A recent decision of the Ontario Superior Court of Justice
confirms that the labour law concepts and resulting liability for
related or predecessor companies may extend into the employment law
sphere. As a result, a company may potentially be liable as the
"employer" of an individual who was never actually
employed by that entity.
In King v. 1416088 Ontario Ltd., 2014 ONSC 145 (Can
LII), Jack King ("King") successfully sued for wrongful
dismissal damages against a group of companies that all traded
under the "Danbury" name. King worked for more than 38
years for various companies trading under the Danbury name and
provided services at one time or another for seven different
corporate entities operating in the liquidation, valuation and
At some points during his tenure, King did bookkeeping or other
work for each of these entities. Since termination paperwork was
never provided when the employer who paid King changed, the exact
identity of his employer at various times throughout his tenure was
King's claim arose following the termination of his
employment in October 2011, when his then-current employer, Danbury
Industrial, ceased trading. At that point, King and all of the
other employees of that company were terminated without cause. King
was the only individual who was not then offered employment with a
new entity, DSL Commercial ("DSL"), which began operating
under the Danbury trade name.
King's wrongful dismissal lawsuit was successful against DSL
(which had never been his employer) as well as other Danbury
entities owned or controlled by common individuals. The Court found
numerous connections between DSL and King's previous employers.
For instance, DSL and King's previous employers all conduced
business under the Danbury trade name based on agreements with a
common numbered company, which had the rights to that trade name,
the businesses operated out of the same premises with common or
similar management, and the businesses had the same telephone
number. Thus, in finding DSL and the other related companies liable
for the severance package payable to King, the Court determined
that throughout King's tenure liability migrated from Danbury
entity to Danbury entity. In addition, the Court found that all of
the relevant Danbury entities were liable for the severance
Key Lessons For Employers
The applicability of the principles from this decision to
typical commercial transactions is unclear. Although there were
numerous "reorganizations" of the Danbury companies
during King's tenure, none of these reorganizations were
negotiated between arms-length parties nor were the changes of
employer documented – both atypical commercial practices.
The argument that different parties who employed an individual
during the course of his or her career, or were successors to those
parties, should be liable to that individual is a novel approach to
employment law claims. Consequently, this decision may bring
increased focus to the appropriate manner of documenting allocation
of liability and related notice to employees who are impacted by
this allocation in asset sale transactions. At the very least, this
decision highlights the importance of having evidence to support
the position that a party has never been the employer of an
individual, or has appropriate indemnification with respect to
potential claims arising from alleged actual or common
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
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