How is reasonable notice calculated where an employee is fired then rehired immediately after a court-approved sale under the CCAA?
The appellant was a technology company operating in the air travel space. The respondent first started her employment with the appellant in July 2011 as a Senior Business Analyst. The parties had a written agreement setting out the terms of her employment.
In February 2016, the appellant obtained CCAA protection. In June 2016, a group of investors agreed to purchase the appellant’s shares pursuant to an agreement which included a condition that the eventual CCAA plan of arrangement would include a term releasing the appellant from any liability for claims by the appellant’s employees arising before the implementation date.
In July 2016, the appellant filed a plan of compromise and arrangement in the Superior Court (the “Plan”). As part of the Plan implementation, the appellant terminated the respondent’s employment and immediately rehired her in the same position. The respondent submitted a Proof of Claim for her termination and severance pay entitlements, seeking $19,321.15. The CCAA monitor accepted her claim, and she was paid $13,367.83, which was approximately 72% of her claim, and represented her pro rata entitlement to payment as an unsecured creditor.
Following the CCAA proceedings, the respondent continued in her employment with the appellant and maintained the same responsibilities she had before the CCAA proceedings. The appellant terminated the respondent’s employment on June 13, 2019, approximately 2.75 years following her September 22, 2016 “reset” start date with the appellant. Upon termination, the appellant paid the respondent $16,867.43. This calculation was based on the respondent’s entitlement under the Employment Standards Act from July 5, 2011 (which was the respondent’s original start date) to June 13, 2019, minus the amount the respondent had been paid in the CCAA proceedings. This sum represented approximately 9.5 weeks of pay.
The employee brought an action for wrongful dismissal, claiming that she was entitled to common law notice. On the employee’s motion for summary judgment, the motion judge held that the respondent’s employment with the appellant should be treated as continuous from 2011 to 2019. The motion judge awarded damages to the employee reflecting a twelve month notice period, less the amount of the employee’s claim in the CCAA proceedings and the amounts she had been paid as a result of her termination of employment.
On appeal, the appellant argued that the motion judge erred by failing to find that the respondent employee’s entitlement to any common law notice for her employment between 2011 and 2016 was released in the CCAA proceedings. The appellant argued that the respondent’s entitlement to common law notice should have been based on 2.75 years of employment, and that 4-months’ notice would be reasonable in the circumstances.
The Court of Appeal noted that there is a “sharp distinction” between the rights of employees under the ESA and under the common law when the ownership of a business changes. While the ESA is clear that the employment of employees of the vendor of a business who are employed by the purchaser is deemed not to be terminated for the purposes of the ESA, the common law is equally clear that such employees are terminated when their employer sells the business and there is a change in the identity of the employer. At common law, since a contract of personal services cannot be assigned to a new employer without the consent of the parties, the sale of the business, if it results in the change of the legal identity of the employer, constitutes constructive dismissal.
Where an employee is dismissed and rehired in the context of a change in ownership, the length of employment at common law is not deemed to be continuous as is the case under the ESA. The Superior Court made an order that released all claims and potential claims against the appellant up to the Plan Implementation Date. The intent of the release was to release claims by employees such as the respondent. By failing to consider the effect of the termination and CCAA release, the motion judge erred in treating the respondent’s employment with the appellant as continuous.
Nevertheless, the employee’s years of employment with the previous owner may still be relevant to determining the appropriate notice period given that the employee’s past experience brings value to the new employer. Here, the respondent continued in her position without the need for any additional training. She had five years of experience doing exactly the same work. The contribution she made to the appellant during her 2.75 years of employment was significantly different from the contribution of an employee at her level who did not have five years of prior employment with the appellant. Accordingly, a notice period of seven months is appropriate in the circumstances.
The Court allowed the appeal.
Judges: Trotter, Coroza and Favreau JJ.A.
Counsel: Lindsay Scott of Paliare Roland for the appellant and Aaron Rosenberg of Re-Law for the respondent
By Matilda Lici