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Testing The Boundaries Of The Common Employer Doctrine

Posted On: April, 13 2015

The common employer doctrine allows individuals who have been wrongfully dismissed to extend liability past the employer who technically employs them to the “true” employer who has effective control over the employee. The limits of the common employer doctrine have yet to be strictly defined by the courts, but recent decisions have begun to test the limits of the doctrine.

The common employer doctrine was established by the Ontario Court of Appeal’s decision in Downtown Eatery (1993) Ltd. v. Ontario, [2001] O.J. No. 1879 (Ont. C.A.) (“Downtown Eatery”). In Downtown Eatery, the Court of Appeal articulated the common employer doctrine as follows:

“It seems clear that, for purposes of a wrongful dismissal claim, an individual may be held to be an employee of more than one corporation in a related group of corporations. One must find evidence of an intention to create an employer/employee relationship between the individual and the respective corporations within the group…the true employer must be ascertained on the basis of where effective control over the employee resides . . . . I stress again that an employment relationship is not simply a matter of form and technical corporate structure.”

In Hibbs v. Murphy, 2015 NSSC 48, the Supreme Court of Nova Scotia considered the common employer doctrine and concluded that a company cannot be considered a common employer where it did not carry on any business operation at the same time as the plaintiff’s employment with the defunct company whose corporate assets it purchased.

In a further test of the doctrine’s boundaries, the Ontario Superior Court of Justice inde Kever v. Nemato Corp., 2014 ONSC 6576, allowed the plaintiff to pursue a wrongful dismissal claim against the director of the employer company under the common employer doctrine. Leave for appeal was granted in this matter by the Ontario Superior Court of Justice (Divisional Court) on March 19, 2015. In granting the motion for leave to appeal, Justice Lederer stated that “if the decision is correct, it suggests that all operators and directors may be subject to such a lawsuit simply as a result of their position of control and without any allegations of action taken specific to the case at hand. This being so, the matter, in my opinion, is one of such importance that leave to appeal should be granted.”

The Divisional Court’s upcoming decision in de Kever v. Nemato Corp. should offer Ontario employment lawyers further guidance respecting the limits of the common employer doctrine. Stay tuned!


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