Overstory Media is on the hook for more than $270,000 in unpaid wages and compensation to nine former employees of Vancouver Free Press Publishing Corp. (VFP) after the Employment Standards Tribunal dismissed its appeal regarding liabilities arising from an asset purchase.
The tribunal’s decision, issued by adjudicator Kenneth Wm. Thornicroft, centred on the interpretation and application of section 97 of British Columbia’s Employment Standards Act (ESA), known as the “successorship” provision. This section addresses the obligations of a successor employer to the vendor’s employees when a business is sold as an asset purchase.
Date of disposition
At the heart of the dispute was the date of the “disposition” of VFP’s assets. Overstory Media argued that the asset sale closed after the employees were terminated on Sept. 27, 2022, and therefore, it should not be liable for their unpaid wages and other entitlements.
However, the delegate of the Director of Employment Standards had determined that the disposition occurred on Sept. 22, 2022, before the employees were terminated, making Overstory Media responsible under section 97.
Section 97 of the ESA states: “If all or part of a business is disposed of, … the employment of an employee of the business is deemed, for the purposes of this Act, to be continuous and uninterrupted by the disposition.” This means that in an asset sale, the employees’ service-based benefits and entitlements transfer to the successor employer, unless their employment was terminated before the disposition.
Successor employer
The tribunal found that Overstory Media Inc. had become the successor employer on Sept. 22, 2022, the date when the $400,000 purchase price was paid to acquire VFP’s assets, including the Georgia Straight newspaper.
“The uncontested evidence before the delegate is that the $400,000 payment was made on September 22, 2022, compelling evidence that the closing date was, in fact, September 22, 2022,” Thornicroft wrote in his decision.
VFP’s employees were terminated without just cause or prior notice on Sept. 27, 2022. Since their employment was deemed continuous under section 97, Overstory Media was held liable for their unpaid regular wages, accrued vacation pay, and compensation for length of service under section 63 of the ESA.
Overstory Media’s appeal
Overstory Media Inc. appealed the Determination issued on April 8, 2024, by delegate Shannon Corregan, on three grounds: error of law, failure to observe the principles of natural justice, and the availability of new evidence. The company contended that the delegate erred in finding the date of disposition as Sept. 22, 2022, and argued that the disposition occurred after the employees were terminated.
However, the tribunal rejected these arguments, stating that the date of the asset sale’s closing was indeed Sept. 22, 2022. Thornicroft noted that the Asset Purchase Agreement (APA) between Overstory Media Inc. and the vendor, represented by W.L. as a nominee holder for secured creditors, specified that the purchase price was to be paid “on the Closing Date.” Evidence showed that the payment was made on Sept. 22, 2022, and the necessary documents, including a certificate confirming the vendor’s compliance with obligations, were executed on that date.
“The fundamental exchange—namely, the payment of the funds in exchange for title to the transferred assets—appears to have been consummated on September 22, 2022,” Thornicroft stated.
The tribunal also addressed Overstory Media Inc.’s claim that the company was not given clear notice of the case it had to meet during the investigation. The decision found that the Employment Standards Branch had provided an “Investigation Report” outlining the issues, including the date of disposition and the applicability of section 97. Overstory Media Inc. had the opportunity to respond but did not adequately address the section 97 issue in its submissions.
“I am satisfied that the appellant was given a fair opportunity, consistent with section 77 of the ESA, to address the section 97 issue but for some inexplicable reason, its legal counsel failed to do so in any comprehensive manner,” Thornicroft wrote.
Furthermore, Overstory Media Inc. sought to introduce new evidence in the form of an affidavit from F.M., the company’s co-founder and CEO, asserting that the closing date was after Sept. 27, 2022. The tribunal found this evidence inadmissible, as it concerned matters predating the Determination and could have been presented earlier. Thornicroft noted that the affidavit lacked corroborating evidence and was inconsistent with other credible evidence in the record.
“Based on an application of the Davies et al. criteria, I find that [F.M.’s] affidavit is not admissible in this appeal,” the decision stated.
APA can’t override ESA
The tribunal emphasized that the terms of the APA, including any intentions between Overstory Media Inc. and the vendor regarding the termination of employees, could not override the provisions of the ESA. “Even if the parties to the APA perhaps intended that VFP’s employees would be terminated prior to the closing of the asset sale, that intention is not sufficient to discharge the appellant’s liability under section 97,” Thornicroft wrote.
The decision reinforces that employees are not bound by the terms of an asset purchase agreement and that employers cannot contract out of the ESA’s provisions. If a vendor fails to terminate employees as agreed, the successor employer’s remedy lies in a claim against the vendor, not in absolving itself of statutory obligations to the employees.
As a result of the dismissal of the appeal, Overstory Media Inc. is required to pay the total amount of $271,319.02, which includes unpaid wages, vacation pay, compensation for length of service, and a $500 monetary penalty for contravening section 18 of the ESA. Additional interest accrued under section 88 of the ESA since the date of issuance is also payable.
“In my view, none of the reasons advanced in support of this appeal has any reasonable prospect of succeeding and, that being the case, the appellant’s appeal must be dismissed,” Thornicroft concluded.
Overstory Media Inc. had applied for a suspension of the Determination under section 113 of the ESA, conditional upon depositing the full amount owed. However, given the dismissal of the appeal, the tribunal found no need for a suspension order.
For more information, see Overstory Media Inc. (Re), 2024 BCEST 109 (CanLII).
