COURT OF APPEAL FOR ONTARIO

CITATION: Manthadi v. ASCO Manufacturing, 2020 ONCA 485

DATE: 20200728

DOCKET: C67556

Doherty, Juriansz and Paciocco JJ.A.

BETWEEN

Sandra Manthadi

Plaintiff (Respondent)

and

ASCO Manufacturing

Defendant (Appellant)

John S. Contini, for the appellant

Jonathan Pinkus, for the respondent

Heard: in writing, with questions by video conference on June 5, 2020

On appeal from the judgment of Justice Judy A. Fowler Byrne of the Superior Court of Justice, dated September 26, 2019, with reasons reported at 2019 ONSC 5572, 57 C.C.E.L. (4th) 232.

Juriansz J.A.:

A. Introduction AND OVERVIEW

[1] This appeal is from a motion for summary judgment in an action brought under Rule 76 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, awarding Ms. Manthadi, the respondent, damages for wrongful dismissal.

[2] Ms. Manthadi was initially employed on February 7, 1981 by one of the third parties to this action, 63732 Ontario Limited (“637”). On or about November 2, 2017, the appellant purchased the assets of 637 along with the business name “ASCO”. Ms. Manthadi worked for ASCO for approximately one month when she was placed on layoff on December 13, 2017 and never recalled. She sued ASCO for wrongful dismissal and ASCO brought a third party claim against 637.

[3] The motion judge granted Ms. Manthadi’s motion for summary judgment. She held that Ms. Manthadi “had been continually employed from 1981 to 2017, a period of 36 years”, concluded that the proper notice period was 20 months, and awarded Ms. Manthadi $66,391.40 for damages for wrongful dismissal plus $11,958.96 for costs.

[4] On appeal, ASCO argues that the motion judge erred by holding that:

a) Summary judgment was appropriate when there were material facts in dispute and an outstanding third party claim;

b) Ms. Manthadi’s employment with ASCO was a continuation of her employment with 637 for the purposes of calculating her entitlement to reasonable notice on termination;

c) The proper notice period was 20 months; and

d) The damages should not be reduced by the amount paid to Ms. Manthadi by 637 under a settlement and release agreement.

[5] The parties agreed this appeal could proceed in writing. However, the court invited them to make oral submissions in response to certain questions.

[6] For the reasons that follow, I agree with ASCO that summary judgment was not appropriate in this case. The motion judge concluded summary judgment was appropriate primarily because she proceeded on an incorrect understanding of the common law that governs an employee’s rights to reasonable notice from the purchaser of an ongoing business. This appeal presents the opportunity to review and restate the applicable law of Ontario. I would set aside the order below and remit the matter for trial.

B. Facts

(1) Ms. Manthadi is terminated by 637

[7] Ms. Manthadi worked for 637 – then known as ASCO Manufacturing Limited – as a braze welder from February 7, 1981 until early November 2017 when the appellant purchased 637’s assets and business name.

[8] The Agreement of Purchase and Sale was dated November 1, 2017 and was said to take effect on November 3, 2017. In that agreement, the appellant obtained a warranty from 637 stating, among other things, that 637 had provided notice of termination and paid severance to all its employees. 637 also agreed to indemnify the appellant against all claims arising from a breach of its warranties.

[9] Ms. Manthadi’s evidence is that 637 presented her with a Settlement and Release Agreement dated September 28, 2017 on or about that date. She states that 637 advised her the business was being sold and she would be offered continued employment with the appellant. In the Settlement and Release Agreement, Ms. Manthadi acknowledges receiving written notice her employment would terminate on November 24, 2017 and that she would be paid $5,900 “representing 8 weeks gross compensation in full satisfaction of all claims … including all severance pay, termination pay or other compensation howsoever arising”. She released 637 (referred to as Asco in the Settlement and Release Agreement) from all liability “in connection with the Employee’s employment with [637], including without limitation the cessation of such employment.” In my view, nothing turns on a second version of the agreement that ASCO filed as fresh evidence in this court on consent showing different execution and termination dates.

[10] It is common ground that Ms. Manthadi received the payment pursuant to the Settlement and Release Agreement, but there is no evidence as to when she did.

(2) Ms. Manthadi is hired by ASCO

[11] Ms. Manthadi was one of twenty of 637’s employees who were employed by ASCO. The terms of her employment by ASCO and the capacity in which she was employed by ASCO are disputed.

[12] ASCO’s position is that it hired Ms. Manthadi along with nineteen other 637 employees for general labour work to pack and unpack the purchased assets for the move to ASCO’s place of business. ASCO also says it “did not assume the continuity of [637’s] employees” or “recognize [637’s] employees’ prior years of service rendered with [637].”

[13] Ms. Manthadi says she was offered and accepted employment by ASCO on an indefinite basis. She states she understood that ASCO would recognize her years of service with 637 and that she continued to work as a welder without interruption. However, she agreed that she assisted ASCO with moving the purchased assets to a new location from December 4, 2017 onward until she was laid off.

[14] While the affidavits of ASCO’s manager and Ms. Manthadi state their respective positions, neither alleges any specific communication between them to support those positions.

[15] There was no written agreement governing Ms. Manthadi’s employment. Ms. Manthadi was not required to apply or attend an interview before she was hired. Ms. Manthadi continued to work similar hours at a similar rate of pay until December 13, 2017, when ASCO laid her off citing “shortage of work” with an unknown date of recall.

[16] Ms. Manthadi produced text messages from her supervisor in December advising she was not being recalled but that he would let her know when she was being recalled.

(3) The wrongful dismissal action and the third party action

[17] Ms. Manthadi brought an action against ASCO alleging wrongful dismissal after she was never recalled.

[18] ASCO in turn brought a third party claim against 637 and its officers. ASCO pled that 637 breached its obligations under the Agreement of Purchase and Sale by falsely representing that it had terminated Ms. Manthadi and paid her the applicable employment benefits. ASCO also relied on the indemnity provisions of the Agreement of Purchase and Sale.

[19] The defence to the third party claim pled that 637 entered into an agreement with Ms. Manthadi that gave Ms. Manthadi notice of termination and severance pay as required by the Agreement of Purchase and Sale. The defence also pled the parties entered into the agreement on September 28, 2017, before the scheduled closing of the asset purchase on November 3, 2017.

C. the motion judge’s decision

(1) Summary judgment was appropriate

[20] The motion judge observed that summary judgment remains appropriate in a simplified procedure action that is document-driven or where there is limited contested evidence. Summary judgment was appropriate in this case, she explained, because the “material facts on this motion have either been admitted or not refuted by [ASCO].” She said that any matters in conflict were not material and would not impact on her decision. She found it unnecessary to resolve the disputes about whether Ms. Manthadi was hired as a temporary general labourer to move the purchased equipment or on an indefinite basis as a welder, and whether there was an express understanding of how her service with 637 would be treated by ASCO.

[21] The motion judge also determined that ASCO’s outstanding third party claim against 637 did not make Ms. Manthadi’s motion for summary judgment inappropriate. Noting that 637 did not participate in the motion, she inferred that 637 did not consider the outcome of the motion relevant to the third party claim. She also found the dealings between 637 and Ms. Manthadi to be irrelevant to determining the issues between ASCO and Ms. Manthadi.

(2) The common law mirrored the requirements of the ESA

[22] The motion judge proceeded on the basis that, in determining the notice to which Ms. Manthadi was entitled, she was “required to consider her past years of employment with 637, commencing in 1981” (emphasis added). Thus, she held that Ms. Manthadi should be considered to have been continuously employed by ASCO from 1981 for the purposes of calculating her entitlement to reasonable notice under the common law.

[23] The motion judge arrived at this conclusion by reasoning that the common law approach to assessing a successor employer’s obligation to provide reasonable notice mirrored the statutory dictates of the Employment Standards Act, 2000, S.O. 2000, c. 41. She set out the terms of s. 9(1) of the ESA, noting there were only two preconditions to its application: (1) that an employer sells his business to a purchaser; and (2) that the purchaser employs an employee of the employer. She remarked that “for the purpose of the ESA and the calculation of [Ms. Manthadi’s] notice period thereunder, [Ms. Manthadi] is considered to have been continually employed by [ASCO] since 1981.” In these reasons, I will refer to a purchaser of a business who employs an employee of the vendor as the “successor employer”, and to the vendor as the “predecessor employer”.

[24] The motion judge did not apply s. 9(1) of the ESA to the facts of this case, as the appellant contends. However, she stated that “[t]he law also supports this concept of continuous employment for the purposes of common law entitlement to damages for wrongful dismissal”. Because Ms. Manthadi’s previous employer sold its assets and business and the purchaser employed Ms. Manthadi, the motion judge reasoned that she was “required” to consider Ms. Manthadi to have been employed by ASCO since 1981 for the purposes of determining her entitlement to common law notice.

(3) Entitlement to notice and the length of the notice period

[25] The motion judge rejected ASCO’s argument that Ms. Manthadi, by executing the Settlement and Release Agreement, had released any right to further damages under the ESA or pursuant to the common law. The motion judge said ASCO could not rely on the Settlement and Release Agreement because of privity of contract. Ms. Manthadi, she said, never agreed that the Settlement and Release Agreement would be enforceable by ASCO.

[26] The motion judge also found the Settlement and Release Agreement was not a relevant consideration in assessing the quantum of Ms. Manthadi’s damages. She rejected ASCO’s argument that the $5,900 Ms. Manthadi had received from 637 under the Settlement and Release Agreement should be deducted from the damage award to avoid “double dipping”. She stated that the purpose of damages in a wrongful dismissal action is to compensate the employee for the notice they should have received on the day of their termination. She concluded that “any monies [Ms. Manthadi] may have received previously from 637 purporting to satisfy its obligation to [her], cannot be counted toward Asco’s obligation as of December 13, 2017.”

[27] Applying the factors set out in Bardal v. The Globe & Mail Ltd. (1960), 1960 294 (ON SC), 24 D.L.R. (2d) 140 (Ont. H.C.), and considering that “[i]n law, [Ms. Manthadi] had been continually employed from 1981 to 2017”, the motion judge found the proper notice period for Ms. Manthadi was 20 months.

D. ISSUES

[28] The errors alleged by the appellant can be considered under the following questions:

a) Was summary judgment appropriate?

b) Did the motion judge err in holding that the respondent was entitled to damages in lieu of reasonable notice of termination?

c) Did the motion judge err in assessing the quantum of damages in lieu of reasonable notice?

[29] For the reasons that follow, I agree with the appellant that the motion judge erred in concluding that summary judgment was appropriate. As summary judgment was not appropriate, the remaining questions are issues for trial. However, they are related to the first question because the motion judge’s conclusion that summary judgment was appropriate rested on an incorrect view of the applicable law on when and how much recognition should be given to an employee’s service with the predecessor employer. Consequently, a discussion of the applicable legal framework is necessary.

[30] Below, I discuss:

a) Why summary judgment was inappropriate given the disputed facts before the motion judge;

b) Why the disputed facts were material to the existence and extent of Ms. Manthadi’s entitlements upon termination, and

c) The common law’s approach to reasonable notice by a successor employer.

[31] I conclude by summarizing the relevant considerations for trial in this case.

E. Analysis and discussion

(1) Summary judgment was not appropriate in the circumstances

[32] The motion judge cited the decision of Mulligan J. in Commander Construction v. Sovereign General Insurance Co., 2012 ONSC 1075, for the observation that a motion for summary judgment in a simplified procedure action is appropriate where the case is document-driven or there is limited contested evidence. Almost the whole of Mulligan J.’s reasons are devoted to explaining the need for circumspection in entertaining a summary judgment motion in a simplified procedure action, based on this court’s decision in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, 108 O.R. (3d) 1, rev’d on other grounds, 2014 SCC 7, [2014] 1 S.C.R. 87. As a result, Mulligan J. concluded that summary judgment was inappropriate in the case before him.

[33] In Combined Air, a five-judge panel of this court indicated, while a motion for summary judgment could be appropriate in some Rule 76 proceedings, such cases would be exceptional: at paras. 254, 256; see also Singh v. Concept Plastics Limited, 2016 ONCA 815, 2017 C.L.L.C. 210-011, at para. 23. This was for two reasons.

[34] First, it will often be more efficient to simply proceed to a summary trial as contemplated by the Rules: Combined Air, at para. 254. The court observed that the simplified procedure rules are designed to get the parties to trial with a minimum of delay and costs. One of the key objectives of the simplified procedure rules is to limit the extent of pretrial proceedings. Discovery is restricted and cross-examination on affidavits and examinations of witnesses on motions are not allowed. The summary trial procedure is designed to reduce the length of the trial.

[35] This court directed that a judge faced with a contested motion for summary judgment in a simplified procedure action will “need to assess whether entertaining the motion is consistent with the efficiency rationale reflected in the simplified procedures”: Combined Air, at para. 255.

[36] On appeal, the Supreme Court’s foundational summary judgment decision in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, did not specifically address how summary judgment applies in a simplified procedure case. However, the court did affirm that the motion judge must assess, among other things, “the relative efficiencies of proceeding by way of summary judgment, as opposed to trial” and the impact of summary judgment on the litigation as a whole when determining whether it is in the interests of justice to exercise their fact-finding powers and grant summary judgment: Hryniak, at paras. 58, 60.

[37] Second, the simplified procedure rules, which are designed to allow the matter to be determined in an expedited fashion, also constrain the parties’ ability to marshal evidence on a summary judgment motion and meet their obligation to put their best foot forward.

[38] In this case, ASCO submits it was hampered because it could not cross-examine Ms. Manthadi on her affidavit supporting the motion and did not have the evidence of the third party, 637. Ms. Manthadi responds that ASCO could have examined Ms. Manthadi and the third parties for discovery (though the parties had initially agreed to proceed without discoveries). These submissions illustrate that summary judgment motions should be discouraged where they would simply require the parties to prepare for and deal with additional procedures, expending resources and time that would have enabled them to proceed to a summary trial.

[39] As this court observed in Combined Air, at para. 4, “the inappropriate use of Rule 20 has the perverse effect of creating delays and wasting costs associated with preparing for, arguing and deciding a motion for summary judgment, only to see the matter sent on for trial.” The risk of this perverse consequence is greater in simplified procedure cases.

[40] The motion judge in this case did find that the motion for summary judgment was “the most proportionate, most expeditious, and least expensive method of adjudication of the issues”. But apart from expressing that conclusion, the bulk of her analysis is directed to her ability to decide the issues. She held that she was able to decide the issues because she took the view that the matters in dispute were not material. However, in the next section, I explain how factual disputes that the motion judge could not and did not resolve on the record before her were genuine issues requiring a trial.

[41] I conclude the motion judge erred in holding that summary judgment was appropriate in the circumstances. This was a case in which the parties had agreed to proceed without any discoveries but where cross-examination on the general assertions in both parties’ affidavits was necessary to resolve the competing evidence. Allowing the matter to proceed to a summary trial would have ensured a fair and just determination on the merits while also disposing of the third party claim.

(2) The disputed facts were material to the existence and extent of Ms. Manthadi’s entitlements upon termination

[42] While the common law implies a term in contracts of indefinite employment requiring an employer to provide reasonable notice upon terminating an employee without cause, there is no such implied term in fixed term employment contracts.

[43] In this case, the motion judge did not resolve the dispute about the basis on which ASCO hired Ms. Manthadi. ASCO’s argument that it hired Ms. Manthadi on a temporary basis for the specific task of moving the equipment amounted to a claim she was a fixed term employee, which, if accepted at trial, could support finding she was not entitled to notice of termination by ASCO at common law.

[44] Fixed term employment may be defined not only by a definite period of time, but also by the duration of a specific task, or by reference to the happening of a specified event: Geoffrey England, Peter Barnacle, and Innis M. Christie, Employment Law in Canada, loose-leaf, 4th ed. (LexisNexis Canada, 2005), at § 12.2.

[45] A fixed term employee who is terminated before the end of the term is entitled to payment of their wages to the end of the term, absent agreement otherwise: Howard v. Benson Group Inc. (The Benson Group Inc.), 2016 ONCA 256, 129 O.R. (3d) 677, at para. 22, leave to appeal refused, [2016] S.C.C.A. No. 240. An employer is not required to provide notice of termination at common law when the term expires, since the employment agreement simply terminates in accordance with the contract: Ceccol v. Ontario Gymnastic Federation (2001), 2001 8589 (ON CA), 55 O.R. (3d) 614 (C.A.), at para. 1.

[46] On the other hand, if it is found that ASCO hired Ms. Manthadi on an indefinite basis, she would be entitled to reasonable notice and it would be necessary to assess the period of notice ASCO was required to provide.

[47] The motion judge proceeded on the view that the common law supported the same “concept of continuous employment” as did s. 9(1) of the ESA. This explains why she found it unnecessary to resolve the disputes between the parties. The fact that Ms. Manthadi, an employee of the vendor of a business, was employed by the purchaser of the business was sufficient to establish she was continuously employed and entitled to reasonable notice from ASCO. The motion judge reasoned she had all the facts necessary to find the notice period. Ms. Manthadi’s length of service was 36 years, and there was no dispute about the dates of her employment, hours worked, rate of pay and age.

[48] However, a sharp distinction must be drawn between termination of employment by a successor employer under the ESA and under the common law. 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 (by constructive dismissal) when their employer sells the business and there is a change in the identity of the employer. Dubin J.A. stated the common law in Addison v. M. Loeb Ltd. (1986), 1986 2474 (ON CA), 25 D.L.R. (4th) 151 (Ont. C.A.), at pp. 152-53, as follows:

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 a constructive termination of the employment.

If the employee is offered and accepts employment by his new employer, a new contract of employment is entered into.

[49] In this case, no matter what is made of the Settlement and Release Agreement, Ms. Manthadi’s employment by 637 was terminated when 637 sold its assets and business name to ASCO. As such, it was necessary to make findings about the nature of the new employment agreement between Ms. Manthadi and ASCO.

[50] I now turn to a general review of the common law’s approach to reasonable notice by a successor employer, before discussing the application of the law to the material facts in dispute in this case.

(3) The common law’s approach to reasonable notice by a successor employer

(a) How prior service with the predecessor employer is recognized in the length of the reasonable notice period: Addison v. M. Loeb Ltd.

[51] Long-time employees are placed in a difficult position when their employer sells the business as a going concern and the successor employer offers to employ them on an indefinite basis. The difficulty is due to the duty to mitigate.

[52] Ordinarily, long-time employees who are terminated without reasonable notice can expect a substantial payment of damages in lieu of notice. Terminated employees, however, have a duty to mitigate their damages. In Addison, Dubin J.A. adopted the description of the employees’ plight by M. Norman Grosman in “Employee Continuous Service Rights: Here Today, Gone Tomorrow - Addison v. M. Loeb Ltd." (1985) 5:4 Adv. Q. 500, at p. 502, who observed that:

Once the employee accepts employment with the new employer, thereby establishing a new contract, he will probably "mitigate himself right out of his cause of action" against his former employer. If he fails to accept the new job and it is in all respects fundamentally the same as his old one, he is likely precluded by the doctrine of mitigation from recovering any loss sustained on the constructive termination on the basis that such loss could reasonably have been avoided. The unfortunate employee is caught in a bind and will inevitably suffer at least the loss of his perhaps lengthy service with the former employer. If, on the other hand, the new employer declines to employ the individual, the termination becomes express rather than constructive and the former employer will remain liable for any properly recoverable damage sustained by the employee.

[53] Thus, long-term employees, who are employed by the purchaser of their employer’s business, have little prospect of obtaining damages for the termination of their employment. Damages aside, people need jobs. Employees terminated by the sale of a business often have no realistic option other than to accept the offer of a new contract of employment with the purchaser if such is offered. If they are subsequently terminated by the purchaser, the new start date of their term of service weighs in favour of a shorter notice period than had the business not been sold.

[54] Addison resolves this predicament by giving “some recognition” to the period of employment with the predecessor employer when determining the length of the notice period unless there is “an express understanding to the contrary”: at pp. 155-56. It does so by attaching appropriate weight to the employee’s “experience”, one of the factors in the generally accepted formulation for the determination of reasonable notice: at p. 156. As stated by McRuer C.J.H.C. in Bardal, at p. 145:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.

[55] In Addison, the employee started working at an IGA store in Delhi, Ontario in May 1963. In September 1981, a receiver operated the business for approximately two weeks and then sold the assets of the business to the defendant, who continued to operate the store. The employee continued to perform the same duties until April 1983 when his employment was terminated. The trial judge found the employee was wrongfully dismissed and assessed his damages on the basis that he had been employed for some 18 and a half months only. The trial judge awarded damages equivalent to six months’ notice of termination. The employee appealed.

[56] On appeal, Dubin J.A. thought it “unfair to assess the appellant’s damages for wrongful dismissal in the same manner as if he had walked into the store for the first time after the respondent purchased the business and became a new employee of the respondent”: at pp. 155-56. His examination of earlier cases disclosed “no clear principle other than that in the majority of the cases some recognition is given to the period of employment with the predecessor employer”: at p. 156.

[57] Dubin J.A. then pointed out that length of service was not the only factor to be applied in determining the proper award for damages: at p. 156. The conduct of the parties was also relevant: at p. 156. Dubin J.A. observed that the purchaser, in hiring the employee, “automatically received the benefit of the services of a very experienced assistant manager and one fully familiar with the operation of the store”: at p. 156. Dubin J.A.’s observation of the value of experienced employees to the purchaser is apt. A purchaser of an ongoing business who takes on the vendor’s employees avoids the burden, cost, and time of having to recruit a new employment force that is unfamiliar with the work, the working environment, and one another.

[58] Dubin J.A. concluded that the trial judge had failed to give sufficient weight to the employee’s prior experience and had erred by assessing his damages on the basis that he was an employee of only 18 and a half months: at p. 156. Dubin J.A. increased the damages from six months to 12 months’ notice.

[59] It is important to note that Addison did not stitch together the employee’s terms of service with the vendor and purchaser of the business and consider them one continuous period of employment, as they are deemed to be under the ESA. Rather, it recognized the employee’s service with the vendor by appropriately weighing the employee’s experience and the benefit of that experience to the purchaser.

[60] The Addison approach differs somewhat from the approach taken by the British Columbia Court of Appeal in Sorel v. Tomenson Saunders Whitehead Ltd. (1987), 1987 154 (BC CA), 39 D.L.R. (4th) 460 (B.C.C.A.), relied on by Ms. Manthadi. In Sorel, the court implied a term into the employment contract with the purchaser that the employee will be given credit for their years of service with the vendor, unless the purchaser advises or makes an agreement with the employee to the contrary: at p. 462.

[61] I do not accept Ms. Manthadi’s submission that Sorel has overtaken Addison. In a short endorsement, this court upheld a trial judgment that relied on Sorel: Debenham v. CSI-Maximus (2003), 2003 10846 (ON CA), 26 C.C.E.L. (3d) 32 (Ont. C.A.). While the court did not refer to Addison, or to Sorel, the trial result upheld is not inconsistent with Addison. I do not read Debenham to abandon the Addison approach in favour of Sorel.

[62] Addison remains the law in Ontario. In Ontario, reasonable notice is determined by applying the usual Bardal factors considering all the circumstances of the particular case and appropriately weighing the experience a long-time employee brings to the purchaser.

[63] The application of the Bardal factors is well able to deal with a successor employer situation fairly. In other cases, this court has stated that the length of service factor should not dominate the application of the Bardal factors. Minott v. O’Shanter Development Co. (1999), 1999 3686 (ON CA), 168 D.L.R. (4th) 270 (Ont. C.A.), firmly rejected a so-called “rule of thumb” by which the starting point in determining reasonable notice would be to allow one month of notice for each year of service and then make adjustments for the particular circumstances of the case. Laskin J.A. held, at para. 73, that the rule of thumb approach “risks overemphasizing one of the Bardal factors, ‘length of service’, at the expense of the others” and that it gave “unnecessary prominence to length of service.” He concluded that “the rule of thumb approach is not warranted in principle, nor is it supported by authority”: at para. 73. See also Love v. Acuity Investment Management Inc., 2011 ONCA 130, 89 C.C.E.L. (3d) 157, at para. 19, leave to appeal refused, [2011] S.C.C.A. No. 170.

[64] That the Bardal factors can be applied to a successor employer case is evident because Bardal itself was a successor employer case. Mr. Bardal worked for the Globe Printing Co. Ltd. for 13 years until the business was sold to the Globe & Mail Limited in 1955. He worked for the Globe & Mail Limited for just four years when he was terminated. His wrongful dismissal action was tried before McRuer C.J.H.C. in 1960.

[65] In 1960, six months was considered the “unofficial ceiling” for notice in Ontario: England, Barnacle, and Christie, Employment Law in Canada, at § 14.106. McRuer C.J.H.C. himself noted at p. 144 that the C.E.D. stated, “In Ontario damages in cases of indefinite hiring are limited to wages for six months.” Despite this, McRuer C.J.H.C. awarded Mr. Bardal 12 months’ notice. In doing so, McRuer C.J.H.C. did not mention Mr. Bardal’s length of service.

[66] A trial judge applying the Bardal factors is able to craft an appropriate award in a successor employer case without stitching together the employee’s two terms of service. The Addison approach does not use a notional length of service as the yardstick of appropriate notice. The Addison approach has the advantage of flexibility. Its flexibility enables the court to deal fairly with the endless variety of circumstances in which an employee’s claim may be presented. The court is able to recognize, under the rubric of experience, the equivalent of all or some of an employee’s service with the vendor employer in order to arrive at a fair result.

[67] The fair result need not devalue the employee’s past service. The notice periods awarded in both Addison and Bardal were no less than had length of service been used as the yardstick. The appropriate notice period is assessed taking into consideration all of the circumstances.

(b) The circumstances in which the common law recognizes prior service with the predecessor employer

[68] In both Addison and Sorel, an indefinite employee of the vendor was employed as an indefinite employee by the successor employer who had purchased the business as a going concern. In both cases, the employee’s connection to the work performed for the conveyed business remained continuous, with the only change being the identity of the employer.

[69] In Addison, “the appellant continued to perform the same duties as he had since 1963” after the respondent purchased the assets of the business from a receiver and took over operation of the store: at p. 152. The employee had been the assistant manager of the store before the sale and continued as assistant manager of the store for the purchaser.

[70] Sorel likewise refers to the purchaser’s expectation that it will retain the employees of the vendor “without alteration of their terms of employment and with the benefit of their experience”: at p. 462. Sorel also holds that there is an implied term an employee will be given credit for their years of service with the vendor “[w]hen a purchaser acquires a business as a going concern”: at p. 462. See also Hall v. Quicksilver Resources Canada Inc., 2015 BCCA 291, 80 B.C.L.R. (5th) 72, at paras. 33-34.

[71] These parameters help explain why, after the sale of a business, the long-time employee who accepts re-employment with the purchaser will be in a better position than a long-term employee who is terminated and gets a job with an unrelated employer. Where a successor employer buys the business as a going concern, while the employee is terminated and enters into a new employment contract with a new employer, their connection to the ongoing business undertaking is continuous. Only in this situation does the common law give special recognition to the employee’s prior service with their previous employer.

[72] In this situation the employees’ basic duties and responsibilities will usually remain the same after the sale, but that need not be the case. It is not unusual that a purchaser of an ongoing business offers a promotion to one or more of the vendor’s employees. What is necessary is that the employee’s relationship to the ongoing business undertaking continues uninterrupted despite the change in the identity of their employer.

(c) The Settlement and Release Agreement is a relevant circumstance in the assessment of the length of the notice period

[73] Another matter disputed before the motion judge was the relevance of the Settlement and Release Agreement between Ms. Manthadi and 637. The motion judge found it was not relevant, as it dealt with the relations between Ms. Manthadi and 637, not those between Ms. Manthadi and ASCO. In my view, the Settlement and Release Agreement is potentially relevant in several ways.

[74] The termination clause in the Settlement and Release Agreement, on its own, did not make the Agreement relevant. At common law, absent express termination, an employee of the vendor is constructively dismissed when the business is sold. An express termination by the vendor, on its own, is simply redundant. Nor did Ms. Manthadi’s release of 637 from all claims in respect of her employment make the Settlement and Release Agreement relevant. The release clause applied only to 637. The motion judge was correct that the Settlement and Release Agreement with 637 did not disentitle Ms. Manthadi from making a claim against ASCO.

[75] The Settlement and Release Agreement, while not relevant to Ms. Manthadi’s entitlement to notice by ASCO, was potentially relevant in other ways. The payment made under the Agreement could be considered relevant to the length of the notice period assessed against ASCO. The payment is part of those circumstances of the particular case the trial judge must consider. Both Addison and Sorel envisage a remedy that is fair to both parties. In my view, a payment, whatever its nature, received by an employee in respect of the termination of employment for which they are seeking “some recognition” from the successor employer is relevant in determining a remedy that is fair in all the circumstances.

[76] As well, the factual matrix surrounding the making of the Agreement and the terms of the Agreement may be relevant to Ms. Manthadi’s understanding of how she would be treated on the sale of the business and the terms on which she entered the employ of ASCO. In this case, absent a valid agreement limiting her notice from 637 to her ESA entitlement, the fact that the amount of the payment was less than the notice a long-term employee might have expected could support the inference that Ms. Manthadi understood she would be employed by ASCO on an indefinite basis and that she would successfully mitigate all of the damages from her termination by 637.

[77] The motion judge erred in concluding the Settlement and Release Agreement was not relevant.

(4) Summary: applying the law to the material facts in dispute in this case

[78] ASCO says it hired Ms. Manthadi as a general labourer on a temporary basis to help move the purchased equipment to its new location. Ms. Manthadi says it hired her as an indefinite employee to continue her duties as a welder. The parties also disagree as to whether there was an express understanding about whether Ms. Manthadi would be credited with her years of service with 637. These factual disputes were material to the application of the common law reviewed above.

[79] At trial, the burden will be on ASCO to establish “unambiguously” Ms. Manthadi was a fixed term employee, engaged as a general labourer for the specific task of moving the purchased equipment: Howard, at para. 21.

[80] If ASCO fails to prove Ms. Manthadi was a fixed term employee, it will bear the burden of displacing the presumption that Ms. Manthadi’s prior service with 637 should be recognized in the assessment of reasonable notice. It would be the task of the trial judge to assess the reasonable notice required on a consideration of all the particular circumstances, attaching sufficient weight to Ms. Manthadi’s prior experience, to arrive at a remedy that is fair to both parties. The Settlement and Release Agreement would be relevant to that assessment.

F. Disposition

[81] I would set aside the summary judgment granted by the motion judge and order that the matter proceed to trial.

[82] The appellant, as the successful party on appeal, may make submissions about the costs of the appeal and of the proceedings below in brief submissions of no more than 3 pages to be served and filed within 10 days after the release of this judgment. Ms. Manthadi may serve and file her submissions 10 days after service of the appellant’s submissions.

Released: “DD” July 28, 2020

“R.G. Juriansz J.A.”

“I agree. Doherty J.A.”

“I agree. David M. Paciocco J.A.”