By Alex Zhvanetskiy, Vice President of Samsonshield Inc.
LEGACY (or successor employee) obligations for building service provider employers (or Bill 7 as it is commonly known as) under the Employee Standards Act, 2000 in Ontario is probably one of the most misunderstood laws in Ontario. Very often company owners, property managers, and even Board members quickly and easily get drawn into disputes related to Bill 7. What should be a straightforward process can become a nightmare for everyone involved if not handled properly.
Building service provider employees are a rare commodity in the current manic Greater Toronto Area marketplace, especially for security and cleaning services. Companies, for the most part, compete for the same pool of people. “Poaching” is a commonly used industry term and describes the soliciting of employees who work for other companies.
Poaching is not illegal in Ontario. In fact, companies hire Talent Acquisition Specialists openly to poach employees from competitors. Employers, in turn, have to hire Talent Retention Specialists to combat such activities.
Is it fair? Is it ethical?
For this discussion, we will leave that open for interpretation.
Many companies who struggle with capacity issues and companies that take on too much business without having the necessary supporting resources often engage in such practices out of desperation.
It infuriates affected company owners who spend countless hours and money training their employees only to have them poached by another firm.
Board members who become fond of specific employees that work at their buildings also become involved in poaching either directly or by way of instructing others, such as property managers, to engage in such practices. Unfortunately, this is where the line gets crossed. The risk increases the more involved Board members, and property managers become in poaching. Civil actions for breach of contract are becoming more prevalent as affected building service provider companies have had enough of these business practices.
The Intention of Bill 7
Between 1992 and 1995, the Ontario government became inundated with public complaints about unscrupulous business owners leaving their employees stranded (orphaned) when building service providers changed. All of the hard work and dedication of these employees was lost without recourse as new service providers would not recognize tenure, pay rates, and benefits, etc. In creating successor employee rights in 1995 through Bill 7, the Ontario government made a clear statement to all employers, that if employees are going to be left behind, they must be looked after.
Some company owners believe that they are legally required to hire employees of an outgoing company; that, however, is not the intention of Bill 7 nor a requirement in law. Nothing in the law forces a new building service provider to hire anyone. An incoming building service provider only has obligations towards employees that the outgoing building service provider does not intend to continue employing. Michael Smyth, a labour and employment lawyer at Hicks Morley, suggests, “While building service providers must recognize that they will have obligations where the outgoing building service provider does intend to leave employees at the site, they need to exercise caution when pursuing employees of a building service provider that is planning on retaining its employees. The new provider has no obligation towards such employees, and could risk causing a breach of a contractual restriction in the employee’s employment agreement.”
Role Based Obligations: What is Allowed and Not Allowed
Simply put, under Bill 7, the only obligation of an incoming service provider is to determine whether the outgoing company will leave behind any employees. That’s it. Nothing more. It makes perfect sense that any new incoming service provider should know the jeopardy they face regarding financial and other implications of legacy employees before a new contract is signed.
The most appropriate method of fulfilling all obligations under Bill 7 is to ask the property manager. Outgoing service providers often provide declarations indicating that no employees will remain which completely satisfies all Bill 7 requirements. If there are employees that will be left behind, the outgoing service provider has a clear obligation to submit that information to the new provider through property management.
Property managers should not, under any circumstance, become an active participant in poaching activities as it puts their reputation and that of their company in jeopardy. Property managers claiming that they were following the direction of their Board is not sufficient protection and highly likely would not pass the ‘Smell Test’.
It can cause unnecessary and sometimes very costly legal consequences, scrutiny, and brand stigmatization to them and their property management firm.
Incoming service providers should not approach employees while actively engaged in their workplace to offer employment. It would likely lead to harsh responses from the outgoing company, and courts have found that such activities are not only uncalled for but do interfere with existing employer/employee relationships.
Alex Young a lawyer at Gardiner, Miller, Arnold, LLP advises, “Where a condo corporation hires a new service provider, the condo corporation should avoid compelling the new provider to interfere with the contractual relationship between the previous service provider and that provider’s employees, as there may be legal liability where the condo corporation oversteps its bounds.”
The Ontario government has set out clear obligations and rights under the Employment Standards Act when taking over a new site. According to “Your Guide to the Employment Standards Act,” published by the Ontario government:
The obligation of the incoming service provider is to request information through the property manager. “If a company becomes the new provider of the services at a building, it has the right to ask for the name, residential address, and telephone number of each employee.”
The obligation of the property manager is to ask for, receive and provide the information. “If a building owner or manager receives a request for information from a new or potential new services provider, it has the right to get the necessary information from the current or former services provider.”
The obligation of the outgoing service provider is to provide information on any employee that they plan to leave behind. That is the intention of the law and outgoing service provide must provide this information when applicable.
The obligation of the Board is to leave the process to the building service providers. The Board has no role in this process and should remain removed from the process.
What Happens When Employees Want to Stay
There are no ownership rights of employees by employers in Ontario. However, some companies may have a prohibition on their employees remaining at a site for a set period after they leave employment.
Restrictive covenants in employment and client agreements will limit the ability of employees to use confidential information or to solicit employees after termination of employment. Such restrictions have been considered to be reasonable given the time, money and effort that the outgoing company spent to train employees on site operations. Incoming service providers often greatly benefit from such poaching activities without having paid for such benefit.
If there is no prohibition in an Employment Agreement or Client Agreement, employees are free to choose their destiny and remain at a site. If there is such a prohibition, the employee may choose to work for the incoming service provider, but must adhere to contractual obligations including non-compete, good faith, and confidentiality requirements. Employers who hire such employees must also recognize their years of service with the previous employer.
The Takeaway
Sage advice from lawyers in the industry including labour relations experts all agree that people should abide by the law when building service providers change hands. Doing otherwise can have severe consequences and lead to lengthy and expensive litigation.
Always seek professional advice from legal experts before deciding on a strategy to change service providers.