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Labour board rules two Nova Scotia companies are one employer in assessing damages for unpaid wages

by HR Law Canada

A recent ruling by the Nova Scotia Labour Board has brought to light the complexities of determining employer responsibilities when multiple businesses appear deeply intertwined.

The case involved two corporate entities, Safe and Sound Wellness and 3315490 Nova Scotia Limited, with the Board determining how three employees’ entitlements to Labour Standards damages should be assessed.

According to the Labour Standards Code, businesses can be treated as a single employer for employee entitlements if they meet specific criteria. The primary factors include common control or direction of the businesses and an association or linkage in their activities.

The case under consideration focused on Safe and Sound, a yoga studio and café operated by SC, and 3315490, a company owned by MN. The issue at hand was whether these two entities should be treated as a single employer. The case was an appeal by 3315490 of three decisions by the Director of Labour Standards that found 3315490 responsible to pay a total of $2,805.18 in unpaid wages, termination benefits and vacation pay.

The company did not argue with the amounts owed, but disputed the three workers were employees of 3315490 and instead worked for Safe and Sound. The workers claimed they were employed by 3315490, either alone ore as a related employer with Safe and Sound and both MN and SC were active in supervising their work.

The Labour Board established that there was undisputed evidence of two corporate entities in operation. Furthermore, it concluded that there was a “common control and direction” between the two businesses.

Evidence suggested that the operations of Safe and Sound and 3315490 were closely entangled during the time in question. Notably, SC had considerable authority in 3315490’s financial dealings, with funds from the café being deposited into 3315490’s bank account.

MN, in his defence, argued that while he may have given SC the corporate authority by registering her as a Director and providing access to the company bank account, he hadn’t explicitly allowed her to exercise the control she did. However, the Board pointed out evidence suggesting that MN was well aware of SC’s involvement with both companies.

In a text exchange from February 2021 between MN and an employee, it was evident that MN was monitoring transactions related to his business account. This exchange highlighted that MN was aware of SC’s substantial authority over both businesses. In addition, the correspondence demonstrated that the operations of the two entities were often difficult to distinguish, with the employee in question serving in an administrative capacity for both Safe and Sound and 3315490.

In an age where corporate structures can be complex, the spirit of the Labour Standards Code in Nova Scotia emphasizes ensuring that employees are not denied their minimum employment standards, even if businesses are interconnected. The Code often seeks to pierce the “corporate veil” to identify the true nature of employment relationships.

As a result, despite the formal distinctions in corporate structures, the Board determined that both businesses were, in effect, employers of the employees in question. They based this decision on the seamless blending of business activities, which would have made it difficult for an employee to determine for whom they were effectively working.

In addition to the intertwined business operations, there was an examination of pay statements provided by the employees. The Nova Scotia Labour Board discovered these did not fully comply with Section 9 of the General Labour Standards Regulations. Specifically, they lacked details about the number of hours for which the payment was made. This issue highlighted SC’s somewhat haphazard approach to payroll duties for the businesses.

While the Board acknowledged that resurrecting old payroll information might be a challenge, they stressed the importance of regulatory compliance for any outstanding amounts owed to employees.

In conclusion, the Board ordered 3315490 Nova Scotia Limited to compensate the three employees for damages in accordance with the Labour Standards Code regulations. The workers were awarded $1,808.32; $674.31; and $322.55 accordingly.

For more information, see 3315490 Nova Scotia Limited v Roberts, 2023 NSLB 120 (CanLII)

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