Ariss v NORR Limited Architects & Engineers, 2019 ONCA 449 is recent decision of the Ontario Court of Appeal regarding the effect a sale of a business and numerous employment contracts have on an employee’s years of service for the purpose of calculating the notice period at termination of employment.
Ariss, the plaintiff, was a 62-year old employee who had worked as an architect for 30 years and who was terminated without cause in 2016. He commenced an action for wrongful dismissal on the basis that his termination package, 3.5 weeks, fell far below his common law reasonable notice.
The parties fundamentally disagreed on the effect of a variety of events, each accompanied by a new employment contract, and their impact on the employment relationship over the 30 years:
- In 2002, the original employer sold its business assets to NORR, who continued Ariss’s employment;
- In 2006, Ariss increased his hours of work from 35 to 40 per week, signing an employment contract which introduced a termination provision limited to his Employment Standards Act, 2000 (“ESA”) minimums; and
- In 2013, Ariss resigned his full-time position and accepted a new part-time contract.
The issue before the Superior Court and the Court of Appeal was whether any of these changes had an impact on his continuity of service for the purpose of determining his reasonable notice of termination.
- The 2002 sale of the business did not impact Ariss’ years of service
Section 9 of the ESA, provides that where an employee continues to be employed following a sale of the business, the employee shall be deemed to have been continuously employed from their start date with the original employer. This means that a sale of the business does not impact one’s years of service for the purpose of calculating their entitlements to notice and severance at termination. It further means that it has no impact on one’s years of service whether the original employer terminated the employee and the new employer subsequently hired them.
For Ariss, section 9 was applied and the Court of Appeal held that his years of service would be calculated from his start date in 1986, which established 30 years of service.
- A valid employment contract can introduce a termination clause
In 2006, Ariss requested to increase his hours from 35 per week to 40. In response, NORR required Ariss to sign a new employment contract. This employment contract contained a termination clause which limited his termination entitlements to the ESA minimums. There was a dispute as to whether he had previously been bound by such limitations.
The Court of Appeal determined that the termination clause was lawfully drafted, Ariss understood it and that there was valid consideration for it as his remuneration increased with his increased hours.
- Forced resignation has no impact on years of service
In response to Ariss’ request to transition from full-time to part-time hours in 2013, NORR required Ariss to resign his employment to which they would subsequently rehire him. This resignation in 2013 formed the basis for the employer’s termination package which provided only 3.5 weeks of notice, as the employer maintained that the resignation was a break in the employment relationship.
The Court of Appeal held that this resignation was artificial and could have no impact on his continuity of service.
As a result of these three conclusions, in which the Court of Appeal upheld all of the motion Judge’s findings, Ariss was entitled to his ESA minimums, per his 2006 contract, based on 30 years of service. In the end, Ariss received 8 weeks of pay in lieu notice and 26 weeks of severance pay.
An important consideration to note is that an employee accrues the same years of service whether they are a full or part-time employee, but the amount they are owed in termination pay will be based on the last weekly salary they received. In this case, that means that all of Ariss’ combined 34 weeks of termination pay and severance will be calculated on his part-time salary.