ASCO Manufacturing, a Toronto-based company specializing in the manufacturing of tables and desks, has been found liable for wrongful dismissal by the Ontario Superior Court of Justice in a case that explored the risks to successor employers.
The court ruled in favor of the plaintiff, SM, and ordered ASCO Manufacturing to pay 12 months’ notice for the wrongful termination of her employment.
Background
SM, a 69-year-old blaze welder, had worked at 63732 Ontario Limited, operating as ASCO Manufacturing Limited, since Feb.7, 1981.
On Nov. 1, 2017, 2603420 Ontario Inc. (referred to as “260”) purchased the tangible and intangible assets of 637, excluding accounts payable and accounts receivable. The acquisition included the ASCO name. ASCO Manufacturing, under the ownership and management of DS, continued operations.
SM alleged she was offered continued employment by ASCO Manufacturing as a blaze welder after the acquisition. However, she claimed that ASCO terminated her employment on Dec. 13, 2017, without any prior notice.
ASCO Manufacturing disputed her claims, contending that her employment was temporary and ended upon the completion of specific tasks related to the asset acquisition.
Simplified procedure rule
The legal proceedings were initiated under the simplified procedure rules outlined in rule 76 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
In a summary judgment motion on June 26, 2019, Justice Fowler Byrne found in favor of SM, ruling that her employment was continuous and that she was entitled to notice. The court ordered ASCO Manufacturing to pay damages of $66,391.40 for wrongful dismissal.
However, ASCO Manufacturing appealed the decision, leading to the case being sent for a trial.
During the trial, both SM and DS provided their evidence through filed affidavits and were cross-examined. The lack of evidence from other witnesses presented challenges, as both parties relied on inadmissible hearsay evidence central to the core issues of the dispute.
Prior to the trial, ASCO Manufacturing made several admissions. These admissions included the purchase of 637’s assets through an Agreement of Purchase and Sale, the absence of a written contract of employment, and the lack of correspondence or documentation regarding the continuity of SM’s service between 637 and ASCO.
ASCO Manufacturing also acknowledged that SM had entered into a Settlement and Release Agreement with 637 regarding the termination of her employment, and ASCO was not a party to that agreement.
Justice L. Shaw found that ASCO Manufacturing had purchased 637 as a going concern and failed to prove that SM was hired on a fixed-term basis.
The court relied on the Court of Appeal for Ontario’s decision, which stated that ASCO Manufacturing had the burden of displacing the presumption that SM’s prior service with 637 should be recognized in determining reasonable notice.
Calculating reasonable notice
The court emphasized that reasonable notice is not determined by stitching together the employee’s terms of service with the vendor and purchaser of a business and considering it as one continuous period of employment.
Instead, it requires a contextual approach, weighing factors such as the character of employment, length of service, age of the employee, and availability of similar employment considering the experience, training, and qualifications of the employee. (Also known as the Bardal factors.)
“While (SM’s) years of service with 637 are a factor to consider, I must also consider that she only worked 5 weeks for ASCO and her skills as a blaze welder were not used in its operations, other than for just over one week completing existing 637 orders,” the court said.
“This is not a case where it is appropriate for the length of notice to be as long as it would have been if 637 had not been sold,” it said. “Given the unique circumstances of this case, I find that the appropriate notice period is 12 months.
The court also took into account her age, the nature of her employment, ASCO’s failure to communicate its intentions during her hiring, and the limited benefit ASCO derived from her skills as a blaze welder.
The court awarded damages based on her 2016 earnings of $39,834.44. It left it to the parties to determine costs, but offered to weigh in if no agreement could be reached.
Lessons for employers
The ruling highlights the importance of recognizing an employee’s rights and the obligations of employers in cases of termination. It clarifies that successor employers must provide adequate notice or compensation to employees and cannot simply disregard their prior years of service.
For more information, see Manthadi v ASCO Manufacturing, 2023 ONSC 3499 (CanLII)
