Abbott et al. v. Bombardier Inc. c.o.b. Bombardier Aerospace

[Indexed as: Abbott v. Bombardier Inc.]

85 O.R. (3d) 21

Court of Appeal for Ontario,

Simmons, MacFarland JJ.A. and Pardu J. (ad hoc)

March 30, 2007

Employment -- Employment standards -- "Going concern" test not applicable to sale of business under s. 9 of Employment Standards Act, 2000 -- Employment Standards Act, 2000, S.O. 2000, c. 41, s. 9.

The plaintiffs were previously employed by B Inc. in its Information Technology Services ("ITS") Group. B Inc. entered into an agreement with CGI to transfer its ITS Group to CGI. CGI agreed to recognize each of the affected employee's original date of hire with B Inc. both for the purpose of determining notice of termination and severance pay under the applicable employment standards legislation and for common law purposes. The plaintiffs were given notice of termination by B Inc. and accepted offers of employment from CGI. They brought an action against B Inc. claiming severance pay pursuant to the Employment Standards Act, 2000 ("ESA"). B Inc. moved successfully for summary judgment dismissing the claim. The plaintiffs appealed, arguing that the motion judge erred in failing to apply the "going concern" test for determining whether the B Inc./CGI transaction constituted a sale of a part of a business within the meaning of s. 9 of the ESA.

Held, the appeal should be dismissed.

The meaning of "business" in s. 9 of the ESA is to be given an expansive interpretation. The "going concern" test would only serve to narrow the ambit of s. 9. While the "going concern" test has been used by the Ontario Labour Relations Board in decisions dealing with the meaning of sale of a business under the Ontario Labour Relations Act, 1995, S.O. 1995, c. 1, Sch. A ("OLRA"), this does not mean that it is appropriate to use the same test under the ESA. "Business" is not defined in the OLRA, while it is broadly defined in the ESA. More importantly, the two legislative regimes target different issues. The OLRA regime is aimed, at least in part, at providing for the continuity of relationships between unions and employers in the context of the sale of a business while the purpose of the ESA regime is to protect individual rights and to preserve continuity of seniority. The motion judge did not err in failing to apply the "going concern" test in determining whether the transaction constituted a sale of a part of a business within the meaning of s. 9 of the ESA.

APPEAL from the order of Spiegel J., [2005] O.J. No. 3561 (S.C.J.), dismissing an action for severance pay.

Cases referred to C.U.P.E. v. Metropolitan Parking Inc., 1979 815 (ON LRB), [1979] O.L.R.B. Rep. 1193, [1980] 1 Can. L.R.B.R. 197; Campbell (Re), [1993] O.E.S.A.D. No. 115; Federated Buildings Maintenance Corp., [1989] O.E.S.A.D. No. 14; Kenmir Ltd. v. Frizzell, [1968] 1 All E.R. 414, [1968] 1 W.L.R. 329, [1968] I.T.R. 159, 4 K.I.R. 240 (Q.B.), consd Other cases referred to Machtinger v. HOJ Industries Ltd., 1992 102 (SCC), [1992] 1 S.C.R. 986, [1992] S.C.J. No. 41, 7 O.R. (3d) 480n, 91 D.L.R. (4th) 491, 134 N.R. 386, 40 C.C.E.L. 1, 92 CLLC 14,022, 11 C.P.C. (3d) 140 (sub nom. Lefebvre v. HOJ); Merrill Lynch Canada Inc. (Re) (7 August 1987), E.S.C. 2256 Statutes referred to Employment Standards Act, R.S.O. 1980, c. 137, s. 13 Employment Standards Act, 2000, S.O. 2000, c. 41, ss. 1 [as am.], 9 [page22 ] Interpretation Act, R.S.O. 1990, c. I.11, s. 10 Labour Relations Act, 1995, S.O. 1995, c. 1, Sch. A Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 20.04(2) [as am.]

Kenneth Alexander, for appellants. Caroline Ursulak, for respondent.

[1] BY THE COURT: -- We indicated at the appeal hearing that this appeal would be dismissed. These are our reasons.

[2] The appellants are a group of employees who were previously employed by Bombardier Inc. ("Bombardier") within its Information Technology Services ("ITS") Group.

[3] On July 11, 2003, Bombardier entered into a contract with Conseillers en Gestion et Informatique CGI Inc. ("CGI") to transfer the Bombardier ITS Group to CGI. Under the terms of the contract, Bombardier transferred significant assets to CGI, including computer servers, a mainframe, as well as desktop and laptop computers while CGI agreed to assume the functions and responsibilities performed by the ITS Group and to offer full- time employment to 194 of the members of the ITS Group, including all of the appellants. Significantly, CGI also agreed to recognize each of the affected employee's original date of hire with Bombardier both for the purpose of determining notice of termination and severance pay under the applicable employment standards legislation and for common law purposes.

[4] On July 10, 2003, the appellants were given approximately eight weeks' notice that their employment with Bombardier would terminate on September 7, 2003. They were also advised that they would receive an employment offer from CGI in mid-August to perform substantially the same work on equivalent terms and conditions as their existing employment.

[5] On August 11, 2003, the Bombardier/CGI transition team made a presentation to the appellants to advise them of their proposed new terms and conditions of employment and of how the transfer from Bombardier to CGI would affect them. During the presentation the appellants were advised that there would be a flow-through of their years of service from Bombardier to CGI and that CGI would recognize their Bombardier seniority. On August 13, 2003, the appellants received written offers of employment from CGI. All of the appellants accepted these offers and commenced working for CGI on September 8, 2003. [page23 ]

[6] The appellants commenced this action against Bombardier on March 5, 2004, in which they claim severance pay pursuant to the Employment Standards Act, 2000, S.O. 2000, c. 41 (the "ESA"). The parties agreed that summary judgment under rule 20.04(2)(b) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] was the appropriate mechanism for determining the issue. Accordingly, on March 22, 2005, the respondent brought a motion for summary judgment to dismiss the appellants' claim, while the appellants brought a cross-motion for summary judgment for payment of their severance pay. On April 7, 2005, Spiegel J. granted the respondent's motion, dismissed the appellants' action and also dismissed the appellants' cross-motion.

[7] It is common ground that but for the provisions of s. 9 of the ESA, the appellants would be entitled to severance pay from Bombardier.

[8] Section 9 of the ESA provides that "[i]f an employer sells a business or a part of a business and the purchaser employs an employee of the seller, the employment of the employee shall be deemed not to have been terminated or severed for the purposes of the Act". The section also provides that in such circumstances, the employee's "employment with the seller shall be deemed to have been employment with the purchaser for the purpose of any subsequent calculation of the employee's length or period of employment".

[9] The central issue on this appeal is whether the motion judge erred in failing to apply the "going concern" test for determining whether the Bombardier/CGI transaction constituted a sale of a part of a business within the meaning of s. 9 of the ESA.

[10] There are two further provisions of the ESA that are especially relevant to this issue. Section 9(3) of the ESA states that "'sells' includes leases, transfers or disposes of in any other manner, and 'sale' has a corresponding meaning". Section 1 of the ESA provides that "'business' includes an activity, trade or undertaking; ('enterprise')".

[11] In his reasons, the motion judge determined that the transaction between Bombardier and CGI constituted a sale of a part of a business for the purposes of s. 9 of the ESA. He noted [at para. 24] that it involved the transfer of a "specific bundle of tasks and functions performed by an identifiable group of employees" and significant assets to CGI. The motion judge also found that the affected employees were re-employed by CGI and continued to apply "essentially the same skills and functions and in many cases used the same facilities and equipment" as they had while at Bombardier. Further, in response to an argument by the appellants, the motion judge held that if an employee accepts [page24 ]employment with a purchaser employer it is irrelevant for the purposes of s. 9(1) of the ESA that the terms of the employee's employment are radically or fundamentally different from those that existed with the vendor employer. In any event, the motion judge concluded that the appellants had failed to meet their onus of demonstrating that the terms of their employment with CGI were radically or fundamentally different than the terms of their employment with Bombardier.

[12] In submitting that the motion judge should have used the "going concern" test in determining whether the Bombardier/ CGI transaction amounted to the sale of a part of a business within the meaning of the ESA, the appellants rely significantly on the decision of Adjudicator Randall in Re Campbell, [1993] O.E.S.A.D. No. 115, dealing with the interpretation of s. 13 of the Employment Standards Act, R.S.O. 1980 c. 137 (the "1980 Act"). Section 13 of the 1980 Act is the predecessor provision to s. 9 of the ESA. It reads, in part, as follows: "Where an employer sells his business to a purchaser who employs an employee of the employer, the employment of the employee shall not be terminated by the sale, and the period of employment of the employee with the employer shall be deemed to have been employment with the purchaser for the purposes of Parts VII, VIII, XI and XIV."

[13] In Campbell, Adjudicator Randall adopted the test set out in Kenmir Ltd. v. Frizzell, [1968], 1 All E.R. 414, [1968] 1 W.L.R. 329 (Q.B.), for the purpose of determining whether a particular transaction amounts to the sale of a business. The Kenmir test focuses on "whether the effect of the transaction was to put the transferee in possession of a going concern, the activities of which could carry on without interruption".

[14] In addition, the appellants rely on Federated Buildings Maintenance Corp., [1989] O.E.S.A.D. No. 14, a decision of Referee Franks interpreting s. 13 of the 1980 Act. Referee Franks relied on C.U.P.E. v. Metropolitan Parking Inc., 1979 815 (ON LRB), [1979] O.L.R.B. Rep. 1193, [1980] 1 Can. L.R.B.R. 197 in which the Ontario Labour Relations Board (the "OLRB") was required to determine whether there had been a sale of a business within the meaning of the Ontario Labour Relations Act, 1995, S.O. 1995, c. 1, Sch. A (the "OLRA"). In Metropolitan Parking, the OLRB referred to Kenmir and also made a distinction between subcontracting out work and the transfer of a business. Further, the Board stated, in part, as follows:

For a transaction to be considered a "sale of a business" there must be more than the performance of a like function, by another business entity. There must be a transfer from the predecessor from the essential elements of the business as a block or as a "going concern". A business is not synonymous [page25 ]with its customers for the work it performs or its employees. Rather, it is an economic organization which is used to attract customers or perform the work. The legislature could have provided for the continuation of bargaining rights whenever there is a continuity of the work performed but it did not do so. Bargaining rights are continued only when the employer transfers his business.

[15] Relying on these authorities, the appellants submit that Bombardier made an agreement with CGI that amounted to nothing more than a contract to outsource its information technology services department in order to reduce expenses. By virtue of that agreement, employees and assets forming part of the ITS Group were transferred to CGI and Bombardier obtained information technology services from CGI at a lower cost. The appellants argue that an employer hiving off a portion of its labour requirements in order to save money does not constitute a sale of part of a business for the purposes of the ESA. They maintain that the Bombardier/CGI transaction amounted to the transfer of an administrative function to CGI, not of a going concern. By itself, information technology services did not contribute to the profitability of Bombardier, but rather was an expense. The appellants contend that the agreement in this case was in pith and substance a transfer of assets with an option to hire Bombardier's employees.

[16] The appellants concede that the statutory definition of "business" under the ESA is not specifically limited to going concerns. However, they submit that the purpose of the broad definition in this statute goes to jurisdiction and is designed to capture workplaces that are not driven by a profit motive. Where the employer is a commercial entity, the appellants say that a definition of "business" that focuses on the concept of a "going concern" is appropriate.

[17] We do not accept the appellants' submission for two reasons. First, we note that the ESA is remedial legislation intended to set minimum standards for terms of employment. As such, in accordance with the provisions of s. 10 of the Interpretation Act, R.S.O. 1990, c. I.11, it should be given a "fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Act according to its true intent, meaning and spirit".

[18] Viewed in the context of the entire statute, in our view, the purpose of s. 9 of the ESA is to protect minimum statutory entitlements that are related to length of employment where the purchaser of a business, or part of a business, continues to employ the employees of the vendor following the sale. Such entitlements include: vacation entitlements, entitlements to pregnancy and [page26 ]parental leaves, as well as entitlement to notice of termination or pay in lieu of notice and severance pay. In our view, this statutory purpose is apparent from the expansive definitions of business and sale that are included in the ESA, the nature of the protections the ESA provides, and the wording of s. 9 of the ESA.

[19] The appellants contend that the rights we have referred to are hollow rights in the context of a case such as this one where the appellants' seniority rights both for statutory and common law purposes were guaranteed by contract. However, we note that in Machtinger v. HOJ Industries Ltd., 1992 102 (SCC), [1992] 1 S.C.R. 986, [1992] S.C.J. No. 41, the Supreme Court of Canada held that an interpretation of the predecessor Act that extended protection to as many employees as possible is to be favoured over an interpretation that does not. In our view, the "going concern" test could only serve to narrow the ambit of s. 9 of the ESA.

[20] Second, while the "going concern" test has been used by the Ontario Labour Relations Board in decisions dealing with the meaning of sale of a business under the OLRA, we are not persuaded that that means that it is appropriate that the same test should be used under the ESA. We note that "business" is not defined in the OLRA, whereas it is broadly defined in the ESA. More importantly, the two legislative regimes target different issues. As noted in Metropolitan Parking, the OLRA regime is aimed, at least in part, at providing for the continuity of relationships between unions and employers in the context of the sale of a business. By way of contrast, the purpose of the ESA regime is to protect individual rights and to preserve continuity of seniority. Viewed in this context, in our view, the meaning of business in s. 9 of the ESA is to be given an expansive interpretation.

[21] In his reasons, the motion judge relied on the decision of Referee Brown in Re Merrill Lynch Canada Inc., August 7, 1987, E.S.C. 2256. In Merrill Lynch, the issue was whether the actions of a financial services company in outsourcing its keypunch operations constituted the sale of a business for the purpose of s. 13 of the 1980 Act. In addition to noting the differing purposes of the Labour Relations Act and employment standards legislation, Referee Brown referred to the fact that "business" was a broadly defined term under the 1980 Act, and said"the services of secretaries, clerks and, in this case, keypunch operators, clearly fall within the definition of an 'activity' and 'undertaking' within the meaning of s. 13 [now s. 9]". Referee Brown also noted that "[w]hile the transfer of this activity or undertaking may not have included some normal indicia of a 'going concern' . . . there was the transfer of a specific bundle of tasks and functions performed by an identifiable group of employees." In addition, he said: [page27 ]

Section 13 is not a limitation placed upon the application of the Employment Standards Act. Quite the contrary, its purpose, as previously indicated, is to ensure that the accumulated period of employment of an employee, which entitles him or her to certain benefits under various parts of the Act, will be carried over from one employer to another where a sale has taken place. If the section is applicable, several benefits are immediately available to an employee; this would not be the case if the section is inoperable, . . . At the same time, there are no disadvantages to an employee solely from the operation of that section. If the new employer decides to terminate him, he is entitled to a period of notice consistent with the accumulated services of employment with both the old and new employer. If he later decides to resign his employment, he is in no worse position than he would have been if the sale had not taken place.

[22] In our view, the motion judge made no error in relying on Merrill Lynch. Moreover, we see no error in his findings and conclusions on this issue.

[23] In addition to the main issue on appeal, the appellants also claimed that the motion judge erred in failing to find that the appellants' employment with CGI was fundamentally or radically different than their employment with Bombardier, and therefore that the provisions of s. 9 of the ESA do not apply.

[24] We do not accept this submission. The appellants' main complaint is that while they were entitled to a defined benefit pension at Bombardier, they receive no similar benefit at CGI. There was also some other evidence identifying other alleged differences in the appellants' employment at CGI, such as a requirement to contribute some portion of the cost of other benefits. In addressing this issue, the motion judge noted that Bombardier filed evidence indicating that it had retained the services of a consulting agency specializing in employee benefits to determine the present value of the loss of pension benefits for each employee and that that amount was translated into an upward salary adjustment for each employee.

[25] Assuming, without deciding, that s. 9 of the ESA does not apply in the event of a fundamental or radical difference in employment with a successor employer, we are not persuaded that the motion judge erred in his conclusion on this issue. As noted by the motion judge, there were no cross-examinations on the affidavits that were filed. Viewed in context, in our view, the evidence adduced by the appellants did not rise to the level of demonstrating a fundamental or radical difference in their employment.

[26] Finally, the appellants raised an issue on appeal concerning the effect of Bombardier failing to provide them with notice of the fact that, if they accepted employment with CGI, it (Bombardier) was relying on s. 9 of the ESA; however, if the appellants chose not to accept employment with CGI, it (Bombardier) would be responsible for their severance pay. As the appellants did not [page28 ]raise this as an issue in their statement of claim, we concluded it was unnecessary that we address this issue on appeal.

[27] For the foregoing reasons, the appeal is dismissed with costs to the respondent fixed at $10,000 inclusive of disbursements and applicable GST.

Appeal dismissed.