Consider this scenario: your company wins a contract to provide cleaning services for a building. The company that previously held the contract had 10 employees that provided cleaning services for the same building.
- Is your company required to hire all 10 employees?
- If your company chooses not to hire some of those employees, would it be responsible for paying those employees their severance entitlements?
In most industries, there is no rule requiring new service providers to hire the employees of previous providers, and any severance obligations are the responsibility of the company that acted as the employer. However, the Employment Standards Act, 2000 (the “ESA”) and Ontario Regulation 287/01 (“Reg 287/01”) contain special rules for employees of building services providers.
These rules apply when a building services provider is replaced by a new provider (“Newco”) and they provide rights and remedies to the employees of the replaced provider (“Oldco”). Generally speaking, and subject to certain exceptions, the following rules will apply:
- Any employees of Oldco who are hired by Newco will have continuity of service, and their length of service with Newco will include their time with Oldco; and
- Any employees of Oldco who are not hired by Newco will be considered to have been dismissed by Newco, and Newco will be responsible for the employee’s severance entitlements.
The Ontario Labour Relations Board described the need for these special rules as follows:
“The building services provider provisions are of significant interest to persons engaged in bidding on contracts to provide services for a building with respect to food, security, cleaning, parking, concession stands and property management. Generally, such contracts are periodically re-tendered by the building owners. Typically, when an employer loses a contract to provide such services for a building, it is left with more employees than it has work for.”
Definition of “Building Services”
The above rules apply only if the employer is providing building services. The term “building services” is defined in section 1(1) of the ESA as services for a building with respect to:
- food,
- security, and
- cleaning.
Reg 287/01 adds two other categories to the definition of building services:
- Services that are intended to relate only to the building and its occupants and visitors with respect to:
- a parking garage or parking lot, and
- a concession stand.
- Property management services that are intended to relate only to the building.
Whether the services provided constitute “building services” or not is a factual determination that is made on a case-by-case basis. For example, in the decision of G.N. Johnston Equipment Co. v. Cabate, the Ontario Labour Relations Board ruled that services related to the functioning of forklift equipment used inside a building did not constitute “property management services”, and thus the new service provider did not owe any severance obligations to an employee of the previous service provider.
Continuity of Service
Section 10 of the ESA provides for continuity of service for employees of building services providers.
Let’s consider the scenario of an employee of Oldco (the former service provider). After the employee had completed six years of service, Oldco loses its building services contract to Newco (the new service provider), and Newco then hires the employee for a period of one year. Section 10 of the ESA provides that their length of service with Newco will be seven years. If Newco dismisses the employee, then their entitlements upon termination will consider their full period of service with Oldco and Newco.
Section 10 further states that if the employee will not be considered to have been dismissed by Oldco if they are hired by Newco within 13 weeks of the earlier of:
- Their last day of work with Oldco; and
- The day that Newco begins providing services for the building.
Obligation of New Service Providers to Existing Employees
Section 75 of the ESA concerns situations in which the new building services provider chooses not to employ an employee of the previous provider.
Consider the scenario in which Oldco loses its building services contract to Newco, and Newco hires all but one of Oldco’s employees that provided services under its contract. Section 75 of the ESA provides that Newco will be deemed to have dismissed the one employee that it did not hire, and that Newco will be responsible for employee’s entitlements upon termination, including Termination Pay and statutory Severance Pay. Newco will likely also be responsible for providing the employee with reasonable notice of termination, or pay in lieu thereof, pursuant to common law.
Reg 287/01 contains several exceptions to the application of section 75, including when an employee refuses an offer of employment with the new provider that is reasonable in the circumstances. In such a scenario, Newco will not assume liability for the termination of their employment.
Conclusion
Companies that act as building services providers need to be aware of the special rules that exist for employees in the industry. When taking over a new contract, it is advisable to obtain information about the employees of the former service providers, for which the new provider will be assuming contingent liability. We can assist employers with navigating their duties and obligations in the industry.
If you are an employee of a building services provider, we can help you enforce your rights in situations where your employment was terminated, or where you were not hired by the new provider.
If you have any questions about your situation or if you would like to get legal advice, please feel free to contact us.
