Three's A Crowd? Ontario Court Of Appeal Clarifies Test For Common Employer

• Published date: 26 July 2021
• Subject Matter: Corporate/Commercial Law, Employment and HR, Corporate and Company Law, Contract of Employment, Unfair/ Wrongful Dismissal, Employee Rights/ Labour Relations, Shareholders
• Law Firm: Stikeman Elliott LLP
• Author: Ms Lucy Carruthers

The Ontario Court of Appeal's recent decision in O'Reilly v ClearMRI Solutions Ltd., 2021 ONCA 385 ("O'Reilly") provides important clarification as to the scope and application of the common employer doctrine in connection with claims for employment entitlements. In particular, O'Reilly confirms that the common employer doctrine will only apply where there is evidence of an intention to create an employer/employee relationship between an individual and the related corporation in question.

O'Reilly also provides clarity as to the application of section 131 of the Ontario Business Corporations Act, which imposes liability on corporate directors for up to six months' unpaid wages and up to twelve months' vacation pay, subject to certain conditions.

This blog focuses on the Court of Appeal's findings with respect to the common employer doctrine.

Common Employer Doctrine

The common employer doctrine provides that an individual may be employed by a number of different companies at the same time. Where an individual has an employment-related claim and invokes the common employer doctrine, they may pursue those claims as against both their primary employer and the applicable related company. At a high level, an employee's ability to recover from the related company will depend on the nature of the relationship, and extent of common control, between the related company and the primary employer of the individual. This assessment will take into account the substance, as opposed to the form, of the relationship between companies.

In pursuing claims against a common employer, an individual can bring an application to have multiple entities declared as a common employer at common law (as addressed in O'Reilly), pursuant to the Employment Standards Act, 2000 ("ESA"), or, for unionized employees, under to the Ontario Labour Relations Act ("LRA").

O'Reilly: Facts and Procedural Background

Mr. O'Reilly served as the Chief Executive Officer and a director of ClearMRI Solutions Ltd. ("ClearMRI Canada") and its wholly owned subsidiary, ClearMRI Solutions Inc. ("ClearMRI US") (together, the "ClearMRI Companies"). Tornado Medical Systems Inc. ("Tornado") is the majority shareholder of ClearMRI Canada. Mr. O'Reilly was employed pursuant to a written employment agreement with ClearMRI US, but he reported to, and had his performance goals set by, the board of directors at ClearMRI Canada.

When Mr. O'Reilly's employment ended, he brought an action against the ClearMRI Companies...