Canada: Quebec Court Of Appeal Confirms That The Sale Of A Business Does Not Terminate The Employment Contract

In a unanimous judgment, the Quebec Court of Appeal recently confirmed that, under Quebec employment law, an employee may not validly refuse to work for the purchaser of a business who is willing to continue his employment on the same terms and conditions he enjoyed with his previous employer. In 2108805 Ontario inc. vs. Boulad, 2016 QCCA 75 the Court overturned a decision of the Superior Court which had awarded damages for wrongful dismissal to an employee who claimed that the position offered by the purchaser of the business was less prestigious than the one he occupied with the seller.

Claude Boulad was initially employed by Hilton hotels in 1988 and in 2002 became the Director of Operations of its hotel near Dorval International Airport. In 2006, Hilton sold the hotel to Westmont Hospitality Group. Boulad became an employee of Westmont and continued to be the Director of Operations. Three years later, the hotel was again sold to a smaller French company (Jesta) who offered to take on all of the employees. However, Boulad was not pleased with this new acquisition and requested that his current employer (Westmont) provide him with a new assignment within the group. Westmont responded that no other positions were available and that since the new employer was willing to continue his employment on the terms currently in force, it was under no obligation to pay him notice or an indemnity in lieu thereof. Boulad nevertheless refused to work for Jesta.

Approximately a year later, Boulad sued both Westmont (operating as 2108805 Ontario inc.) and Jesta alleging that he had been the object of a constructive dismissal and claiming the monetary equivalent of 24 months of remuneration in lieu of reasonable notice. However, on the morning of the trial, Boulad abandoned his claim against Jesta.

Before the Superior Court, Boulad argued that since Jesta was a much smaller company than Westmont, this limited his "international" career prospects and his possibilities for work in other hotel locations. He alleged that this situation was a fundamental change of his employment conditions and was tantamount to constructive dismissal. Westmont argued that by reason of the application of article 2097 of the Civil Code, the sale of the business had not resulted in the termination of the employment contract and that the new employer was legally bound by the terms of Mr. Boulad's employment agreement. By refusing to work for Jesta, Mr. Boulad had simply resigned his position. Westmont also argued that Boulad had failed to mitigate by refusing to work for Jesta.

The judge of the Superior Court sided with Mr. Boulad and agreed that Mr. Boulad was justified in refusing to work for Jesta because he felt that his position within Jesta, even though there had been no formal changes to his conditions of employment, was in fact a demotion because Jesta offered less career opportunities and was considered a less prestigious employer in the hotel management field. The judge also felt that Boulad had not failed to mitigate by refusing to work for Jesta. She awarded Mr. Boulad an indemnity of 24 months.

The unanimous judgment of the Court of Appeal was rendered by Madam Justice Bich who has long been recognized as an authority in matters of employment law in Quebec. She disagreed with the reasoning of the Superior Court, allowed the appeal and quashed the judgment of the Superior Court.

On behalf of the Court, she stated that article 2097 of the Civil Code (enacted in 1994) clearly enshrines the principle that the sale of a business does not result in the termination of the employment contract. The new employer is therefore legally bound by the terms of the existing employment agreement. In the present case, the new employer was in fact perfectly willing to be bound by the existing terms of Boulad's employment agreement. Boulad's argument that the international character of his previous employer (Westmont) which entailed, according to him, the opportunity to travel and work in other locations formed an integral part of his employment agreement was specifically rejected by the Court. Indeed, the Court found that there had never been any informal let alone contractual undertaking on the part of Westmont to provide these employment opportunities to Boulad.

The Court was of the opinion that by refusing to work for Jesta despite the fact that the latter was willing to abide by the existing contract of employment, Boulad had simply resigned from his employment. The Court also felt that Boulad had failed to properly discharge his obligation to mitigate by refusing to work for Jesta (albeit while looking for alternate employment). The Court distinguished the rule set out by the Supreme Court in the Evans decision by stating that since Boulad was not in a situation of constructive dismissal, there was nothing to prevent him from continuing his employment with Jesta.

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