Sometimes being under an umbrella is a good idea; like when it is raining. Other times, however being under the same umbrella as someone else is not such a good thing.
In employment law, the issue of whether two companies are a “common employer” or ‘stand under the same umbrella’ can be important when calculating a dismissed employee’s length of service; the same being one of the critical factors for calculating a dismissed employee’s entitlement to reasonable notice of termination.
In the case of Dear v Glamour Designs Ltd., 2015 ONSC 5094 (CanLII), the Honourable Justice S.A.Q. Akhtar held that there were simply too many interconnecting factors between two related companies to say that the two were anything but a common employer. The employers were found to be one and the same for the purposes of calculating the employee’s length of service.
The plaintiff in the case, Mr. Dear began his employment at Special Occasion Sales Ltd. (“SOS”) as a sales representative on March 1, 2005. That company was owned by Mrs. Kathy Maccarone, although Mr. Dear claimed that he reported to her husband, Mr. Vince Maccarone, the President of International Fashion Group Ltd.
In or around August 2013, Mr. Maccarone informed all SOS sales associates that they would, in future, be compensated for their work by GDL. Mr. Dear’s job title, responsibilities and remuneration remained unchanged and, according to him, he continued to report to Mr. Maccarone thereafter. The defendant, GDL denied such claims.
On September 17, 2014, Mr. Dear received three months’ notice that his employment was to be terminated without cause on December 19, 2014.
Mr. Dear sued and claimed that this notice period was insufficient. He argued that SOS and GDL were common employers under the umbrella of the “International Fashion Group.” As such, he claimed that his employment was for approximately 9 years, which entitled him to a notice period of 12 months.
For its part, GDL denied that it shared common ownership with SOS. It claimed that when Mr. Dear moved to GDL his employment with SOS had already been terminated, notice of which had been given some months prior.
Following the hearing of a motion for summary judgment, Justice Akhtar made the following findings of fact, critical to the court’s decision:
- Corporate searches tendered by Mr. Dear showed that:
- Vince Maccarone was listed as President for International Fashion Group;
- His wife, Michelle Maccarone was listed as President of GDL;
- Their daughter, Katharine Maccarone was listed as President of SOS;
- Both GDL and International Fashions displayed their mailing address as 120 Tycos Drive in Toronto; and
- SOS had a mailing address of 116 Tycos Drive Unit 2, which property is located adjacent to 120 Tycos Drive.
- Vince Maccarone was involved in GDL, reflected by the fact that he “assumed control” as soon as his daughter, Katharine Maccarone began her maternity leave.
- Mr. Maccarone’s name was listed as the contact person on the Records of Employment Mr. Dear received from both GDL and SOS.
- Although GDL’s address is listed as 120 Tycos Drive in their Corporation Profile Report, their company letterhead on August 27, 2013 displayed their address as 116 Tycos Drive Unit 4 in Toronto - the very same building from which SOS operated.
In coming to the conclusion that “International Fashions, GDL and SOS were three components of the same corporate structure” and thus one “common employer” Justice Akhtar, in addition to looking at the facts of the case, relied on what was said by the British Columbia Supreme Court in the case of Sinclair v. Dover Engineering Services Ltd. (1987), 1987 CanLII 2692 (BC SC), 11 B.C.L.R. (2d) 176 (BC SC), affd (1988), 1988 CanLII 3358 (BC CA), 49 D.L.R. (4th) 297 (BC CA), at paragraph 18 of its reasons for decision:
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 will constitute a sufficient degree of relationship will depend, in each case, on the details of such relationship, including such factors as individual shareholdings, corporate shareholdings, and interlocking directorships. The essence of that relationship will be the element of common control.
In the result, and being mindful of the fact that Mr. Dear was 66 years old at the time of dismissal, the court in this case agreed that the reasonable notice period ought to have been 12 months.
In the Glamour Designs case it was rather clear that the two companies were really just one large family business. It is difficult to argue with the court’s decision in that case.
Of greater interest is what is happening south of the border. The principle of common employment has been a hot issue in the United States recently. The Browning-Ferris decision from the National Labour Relations Board (“NLRB”) out of California has dramatically changed how that country may view common employment.
In the Browning-Ferris case, a recycling company, Browning-Ferris Industries used workers supplied by a staffing agency, Leadpoint Business Services to clean and sort recycled products at its facility in California. When the Teamsters tried to unionize the workers, both Leadpoint and Browning-Ferris Industries were named as joint employers.
In what a lot of American “labor” lawyers are calling a sea change, the NLRB ruled (3:2) that Leadpoint and Browning-Ferris Industries were a joint employer. According to one commentary about the decision:
In making that finding, the majority of NLRB held that an employer is no longer required to exercise direct and immediate control over workers’ terms and conditions of employment to be a joint employer. Indirect or even reserved control may be sufficient to establish a joint employer relationship. Further, the factors used to determine control are extremely broad under the NLRB’s new test and make it far easier to establish a joint employment relationship.
Why the dramatic change? With almost 3 million U.S. workers employed through temporary agencies in August 2014, the majority of the NLRB held that its previous joint employer standard had failed to keep pace with changes in the workplace and modern economic circumstances. It would appear that the majority’s hope, if not expectation, is that expansion of the joint employer standard will lead to more meaningful collective bargaining particularly for those workers who are perceived to be more vulnerable members of the workforce.
And while the Browning-Ferris case is not only American, but also a labour decision, the implications of it are sure to be felt on this side of the 49th parallel as well.
Takeaways for Employees with Labour Pains
The takeaway for employees is that it is always important to consider the whole of one’s employment history before making any final decisions about the amount of ‘severance’ to which one is entitled on termination. In some cases, but not all, previous employment with another employer can be critical to calculating one’s length of employment.
Takeaways for Employers with Labour Pains
The takeaway for employers is to be mindful of attempts to create artificial barriers between companies. Courts are becoming increasingly skeptical of such divisions and as the Browning-Ferris case demonstrates, there is a movement towards finding joint control over vulnerable employees.--
As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.