible for 1/2 of her combined salary.
This is what the Judge said :
47 The Plaintiff contends that in the circumstances of this case, Rodinia and PetroFrontier were common employers due to factors such as: a shared corporate history; shared office and equipment; similarity of directors; and shared executives and employees.
48 PetroFrontier argues that the common employer doctrine does not apply in this case. While acknowledging the commonalities relied upon by the Plaintiff, it says that this is not a case in which the true employer of Ms. Freeman is in doubt. Nor is it a case in which a business entity has continued to shield itself from liability to employees through the use of an asset-less “paymaster” company. Rather, it is a case where two separate companies have engaged in two separate businesses for the benefit of two distinct set of shareholders, and have entered into separate employment contracts.
49 I agree with PetroFrontier that the common employer doctrine does not apply in this case. There is no doubt as to who Ms. Freeman was employed by. Her employment contracts make it clear that she was employed by each company with separate terms of employment and separate confidentiality agreements executed for each. There is no need to lift the corporate veil, because it has never been let down.
50 To use the common employer doctrine to impose joint and several liability would constitute re-writing a contract that is clear on its face and that was executed in good faith. Although sympathetic to Ms. Freeman’s plight, I am not prepared to take such step.
2) In Rowland v VDC Manufacturing ( 2017 ONSC 3351) Justice Morgan had a plaintiff who first worked for HMV ( and was issued a T4 ) and then after 6 months was transferred to a related company , VDC, who from then on issued T4’s under its name.
When the Plaintiff did work for HMV, VDC sent an invoice to HMV. The companies handled different ends of the business, one did engineering, one did manufacturing and another did the marketing.
These are the comments that the judge made about why he held that the companies were not common employers:
14 The Plaintiff has not succeeded in establishing that there was anything like “a highly integrated or seamless group of companies which together operated” what was effectively one business and one employer: Downtown Eatery, at para 34. An example of such integration would be where one company in the group is the ‘paymaster’ for the others such that it is impossible to say which one is the real employer: Ibid., at para 33. On the evidentiary record before me, it cannot be said that the Defendants “apparently compete for the role of employer”: Sinclair, at 181.
I note that just as the Defendants market themselves on their website as a “Group of Companies”, the Plaintiff has marketed himself on his C.V. as working for a single company, AVL. In my view, neither of these marketing efforts is significant, as they are not aimed at the issue at hand. The Defendants’ website is targeted at customers, and is not designed to send a message to the Plaintiff or other employees with respect to the corporate identity of their employer. Similarly, the Plaintiff’s C.V. is targeted at prospective employers, and is not designed to make a point about the corporate or group identity of his former employer. These reciprocal marketing efforts are just that — marketing efforts — and should not be taken to reflect the views of either party with respect to the employment relationship.
11 It is significant that the Defendants have consistently kept a formal distance from each other not just in their corporate legal structures, but in their dealings with the Plaintiff. Whereas the Plaintiff worked for one of the Defendant companies, HMW, for the first 6 months after being hired, that company formally transferred him to AVL, where he continued to work for the rest of his 9 years on the job. Likewise, the Plaintiff himself has conceded that the companies issued invoices and Purchase Orders to each other for services he rendered to companies other than his formal employer, AVL. This documented separation between the Defendant corporations in terms of their responsibility for the Plaintiff militates against their having common control over the Plaintiff as employee: Sinclair v. Dover Engineering Services Ltd., [1987] B.C.J. No. 60 (B.C. S.C.), at 181.
12 In order to establish that two or more legal entities are his common employer, the Plaintiff must demonstrate that he had a reasonable expectation that the Defendants were each a party to his employment contract. “[M]ere allegation of corporate affiliation simpliciter is not sufficient to bring the common employer doctrine into play . . . Any plaintiff invoking the common employer doctrine must be able to demonstrate on the particular facts of the case that he or she held a reasonable expectation in the circumstances that each of the alleged common employers were parties to the employment arrangement governing that particular employee at all relevant times”: Mazza v. Ornge Corporate Services Inc., 2015 ONSC 7785 (Ont. S.C.J.), at paras 85-86, aff’d 2016 ONCA 753 (Ont. C.A.).
13 Where the employee is aware that he was employed by a single employer, the fact of interlocking shareholders with his formal employer does not itself establish a common employer: Dumbrell v. Regional Group of Cos. (2007), 85 O.R. (3d) 616 (Ont. C.A.), at para 83. The onus is on the Plaintiff to demonstrate that there was “effective control over the employee” by all of the alleged common employer companies: Downtown Eatery (1993) Ltd. v. Ontario (2001), 54 O.R. (3d) 161 (Ont. C.A.), at para 33. There must be evidence of an actual “intention to create an employer/employee relationship between the individual and the respective corporations within the group”: Gray v. Standard Trustco Ltd. (1994), 8 C.C.E.L. (2d) 46 (Ont. Bktcy.).
Unfortunately this Judge did not refer to a recent similar case on the Ontario Court of Appeal entitled King v. 1416088 Ontario Ltd. (Danbury Industrial), 2015 ONCA 312, where similar facts involving interlocking ownership, common marketing and working for more than one company was found to be sufficient to uphold a finding of common employer.
The Rowland case in particular would seem to impose a very high burden on an employee to be able to prove the issue of common ownership.
Think of this situation. Vince, the owner of 4 related companies operating out of the same site, tells the accountant, who is only on the payroll of one of the 4 companies, to go to the bank with a envelope of checks to be deposited . The envelope contains deposits for all 4 related companies. Can the accountant open up the envelope , extract only those checks that relate to the company that he gets his T4 from, and refuse to deposit the rest because that is not his job?
If the answer is no, that would be insubordination, then how it can he that he is not the employee of all four companies?
The Defendant is the one who sets up the corporate structure. The employee has no input into this process, nor can he object to be ” formally transferred” to another related corporate entity. Why then should the employee get the short end of the stick when the owner decides to bankrupt one company and keep the other alive ?