In the purchase and sale of a building – be it an apartment building or an office building – employment issues are oftentimes an important consideration. Most building owners rely on employees to perform various services with respect to the building, such as cleaning, security and parking. These employees are typically employed by the building owner directly, or by a third party building service provider. When the building is sold, the employment of the service employees is often affected. It is important to be aware of the impact of statute on the rights of employees, and on the obligations of the parties to the real estate transaction.
The Employment Standards Act
In Ontario, the Ontario Employment Standards Act, 2000 (the “ESA”) imposes minimum employment standards on almost all employers in the province in respect of a wide variety of employment issues. Neither employers nor employees can contract out of these minimum standards (unless it is to provide a greater benefit). Among the standards, the ESA provides minimum notice and severance entitlements for employees upon termination. The ESA also has unique provisions dealing with “building service providers”. These provisions are often overlooked in the purchase and sale of a building.
(i) Building Service Providers
The terms “building services” and “building service provider” are relatively narrowly defined in the ESA. “Building services” means services for a building with respect to food, security and cleaning, and any prescribed services for a building. The following are prescribed services for purpose of the definition: (i) property management services that relate only to the building; and (ii) services that are intended to relate only to the building and its occupants and visitors with respect to a parking lot or a parking garage, and a concession stand. A “building service provider” is a person or company which provides cleaning, security or food services for the building or premises, and it includes an owner or manager.
Therefore, if an apartment building, or building owner, employs a superintendent who is employed to clean the building, or who supervises maintenance and repairs, he or she would likely be captured under the building service provisions of the ESA. Similarly, the cleaning staff or security staff at an office building would be covered under the provisions.
The ESA deals with building service providers in three main areas: (i) with respect to continuity of employment on a sale; (ii) with respect to obligations to pay notice and severance if a building service provider is replaced and the affected employee is not retained; and (iii) with respect to obligations to provide information when there is a change of building service providers.
Under Part IV of the ESA, continuity of employment is ensured if a building service provider is replaced by a new provider and the new provider employs an employee of the replaced provider. In those circumstances, that employee’s employment is deemed not to have been terminated and the employee’s employment with the replaced provider is to be taken into account in determining statutory entitlements with the new provider. The new provider would effectively assume the seniority of the employee for various entitlements, such as for the calculation of notice or severance pay on a subsequent termination, leave entitlements and vacation entitlements.
In cases where the new building service provider elects not to employ the employees of the former provider, the new provider must comply with the termination and severance provisions of the ESA as if the employees had been terminated by the new provider. The ESA essentially transfers the obligation from the previous employer (where in most cases it would be placed) to the new employer. The specific language in the ESA is as follows:
BUILDING SERVICES PROVIDERS
75. (1) This Part applies if a building services provider for a building is replaced by a new provider.
Termination and severance pay
(2) The new provider shall comply with Part XV (Termination and Severance of Employment) with respect to every employee of the replaced provider who is engaged in providing services at the premises and whom the new provider does not employ as if the new provider had terminated and severed the employee’s employment. 2000, c. 41, s. 75 (2).
(3) The new provider shall be deemed to have been the employee’s employer for the purpose of subsection (2).
(4) The new provider is not required to comply with subsection (2) with respect to,
(a) an employee who is retained by the replaced provider; or
(b) any prescribed employees.
76. (1) A provider who ceases to provide services at a premises and who ceases to employ an employee shall pay to the employee the amount of any accrued vacation pay.
(2) A payment under subsection (1) shall be made within the later of,
(a) seven days after the day the employee’s employment with the provider ceases; or
(b) the day that would have been the employee’s next regular pay day.
Information request, possible new provider
77. (1) Where a person is seeking to become the new provider at a premises, the owner or manager of the premises shall upon request give to that person the prescribed information about the employees who on the date of the request are engaged in providing services at the premises.
Same, new provider
(2) Where a person becomes the new provider at a premises, the owner or manager of the premises shall upon request give to that person the prescribed information about the employees who on the date of the request are engaged in providing services for the premises.
Request by owner or manager
(3) If an owner or manager requests a provider or former provider to provide information to the owner or manager so that the owner or manager can fulfil a request made under subsection (1) or (2), the provider or former provider shall provide the information.
Use of information
78. (1) A person who receives information under this Part shall use that information only for the purpose of complying with this Part or determining the person’s obligations or potential obligations under this Part.
(2) A person who receives information under section 77 shall not disclose it, except as authorized under this Part.
Accordingly, if a building service provider, including an owner, is replaced, the new provider must either 1) offer employment to the employees of the former building service provider, or, 2) provide those employees termination and severance pay in accordance with the ESA. The intent of the provisions is to encourage to the extent possible the continuity of employment of those employed in the building services, and to limit the disruption in employment that would otherwise result, absent these provisions, when a building service provider is changed.
Finally, where a building service provider is planning or deciding to become a new building service provider (whether as a function of a sale or otherwise), it is entitled to receive certain information about the employees who are employed by the current building service provider. The information they are entitled to includes: job classification, wage rates, benefits, seniority etc. This allows the new building service provider to make an informed decision.
(ii) Notice and Severance Obligations - Statutory Standards
Statutory Notice and Severance Pay
The ESA requires that employees who have been continuously employed for three months or more be given either written notice before termination or termination pay in lieu of notice. The extent of the notice is determined by calculating the length of the employee's employment. The ESA stipulates that an employee receive one week of notice (or payment in lieu) for each year of service - to a maximum of eight weeks. As such, a 35 year employee would only be entitled to eight weeks' notice under the ESA, as opposed to the much larger amount that would result from an action at common law.
Period of Statutory Notice
Employment or Pay in Lieu
3 mo. to 1 year 1 week
1 - 3 years 2 weeks
3 - 4 years 3 weeks
4 - 5 years 4 weeks
5 - 6 years 5 weeks
6 - 7 years 6 weeks
7 - 8 years 7 weeks
8+ years 8 weeks
In addition to notice obligations, certain employers must pay employees who have five years' service or more a severance payment. Unlike notice, which gives employees a reasonable opportunity to find new employment, severance rewards long-term employees for past service. However, only large employers are obliged to give severance under the ESA. Such employers either: (1) have a payroll in excess of $2.5 million or more; or, (2) have severed the employment of 50 or more employees in a six-month period. Smaller employers - with payrolls under the $2.5 million threshold, or not terminating 50 or more employees as a result of a closure of all or part of its business - are thus exempt from severance obligations. Qualifying employers will have to pay employees with five or more years of service one week's salary for every year of employment up to a maximum of 26 weeks.
Residential Tenancies Act
In addition to issues with respect to the ESA, it is also important to note for those businesses that are purchasing or selling an apartment building, under the Residential Tenancies Act, if a landlord has entered into a tenancy agreement with respect to a superintendant’s premises, unless the parties agree otherwise, the superintendent’s tenancy terminates on the same day his or her employment terminates. The superintendent then has one week after that date to vacate the premises. During that one-week period, the landlord is not permitted to charge or receive rent with respect to the superintendent’s premises.
As mentioned above, it is important to be aware of the impact of statute on the rights of employees, and on the obligations of the parties to a real estate transaction.
David J. Spears is a Partner with the law firm of BrazeauSeller.LLP. He practices in the areas of employment & labour law. David can be reached at 613-237-4000 ext. 207 or at firstname.lastname@example.org. For more information about David, please visit www.brazeauseller.com.
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