The "common employer doctrine" recognizes that an employee can have a number of employers. The doctrine has the effect of preventing an organization from arranging its corporate structure in way that attempts to circumvent its legal obligations to its employees.
The common employer doctrine comes into play when an employee seeks damages for wrongful dismissal against his or her employer, but the employer has insufficient assets to satisfy the claim. The doctrine acts to permit the employee to "pierce the corporate veil" and recover damages from a related company.
The Ontario Court of Appeal decided the leading case addressing the doctrine, and subsequent cases have reinforced the applicable principles. In determining whether two or more companies are a "common employer," courts consider various factors including: individual shareholdings, corporate shareholdings, and interlocking directorships. Any similarities in the physical locations of the companies may also weigh in favour of a finding that two companies are a common employer. Ultimately, the key question in the analysis is whether there is an element of common control.
Written with the assistance of Samantha Cass, articling student.
Norton Rose Fulbright Canada LLP
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