THE EMPLOYERS' EDGE
Ontario Court of Appeal Clarifies Common Law Liability When Building Services Contracts Change Hands
When a new building services provider in Ontario replaces a provider whose contract ends, that new provider is deemed to be and to have been the employer of any affected employees. This is required by Ontario’s Employment Standards Act, 2000. The ESA also requires the new building services provider to provide notice of termination and severance pay (if applicable) to any such employees that they choose not to retain, and who the prior building services provider also does not retain. The amount of notice and severance owed to the employee is pursuant to the ESA. This is not controversial.
But terminated employees are not necessarily limited to their ESA entitlements. The common law applies to employees whose entitlements are not limited by contract to the ESA minimums, giving those terminated employees far more compensation.
So if a building owner retains a new building services provider, the old provider does not retain the employee, and the new building services provider owes an employee the ESA portion of their termination entitlements, who owes the common law portion?
In Kondaj v. Crossbridge Condominium Services Ltd., 2026 ONCA 636, the Ontario Court of Appeal answered that question for the first time and delivered an important ruling for employers in the condominium, security, cleaning, and property management sectors.
The Facts
The Employee worked as a building manager for Crossbridge Condominium Services Ltd. at the SoHo Hotel & Residences in Toronto. When the property retendered its management contract, Duka Property Management Inc. became the new service provider.
After taking over the contract, Duka decided not to continue the Employee’s employment. Crossbridge also declined to place him elsewhere. Duka paid the employee's minimum termination entitlements under the ESA, but neither company paid common law reasonable notice damages and in litigation they each pointed their fingers at the other.
The Court's Decision
The Court held that Duka, as the incoming building services provider, was responsible for Mr. Kondaj's common law wrongful dismissal damages.
The decision turned on the interaction between sections 56 (termination entitlements) and 75 (building services providers) of the ESA. The Court concluded that s.75 does more than transfer responsibility for ESA minimum termination pay. It also makes the successor provider responsible for the common law consequences of that termination.
What?
Employment lawyers spend a lot of time analyzing statutory rights vs. common law rights. How can the statute actually impose common law rights, when s.75 itself only requires new providers to comply with the ESA provisions on termination and severance, and says nothing about common law rights?
The Court of Appeal’s explanation goes like this:
[70] First, while s. 56 of the Act describes the ways in which an employee can be terminated “for purposes of section 54” of the Act, the definitions of termination in s. 56 also apply at common law, “because [s. 56] applies generally in all cases to require the employer to give notice whenever an employee is terminated”: Elsegood at para 8. Likewise, the statute deeming a new provider to have been the employee’s employer under s. 75(3) “for the purposes of subsection (2)” does not preclude a similar deeming for the purposes of the common law.
[71] Second, by incorporating s. 56, s. 75(2) imposes common law reasonable notice provisions on new providers. The chain of reasoning is as follows: (i) Mr. Kondaj’s employment was “terminated” for the purpose of s. 56 when Duka refused to continue to employ him; (ii) s. 75 deems Duka, as the new provider, to have been Mr. Kondaj’s employer for the purpose of termination as if Duka had terminated and severed Mr. Kondaj’s employment; (iii) s. 75 requires the new provider to comply with s. 56(1); and (iv) as in Elsegood, s. 56(1) allows an employee who has been terminated to claim common law damages.
You may be wondering (I know I was) “how did the Court of Appeal assess the impact of the previous provider/employer choosing not to retain the employee?” Well…it didn’t. A new provider is not required to compensate an employee for termination if the old provider keeps them by, for example, moving them to a different building. It would seem that the old provider retains some legal responsibility for their own decision not to continue employing the worker, but the Court of Appeal did not consider this.
As a result, Duka was liable for approximately 10 months' pay in lieu of notice, together with compensation for lost benefits.
Why This Matters
The Court emphasized that Part XIX of the ESA is intended to promote employment continuity in industries where service contracts frequently change hands. If outgoing employers were responsible for common law notice, incoming contractors would have a financial incentive to terminate incumbent employees immediately and avoid future liability.
The Court found that such an interpretation would undermine the protective purpose of the legislation.
The decision also highlights that successor providers are not left without protections. Under section 77 of the ESA, prospective service providers can obtain information about incumbent employees before assuming a contract, allowing them to assess potential employment liabilities as part of their bidding process.
Key Takeaway for Employers
Not every case is the same, and different circumstances will yield different outcomes, but for now, the guidance from the Court of Appeal in Canada is that if you are a building service provider taking over a new contract, you have common law liability for any existing employees on site that you do not retain. On the other hand, if you are a building services provider and your client is replacing you with another provider, the law indicates that you are not liable to employees who you do not retain.
CCPartners LLP represents building services providers in Ontario, and we will be keeping a keen eye on any further developments in this area as we continue to advise and advocate for our employer clients.
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