Summary
In Kondaj v. Crossbridge Condominium Services Ltd., 2026 ONCA 636, the Court of Appeal considered which party is liable when a building services contract changes hands and the incoming provider chooses not to hire an employee of the outgoing provider. The Court confirmed that, in these circumstances, the incoming provider is responsible for the employee’s common law reasonable notice, in addition to any termination and severance under the Employment Standards Act, 2000 (the “ESA”).
Background
The ESA contains a unique scheme applicable to building services employers. “Building services” is defined under the ESA as services for a building with respect to food, security and cleaning, or property management, or which relate to a parking garage or lot, or a concession stand.
Where one building service provider is replaced by a new provider, any employees of the former provider that maintain employment with the new provider are considered to have continuous service under section 10 of the ESA. Under section 75, the new employer must comply with the termination and severance obligations under the ESA, whether it chooses to hire the former employer’s employees or not, subject to limited exceptions.
This case addressed the novel issue of whether the incoming provider will also be responsible for common law reasonable notice for those employees of the outgoing provider that it chooses not to hire.
The Appellant, Mr. Kondaj, was employed by Crossbridge Condominium Services Ltd (“Crossbridge”) as a building manager at a hotel and shared residence facility. After the facility switched its property management company to Duka Property Management Inc. (“Duka”), Duka chose not to employ Mr. Kondaj. His employment with Crossbridge ended when Crossbridge ceased performing the work. Duka did pay Mr. Kondaj his entitlements under the ESA, but Duka and Crossbridge disagreed regarding which company was responsible for his common law reasonable notice.
The motion judge found that Duka was liable for 10 months of common law reasonable notice. Duka appealed.
Decision: Incoming Employer Liable for Common Law
The Court of Appeal dismissed Duka’s appeal, and affirmed that Duka was responsible for Mr. Kondaj’s common law termination entitlements.
Legislative Intent
The Court dismissed Duka’s first argument that finding an incoming provider responsible for common law reasonable notice was inconsistent with legislative intent.
The Court reiterated that the purpose of the ESA is to protect employees, including employees working under services contracts which may frequently change hands. If the outgoing employer alone were responsible for common law entitlements, an incoming provider would have an incentive not to hire the outgoing provider’s employees or to terminate them after a transfer.
The Court also considered the legislative history. Amendments made in 1995 removed the requirement that a successor hire the predecessor’s employees, giving employers greater flexibility to employers to choose their workforce, while preserving an incentive for continued employment. The Court found that imposing potential common law liability does not eliminate that flexibility; it merely “adds a variable” to the incoming provider’s decisions about bidding on the contract and selecting its workforce.
Scheme and Wording of the ESA
The Court also dismissed Duka’s arguments that successor liability is inconsistent with the scheme and wording of the ESA, which is to only provide for minimum entitlements – not additional common law entitlements.
The Court held that statutory and common law termination entitlements arise from the same incident of termination and operate together, with the common law supplementing the ESA’s minimum standards. The ESA also deems the incoming employer to be the employer for the entirety of the employee’s service with the outgoing provider. Holding the incoming provider responsible at common law when it does not hire employees would, therefore, harmonize the consequences of refusing employment with those of hiring and later terminating the employee.
Relatedly, the Court held that section 56 of the ESA sets out what constitutes a termination under both the ESA and at common law. Since incoming providers must comply with section 56, the Court held that it was consistent with these provisions that the incoming provider must also be responsible for common law reasonable notice.
Finally, the Court found that a successor employer is provided sufficient information – including, under the ESA scheme, an employee’s name, status, length of service, and terms and conditions of work – through the retendering and bidding process to enable it to make informed business decisions about potential common law liability.
Exemptions
The parties did not dispute that Mr. Kondaj was subject to the building services scheme, and, as such, the Court did not address whether any exemptions applied. Under the ESA and O. Reg. 287/01: Building Services (the “Regulation”), an incoming provider will not be responsible for termination entitlements where:
- The employee is retained by the outgoing provider (ESA, section 75(4));
- An employee who did not perform their duties primarily at the premises during the 13 weeks before the changeover date (Regulation, section 2(1)(1));
- An employee who was not at work immediately before the changeover date and did not perform their duties primarily at the premises during the most recent 13 weeks of active employment (Regulation, section 2(2)(2));
- An employee who did not perform their job duties at the premises for at least 13 weeks during the 26-week period before the changeover date (Regulation, section 2(1)(3)); or
- An employee who refuses an offer of employment with the new provider that is reasonable in the circumstances (Regulation, section 2(1)(4)).
The Court’s reasoning suggests that responsibility for any common law reasonable notice for exempt employees would remain with the outgoing provider.
Takeaways
This decision clarifies that an incoming building services provider may be responsible not only for termination and severance entitlements under the ESA, but also for common law termination entitlements owed to employees of the outgoing provider whom it does not hire. Building service providers should consider the prospect of paying common law reasonable notice for employees of the outgoing provider when accepting new services contracts, obtaining employee information from the outgoing employer, and making business decisions regarding their new workforce.
Need More Information?
For more information or assistance with building services transitions, contact Alyssa Johnson at ajohnson@filionlaw.com or your regular lawyer at the firm.