The common employer doctrine is a legal doctrine that can be used to extend an employment relationship to an entity that may not be party to an employee's employment contract, but acts sufficiently like an employer that it could also be held liable to the employee for employment-related claims, such as wrongful or constructive dismissal. This can happen accidentally, as an entity gradually asserts more direction or control over another entity's employees, or it can happen more overtly by, for example, entering into a new contract directly with the employees. Recent developments in the law in BC suggest that entities should be increasingly careful of their conduct and contractual relationships to avoid becoming accidental employers.
Developments in the Common Employer Doctrine
In its recent decision James McCallum & Associates Ltd v Courchene, 2025 BCCA 82 [James McCallum], the BC Court of Appeal overturned the dismissal of an alleged employer's application to strike a novel wrongful dismissal claim grounded in the common employer doctrine. In reaching its decision, the Court of Appeal revises the test to prove that two entities are a common employer, but leaves some open questions for future decision makers to clarify.
In BC, prior to James McCallum, the BC Supreme Court had most recently articulated a "two-pronged" test for when two entities constitute a common employer in Linza v Metric Modular, 2023 BCSC 1196 [Linza]. In Linza, the Court held that two entities are a common employer when:1
- the alleged employer has sufficient interrelationship and common control with the apparent employer; and
- the employee held a reasonable expectation that the alleged employer was party to their employment contract.
The BC Supreme Court adopted this two part test from a recent decision of the Ontario Superior Court, Scamurra v Scamurra Contracting, 2022 ONSC 4222 [Scamurra], and it brought some welcome clarity to the common employer doctrine in BC. Prior jurisprudence relied on a more general standard expressed in the previously leading BC case on common employers, Sinclair v Dover Engr Services Ltd, 1987 CanLII 2692 (BCSC). This general standard was whether a "sufficient degree of relationship" between the entities exists to create a common employer.2
In James McCallum, the BC Court of Appeal appears to affirm the two-pronged test in Linza.3 However, it tweaks the first prong of the test and arguably muddles the second prong.4 Finally, the Court of Appeal leaves open the possibility that even unrelated entities can be common employers.5
Sufficient Interrelationship Between the Employers
Regarding the first prong, namely, whether two entities have "sufficient interrelationship and common control" to constitute a common employer, the BC Court of Appeal focuses on the requirement that the alleged employer must have "sufficient interrelationship" with the existing employer, which may give rise to an inference that they are a common employer.6
Instead of also requiring that the alleged employers have "common control", as the Court did in Linza, the BC Court of Appeal says that common control is merely a consideration when deciding whether there is sufficient interrelationship.7 This tweak arguably lowers the threshold that employees must meet with respect to the first prong of the test for establishing a common employer. In other words, under the first branch, as expressed in Linza, the apparent employer and alleged employer had to share an element of "common control", but to meet the first branch as articulated in James McCallum, an alleged employer only needs to be sufficiently connected to the apparent employer.8
Sufficient interrelationship can often be established by the structure of the entities. For example, if the alleged employers are both members of a related corporate group with common directors, owners, or management, this may be enough.9 Prior decisions referred to in James McCallum suggest that conduct can also factor into the sufficient interrelationship branch. For example, if corporations hold themselves out as a joint entity, share employees and services, or share losses and profits, conduct will also militate towards sufficient interrelationship.10
Reasonable Expectation of the Employee
Regarding the second prong of the test for a common employer, namely, whether an employee held a "reasonable expectation" that they were employed by a common employer, the BC Court of Appeal in James McCallum may have incorporated some law from Ontario into the analysis, but this not clear.
Traditionally in BC, to determine whether an employee held a reasonable expectation that they were employed by a common employer, courts would look at objective evidence, including contracts between the parties, how the employers represented themselves, and any conduct that demonstrates effective control over the employee. For example, if corporations co-author policies, hold themselves out to be a joint entity, or treat employees as interchangeable, this may be enough to meet the second part of the test.11 Additionally, if an employee is paid by the alleged employer,12 or the alleged employer oversees the employee's job performance, these factors will suggest common employment.13
In James McCallum, the Court of Appeal appears to also adopt a three-part analysis from the Ontario Court of Appeal decision O'Reilly v ClearMRI Solutions Ltd, 2021ONCA 385 [O'Reilly], which arguably guides a determination under the second prong of the Linza test regarding when "two related companies in a corporate group, both exercising an active role in the business operations, are a common employer."14 The O'Reilly factors, as summarized in James McCallum, are:15
- There must be an objective intention to create a contractual employer/employee relationship between the employee and the alleged employer. The parties' subjective thoughts are irrelevant.
- The objective intention may be reflected in a written agreement, but also may be derived from conduct.
- Conduct that may reflect this objective intention can include conduct that reveals the alleged employer has effective control over the employee. This can include showing that the alleged employer has effective control over such matters as the selection of the employee, payment of wages, methods of work, and the ability to dismiss.
However, in James McCallum, the Court of Appeal merely summarizes these factors from O'Reilly and does not specify how they fit into the two-pronged test for a common employer.16 We expect that decisions post-James McCallum will clarify this point of law, but for now, the factors in O'Reilly can likely be used to consolidate the principles underpinning the second prong of the Linza test. Namely, that a "reasonable expectation" is based on an objective intention to form an employment relationship and can be derived from contract or conduct that demonstrates effective control over the employee by the alleged common employer.
Possible Expansion of the Common Employer Doctrine
Finally, the BC Court of Appeal leaves open the possibility that unrelated entities can become a common employer. As an example of such a scenario, the Court refers to a situation where one entity invested in another and took over operations.17 Other examples of when this doctrine may apply to unrelated entities are yet to be seen.
Application of the Test in James McCallum
In James McCallum, the respondent employee had worked at a dentistry office for almost 40 years, but in the last six months prior to her termination, she began receiving directions from the appellant accounting firm, James McCallum & Associates Ltd. ("JMA"). The respondent employee plead that JMA took over payroll and gave her orders and directions for the final six months of her employment, including reducing and changing her compensation and duties.18 Based on these factors, she argued that JMA was a common employer with the dentistry office, and that they should be jointly liable for her wrongful dismissal.
Applying its newly articulated test for common employers, the Court of Appeal found that the employee had failed to plead sufficient material facts to meet either branch of the test. On the first branch, the Court held that the employee failed to plead that the dentistry office and JMA were sufficiently interrelated to be a common employer. In fact, the employee had not even plead that the two entities were related at all.19
While the respondent employee was likely to fail with respect to the first prong alone, the Court also considered the second prong of the Linza test and found that the employee had not plead sufficient material facts to demonstrate a reasonable expectation of common employment. The Court found that, while she had plead "some supervision or direction", she had not plead employer-like attributes such as "issuing a paycheque on its own account" or "giving her notice of her dismissal".20
What This Means for Employers
Given the recent developments in the common employer doctrine, entities that wish to avoid liability as a common employer should be careful in both their conduct and how they structure their contractual relationships with third parties to avoid sharing liability for wrongful dismissal or other employment claims. Before exercising additional control over another entity's employees by, for example, directing their work, drafting policies, or including their company name on employment-related correspondence, corporate and other entities should remind employees who they are working for.
Footnotes
1 Linza v Metric Modular, 2023 BCSC 1196 at para 65 [Linza], citing Scamurra v Scamurra Contracting,2022 ONSC 4222at paras65, 71–73 [Scamurra].
2 Sinclair v Dover Engr Services Ltd, 1987 CanLII 2692 at para 18 (BCSC) [Sinclair].
3 James McCallum & Associates Ltd v Courchene, 2025 BCCA 82 at paras 14-15 [James McCallum].
4 Ibid at paras 13-15.
5 Ibid at para 22.
6 Ibid.
7 Ibid.
8 Ibid.
9 Ibid; Sinclair at para 18.
10 Linza at para 67; Scamurra at paras 67-70.
11 Linza at para 67; Scamurra at paras 74-77
12 James McCallum at para 25.
<13 Scamurra at para 78.
14 James McCallum at para 13.
15 Ibid.
16 Ibid.
17 Ibid at para 22.
18 Ibid at para 16.
19 Ibid at para 19.
20 Ibid at para 25.
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