2880-98-ES Bregman’s – The Foodfactory Inc., Applicant v. Isidora Colovic, Patrick Ng, Rick Boisvert, Elaine Wong, Nancy Young, Dawn Armstrong, Maria Bernardo, Lorraine Tait, Gordon Chan, Gilbert Chan, Bibi Parvaneh, Bernard Suthan Sivapalan, Jeyaranjan, Muthiah, Grazyna Sulikowska-Firgan, Jelena Colovic, Siu Yiu Yan, Lee Nay Yee, Lin Guang Yan, Chen Shao Lo, Raja Ponnuthurai, Kandasamy Baskaran, Kandiah Arithas, Jonathan Lung, Lung Ping Kuen, No Po-Ling Shirley, and Ministry of Labour, Responding Parties.
BEFORE: Russell Goodfellow, Vice-Chair.
APPEARANCES: Mark Grossman and Benn Spiegel for the applicant; Patrick Ng, Parvaneh Bibishahrbanoei, Elaine Wong, Raja Ponnuthurai and Shao Lo Chen for responding employees; Alicia Gordon-Fagan for the Ministry.
DECISION OF THE BOARD; January 13, 2000
This is an application for review of an order by an Employment Standards Officer. The Officer required the applicant to pay vacation pay to the responding parties in the amount of $7,288.90.
The Officer found that the applicant was the purchaser of a business from a numbered Ontario company and was, therefore, responsible for any accrued but unpaid vacation pay as of the date of the purchase. The applicant denied responsibility for any such payments on the basis that it was not the “employer” of the responding parties nor was it the “purchaser” of a business within the meaning of the Employment Standards Act (the “Act”).
A hearing was held to deal with this matter on October 29, 1999. The responding parties represented themselves, while the Ministry of Labour and the applicant were represented by counsel. The responding parties and the Ministry supported the Officer’s decision.
I agree with Ministry counsel’s assertion that there can be no serious argument that the applicant was not the employer of the responding parties. “Employer” is defined in section 1 of the Act in the broadest possible terms:
"employer" includes,
(a) any owner, proprietor, manager, superintendent, overseer, receiver or trustee of any activity, business, work, trade, occupation, profession, project or undertaking who has control or direction of, or is directly or indirectly responsible for, the employment of a person therein, and
Expressly included within the definition of “employer” is the term “manager”. By the applicant’s own admission (see the “reasons for review” filed in support of the application) even if it was not the “owner” of the business it was certainly the “manager”. Accordingly, the applicant’s first argument is rejected.
The gist of the applicant’s second argument is that it was not a purchaser of the restaurant business but had merely contracted to manage the business on behalf of the owner. Hence, so far as the applicant was concerned, it was the numbered company that continued to be responsible for any unpaid vacation pay accrued as of the date that it became the manager.
In my view this argument has no greater merit than the first. It proceeds from a fundamental misapprehension of the concept of a sale of business within the meaning of the Employment Standards Act. Although it is true, as the applicant points out, that its involvement in the business was established pursuant to the terms of something called a “Management Agreement” with the numbered company, the agreement was much more than a contract to “manage”. For the sum of $200 per year the applicant obtained the right not only to operate and manage the business in all respects, but to retain all of the profits and to bear all of the losses. Thus, the agreement stated in part:
Spiegel will operate all of the business operations of Bregman’s on his own account effective April 15, 1997. Spiegel will be responsible for all of the payables listed in Schedule “A” hereto attached and being those amounts listed as of April 10, 1997. Spiegel shall pay pay [sic] all Bregman’s business expenses incurred on and after April 15, 1997 until the termination of the agreement. Bregman’s shall insure that all other debts and obligations not otherwise listed herein are satisfied forthwith.
Spiegel shall retain all revenues from the business operations of Bregman’s earned on and after April 15, 1997 until the termination of the agreement. Spiegel shall have the benefit of all of the assets of the Bregman’s business operations as of April 15, 1997 including but not limited to all chattels, equipment, inventory, bank accounts credit card receipts, pre-paid expenses, and deposits.
The agreement had no expiry date.
The effect of the agreement was to enable the applicant to operate and manage the business on his own account. Thus, if the business had been successful, the applicant would have retained all of the profits; if it had been unsuccessful, the applicant would have incurred all of the losses. To that end, and on a day to day basis, the applicant entirely ran the business. The only real involvement of the former owners was in the continued holding of legal title to certain physical assets and as party to certain contracts, such as the management agreement. In all other respects, and certainly insofar as the employees were concerned, it was the applicant’s business. Indeed, when the applicant terminated the agreement after only 13 months, the former owners never returned; they walked away from the business, leaving the landlord to exercise its legal rights to dispose of the assets to a third party.
There can be no doubt that what occurred between the numbered company and the applicant was the “sale” of a business within the meaning of section 13 of the Act. Section 13 defines “sells” to include “leases, transfers or disposes of in any other manner…” I am satisfied that the former owners entirely “disposed of” or “transferred” the business to the applicants. The benefit of the business and all of its day to day operations passed from one entity to another. Although neither party furnished me with any Employment Standards Act case law dealing with so-called “management agreements”, the Ministry referred to cases on receiverships (see e.g. Renfrew Inn Holdings Ltd., [1994] O.E.S.A.D. No. 188, Decision No. ESC 94-212) which lend support to this result, as do the Board’s cases dealing with sales of a business under section 69 of the Labour Relations Act, 1995. The applicant’s second argument is, therefore, rejected and the Officer’s order to pay vacation pay is affirmed.
Counsel for the applicant asked that, in the event the application were to be dismissed, the statutory administration fee be returned to the applicant. Counsel submitted that I had the discretion to make such an order and that I should exercise that discretion here given that the point was “novel”, the applicant paid the amounts to the Director quickly, and it conducted the case cooperatively and efficiently. It was the position of the Ministry that I possessed no such discretion and that even if I did there was no basis for exercising that discretion in the applicant’s favour.
I agree with counsel for the applicant that I have the authority to order the return of the fee. For the purposes of disposing of this application, I have all of the powers held by the Officer and the Officer’s power to require the payment of the fee is permissive rather than mandatory [see 65(1)(1.2)(b)]. Having said that, however, I agree with counsel for the Ministry that this is not an appropriate case for exercising that discretion.
The purpose of the statutory administration fee is to defray some portion of the costs of processing the application. The Legislature has decided that Employment Standards Act adjudication will not be fully-funded by the taxpayer but, instead, should be subject to a partial user-pay requirement. As such, employees need not pay for the review of a refusal to issue an order and, while employers must remit the fee in order to apply, the fee is normally returned if the employer is successful. Here, the applicant asks for the return of the fee even though its application has been unsuccessful. There was no suggestion that this request was anything but exceptional.
In my view, the request must be denied. While the applicant is to be commended for the promptness of the payment to the Director and for the way in which it conducted this litigation, neither of these things should be viewed as exceptional. Further, and without agreeing that the novelty of the issue is a factor to be considered in the exercise of this discretion, for the reasons already given I disagree that the point raised here was “novel”. Hence, unless the fee payment system is to have no real application, it must apply in cases such as this. Accordingly, there shall be no order to return the statutory administration fee to the applicant.
The application is dismissed.
“Russell Goodfellow”
for the Board