Marialuz Naranjo v. Canadian Back Institute Operating Limited Partnership, 2018 ONSC 2882

CITATION: Naranjo v. Canadian Back Institute, 2018 ONSC 2882

DIVISIONAL COURT FILE NO.: DC406/17

DATE: 20180509

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

BETWEEN:

MARIALUZ NARANJO

Respondent

– and –

CANADIAN BACK INSTITUTE OPERATING LIMITED PARTNERSHIP

Appellant

David J. Israelsohn for the Respondent

Adrian Miedema/Chelsea Rasmussen for the Appellant

HEARD at Toronto: April 25, 2018

GILMORE, J.

SMALL CLAIMS COURT APPEAL JUDGMENT

NATURE OF PROCEEDING and overview:

1The appellant, Canadian Back Institute Operating Limited Partnership (“CBI”) appeals from the Small Claims Court judgment of Deputy Judge Anschell (“the Deputy Judge”) dated June 22, 2017.

2This matter involves six separate Divisional Court appeals which were ordered to be consolidated and heard together on November 15, 2017, with this appeal to be considered the lead matter. The reasons of the Deputy Judge related to the Small Claims Court plaintiff, Maiya Kogan, but it was agreed that those reasons would apply to all six matters.

3CBI had a contract to perform rehabilitation services at Mackenzie Health Hospital (“Mackenzie”). The collective respondents were all employed by CBI in various roles related to rehabilitation services including occupational and physiotherapy.

4In 2012 CBI failed in its bid to renew its contract with Mackenzie and its competitor Saint Elizabeth Health Care (“Saint Elizabeth”) was awarded the contract.

5In this appeal, CBI submits that the failure of its bid and the award of the contract to Saint Elizabeth was the “sale of a business” pursuant to s. 9 of the Employment Standards Act, 2000 (the “ESA”). As a result, no termination pay was owed to the six respondents.

6At trial, the Deputy Judge found that a sale of a business had not occurred and ordered CBI to pay damages to Ms. Kogan totaling $23,537.60 plus pre and post judgment interest. The damages included termination pay, premiums for benefits continuation, and severance pay.

7The evidence at trial was that not all existing CBI employees were offered new employment with Saint Elizabeth. Their employment with CBI was terminated and they were required to apply for a position with Saint Elizabeth on line and attend a panel interview before being hired. No assets or equipment were transferred from CBI to Saint Elizabeth nor were any management or administrative staff from CBI hired by Saint Elizabeth. CBI and Saint Elizabeth had no prior commercial connection. They were, in fact, competitors.

8While Saint Elizabeth promised to give CBI employees priority when hiring, they were under no obligation to hire any CBI employees. Although the respondents were all ultimately offered positions with Saint Elizabeth, their previous years of service with CBI were not recognized, their remuneration was reduced, flexibility in their schedule was taken away and they were placed on probation. They received no benefits during their probation period. After the probation period ended, they were entitled to fewer benefits with a greater contribution from them than the plan they had with CBI. As well, new management and new processes were implemented by Saint Elizabeth such that the former CBI employees worked out of the same location but in a very different way than they had for CBI.

9The appellants submit that the Deputy Judge erred in;

a. Applying a strict version of the “going concern” test used in decisions dealing with the meaning of sale of a business under the Ontario Labour Relations Act, 1995 (the “OLRA”).

b. Giving the term “business” in s. 9 of the ESA a restrictive rather than an expansive interpretation.

c. Requiring a “historical and functional connection” between CBI and Saint Elizabeth in order for there to be a sale of a business under the ESA.

d. Relying on decisions under the OLRA as supporting the finding that s. 9 of the ESA is inapplicable in this case.

e. Considering that Saint Elizabeth did not recognize the service of CBI’s employees as a factor in determining whether there had been a sale of a business under the ESA.

THE STANDARD OF REVIEW AND POSITIONS OF THE PARTIES

10CBI submits that this appeal pertains to errors of law made by the Deputy Judge. Such errors are reviewable on a standard of correctness.¹

11The respondent submits that the Deputy Judge made no errors of law and engaged in the correct interpretative exercise. She submits that appeal should be dismissed.

ANALYSIS AND RULING

12The Deputy Judge did not err in law. She applied the correct test in accordance with the principles in Abbott and Ajax. While relying on some OLRB cases, she recognized the test in those cases was different but not completely inapplicable. The Deputy Judge properly weighed the evidence and made no palpable or overriding error with respect to applying the evidence to the law.

Did the Deputy Judge Err in Using the “Going Concern” Test?

13CBI relies on Abbott v. Bombardier² in which the Ontario Court of Appeal refused to apply the “going concern” test in order to find the “sale of a business. In Abbott the respondent Bombardier entered into a contract with CGI in which it outsourced its IT services to CGI. As part of the contract, Bombardier transferred significant assets to CGI and offered full time employment to all of the appellants. CGI recognized all of the affected employee’s original date of hire with Bombardier as per employment standards legislation and the common law. All of the appellants accepted the offers of employment from CGI and commenced doing substantially the same work as in their previous employment for Bombardier.

14The appellants in Abbott commenced an action against Bombardier for severance pay. A motion for summary judgment was brought by Bombardier to determine whether a “sale of the business” had occurred and s. 9 of the ESA applied. Bombardier was successful in having the appellants’ claim for severance pay dismissed on the basis that a sale had occurred and no termination pay was owed.

15On appeal, the central issue was whether the motion judge erred in failing to apply the “going concern” test to determine whether the “sale of a business” had occurred. The court held that the “going concern” test was one used by the Ontario Labour Relations Board in determining whether the sale of a business had occurred under the OLRA. It was not a test that should be applied in cases under s. 9 of the ESA because the OLRA regime targets the “continuity of relationships between unions and employers in the context of the sale of a business.” As such, the court held that s. 9 of the ESA must be given a more expansive interpretation and there was no requirement for the transfer of a “going concern” in order to find that the sale of a business had occurred.

16The Deputy Judge found, correctly, that Abbott did not apply to this case because;

a. Abbott involved outsourcing of an entire department to a third party and the transfer of significant assets. She also noted that “when the relationship with CBI and Mackenzie Health came to an end, a new relationship was created with Saint Elizabeth.” CBI did not outsource its services to any third party. The Deputy Judge therefore found that no “transfer” had occurred within the meaning of s. 9 of the ESA.

b. Saint Elizabeth obtained a contract from Mackenzie Health but it did not acquire anything from CBI. In Abbott, CGI obtained significant assets from Bombardier including computer servers, mainframes, and desktop and laptop computers.³ In the instant case, all equipment was owned by Mackenzie so no transfer of assets ever occurred.

c. In Abbott, there was a contract in which CGI agreed to offer full time employment to 194 members of the IT group and recognize each affected employee’s date of hire.⁴ There was never any agreement between CBI and Saint Elizabeth requiring Saint Elizabeth to hire any employees from CBI nor were any personnel files transferred. In fact, CBI’s employees applied to Saint Elizabeth independently with no promise of being re-hired. The hiring process included competing with outside applicants.

Did the Deputy Judge Give an Overly Restrictive Interpretation of the Meaning of “Business” in Section 9 of the ESA Including Requiring a Historical and Functional Connection?

17The trial judge did not give the meaning of “business” in s. 9 of ESA an overly strict interpretation. She specifically states that even using the “broadest possible” interpretation of the sale of a business under s. 9 of the ESA no sale occurred. The Deputy Judge cites specific examples such as the lack of any transfer of data, patients, assets, personnel files or equipment. She did not err in referring to the lack of a historical and functional connection between CBI and Saint Elizabeth. This was only one of several factors she considered with respect to whether a sale of a business had occurred. There is no possible error of law in this regard.

Did the Deputy Judge Err in Relying on Decisions Under the OLRA?

18The Deputy Judge did not err in referring to certain cases decided under the OLRA. In relying on cases such as HGC Management Inc. v. CEP Local 333-0756, the Deputy Judge was using a correct comparison between s. 69 of the OLRA and s. 9 of the ESA with respect to the intention of protecting a status quo for employees in the event of a sale of a business.

19While the test under the OLRA may have a different objective, it was not an error to rely on the indicia of sale (or no sale) to assist her in her interpretative exercise and applying the correct test in Abbott.

Did the Deputy Judge’s Err in Considering Saint Elizabeth’s Refusal to Recognize Service?

20Saint Elizabeth did not recognize CBI employees’ seniority. In fact, it treated CBI employees as any other outside job applicant. Saint Elizabeth’s refusal to recognize the prior service of the CBI employees that it hired at its discretion was entirely relevant to the issue of whether there was a “sale of business.” There was no error of law in this respect.

21As the Deputy Judge recognized in her reasons, there must be two parties with a mutual objective in order for a sale of a business to occur. In this case she noted that neither party had any previous history and they were, in fact, competitors. She finds that there was no evidence of “any past collaboration or relationship,” and neither party conducted themselves as if they were a party to a sale. Such a consideration cannot be an error when it goes to the very heart of determining whether there had been a sale of a business.

22For the reasons set out above, the appeal is dismissed.

COSTS

23The parties had not agreed on costs in this matter. As such, written costs submissions of no more than two pages (exclusive of any Bill of Costs or Offer to Settle) shall be submitted on a seven day turnaround starting with the respondent and commencing seven days from the date of this judgment. If no costs submissions are received within 35 days of the date of this judgment, costs shall be deemed to be settled.

Gilmore J.

Footnotes

1. 1Housen v. Nikolaisen, 2002 SCC 33.
2. 22007 ONCA 233
3. 3Ibid at para 3.
4. 4Ibid.