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Release of previous employer has no effect on termination by subsequent employer


In Manthadi v ASCO Manu (2019 ONSC 5572) Fowler Byrne J. had a situation where a 64 year old welder had over 36 years with Company A. Company A sold its business to the Defendant. Company A paid the plaintiff her 8 weeks under the ESA and she signed a release. The defendant immediately hired her on the closing date. She was terminated a few months later.

The Defendant claimed that she was only an employee for a few months. The judge held that in accordance with Sec 9(1) of the ESA her employment was continuous and therefore for purposes of the ESA she was a 36 year employee. The judge also held that as the Release did not name the Defendant but rather named Company A, it was no effect in regards to her dismissal from the Defendant. She was awarded 20 months notice, with no credit for the 8 weeks termination pay that she got from Company A.

The Judge commented on the common law element of the case as follows:

35      The law also supports this concept of continuous employment for the purposes of common law entitlement to damages for wrongful dismissal: Addison, at para. 22; Violo v. Delphi Communications Inc., 2014 ONSC 7008, at para. 16. Further, as stated in Ariss (ONSC), at para. 38: If the statutory protection were not enough, Ariss also has the protection provided by the common law. There is nothing in any of the documents executed in 2002 to suggest that NORR intended that former DTM employees would not be credited for their years of service with DTM. Most important, there is nothing to that effect in the offer letter signed by Ariss. In the absence of notice from NORR that Ariss would not be credited for his years of service with DTM, recognition of that service is deemed to be part of Ariss’ contract of employment with NORR (Vinette v. Delta Printing Limited, 2017 ONSC 182278 A.C.W.S. (3d) 756, at para. 21).

Q: Therefore how is a purchaser supposed to protect themselves?

A: Easy.

The new employer should have an employment agreement with the employee stating that for the sole purpose of the ESA, the employee’s prior service will be recognized but that for the purposes of determining any other issue, including their entitlement to common law notice of termination, the start date of the employment is the date of this employment contract.

Remember, now that the ESA provides for an escalation of vacation pay based on years of service, this provision also recognizes prior service. The good news for the Vendor is that because the service is deemed to be continuous, they have no obligation to pay either termination pay, severance pay nor common law notice to their ex-employee.

Barry B. Fisher LL.B.

Barry B. Fisher, LL.B., is a mediator and arbitrator of both employment and labour relations matters. He offers three forms of ADR based on clients’ needs: Mediation, Arbitration and Med/Arb. Barry is from the evaluative school of mediation and brings his over 30 years' experience as an employment lawyer and legal author to the dispute. In addition to his knowledge of the legal issues involved in these disputes, he also has a deep understanding of the psychological factors that motivate both employees and employers. By combining these two skills, Barry is able to achieve a settlement rate of over 80% of the disputes that he mediates.

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