The 'common employer' doctrine allows Courts to treat two related entities as jointly owing contractual obligations as an employer to employees. Recently, in James McCallum & Associates Ltd v. Courchene,1 the British Columbia Court of Appeal clarified the test to determine whether two companies are a common employer.
Background
Ms. Courchene began working for Dr. Lee Inc. ("Dr. Lee") in the 1980s in an administrative and management support role. One of her duties was to manage payroll for the dentistry practice. In 2022, Dr. Lee's spouse – Ms. Lee, joined the practice and later in January 2023, James McCallum & Associates ("JMA") took over the practice's payroll duties and reviewed employee compensation.
Shortly thereafter, JMA began giving Ms. Courchene directions, 'in concert' with Dr. Lee and Ms. Lee, and changed her compensation and job duties. Several months later, Ms. Courchene's employment was terminated by Ms. Lee.
Ms. Courchene sued Dr. Lee for wrongful dismissal and named JMA as a common employer. JMA appealed the chambers judge's finding that sufficient facts were plead by Ms. Courchene to support her claim that JMA was a common employer with Dr. Lee.
Common Employer Doctrine
The common employer doctrine arises where an employee claims they were employed by more than one company. The Court of Appeal confirmed the two-prong test to determine whether the common employer doctrine applies.
(1) Is there a sufficient interrelationship and common control between the two entities?
Evidence must exist that the employer and related entity have a sufficient interrelationship to give rise to the inference that they may be common employers. If an employer is a member of an interrelated corporate group, other entities in the group may be liable for employment obligations. Courts will consider whether the employer and related entity have common control over the employee which may include control over employee selection, payment of wages, method of work, and the ability to dismiss. What matters is the substance of the relationship, not just form.
(2) Did the employee have a reasonable expectation that both entities were parties to the employment contract?
Even if the Court finds the employer and related entity have a sufficient relationship to give rise to the common employer doctrine, evidence must exist to establish that there was an intention to create an employer/employee relationship between the employee and the related entity. What is relevant is whether the employee and related entity objectively acted in a way that showed they intended to be parties to an employment contract.
JMA Was Not a Common Employer
The Court of Appeal found that Ms. Courchene failed to plead any facts to suggest that JMA and Dr. Lee were related such that the affairs of both companies were intertwined. Although JMA exerted some direction over Ms. Courchene in her last few months of her employment, it did not have employer-like attributes including issuing her paycheque from its own account, giving notice of her dismissal, or directly benefiting from her services.
Key Takeaways
This case confirms that Courts will strictly construe the common employer doctrine requiring clear intentions to create an employer/employee relationship between the employee and two related companies. However, this case also serves as a reminder to companies to regularly review their corporate structures to ensure that clear lines of liability exist.
Footnote
1. James McCallum & Associates Ltd v. Courchene, 2025 BCCA 82
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.
© McMillan LLP 2025
