New building services provider found liable for employee’s common law termination entitlements

At a glance

• Continuity in building management staff is common in Ontario, even when service providers change; the Ontario Employment Standards Act 2000 (ESA) deems the new provider the employer for termination and severance pay purposes.
• In Kondaj v. Crossbridge Condominium Services Ltd (Kondaj) the Ontario Superior Court ruled that new service providers are also liable for common law reasonable notice if they choose not to retain existing employees.
• The Court emphasised that ESA obligations extend to common law entitlements, aligning with prior case law (Elsegood v. Cambridge Spring Service).
• Mr. Kondaj, a Licensed Condominium Manager, was awarded ten months’ reasonable notice despite only 3.5 years of service, due to his diligent job search and the severe economic downturn in the GTA condominium market.

The case underscores that economic conditions and mitigation efforts significantly influence reasonable notice assessments under common law.

---

Ontario residential and commercial buildings often outsource building management. Although service providers can change from time to time, the staff providing management services often stays the same. ESA sets out rules that address such scenarios. Section 75(2) of Part XIX of the ESA, in particular, addresses the scenario where a new building services provider does not retain the staff of the former building services provider: when a building services provider is replaced with a new provider, the new provider is deemed to be the employer of the former provider’s employees for the purposes of compliance with the termination and severance pay provisions of the ESA.

However, which employer – the former or current service provider – is liable to an employee in respect of the implied right to reasonable notice of termination under the common law, was a question that the court had not previously considered. The Ontario Superior Court considered this issue in Kondaj: specifically, whether a new building services provider is responsible for the common law termination entitlements of an employee of the former building services provider that they did not retain.

Background

In late November 2023, Crossbridge Condominium Services Ltd.’s (Crossbridge) property management contract with SoHo Hotel and Residences (SoHo) ended, and Duka Property Management Inc. (Duka) subsequently assumed the contract. The Plaintiff, Gazmend Kondaj, was employed by Crossbridge for almost three and a half years as a Licensed Condominium Manager with respect to the SoHo properties.

After Duka assumed Crossbridge’s property management contract, it informed Mr. Kondaj that it would not employ him and terminated his employment without cause, providing him with three weeks of pay in lieu of notice of termination under the ESA.

Mr. Kondaj subsequently commenced an action against Crossbridge and Duka for wrongful dismissal. While Mr. Kondaj did have a written employment agreement with Crossbridge that contained termination provisions, neither Crossbridge nor Duka disputed that the termination provisions were not enforceable. As such, the motion for summary judgment proceeded on the basis that Mr. Kondaj had an implied right to reasonable notice of termination of employment under the common law.

The questions before the Court were (1) which Defendant, Crossbridge or Duka, was responsible for any damages suffered by Mr. Kondaj and (2) what period of reasonable notice of termination was Mr. Kondaj entitled to receive.

Decision

The new provider was found to be liable for common law reasonable notice.

Section 75 of the ESA is clear with respect to who bears the burden of responsibility for an employee’s statutory termination and severance entitlements. In determining whether this responsibility also applied to an employee’s common law termination entitlements, the Court considered the legislative intent of the ESA, and section 75 specifically, which is to protect employees and stabilise employment, and to incentivise new building services providers to retain existing employees. Relying on the Ontario Court of Appeal decision in Elsegood v Cambridge Spring Service, where the Court of Appeal concluded that a deemed termination following a temporary layoff under ESA was also a termination of employment at common law, the Court concluded at paragraph 47 that where ESA 'imposes an obligation to provide termination or severance pay, that obligation includes common law notice.'

As such, the Court held that Duka, the new building services provider, was responsible for Mr. Kondaj’s common law reasonable notice entitlements.

Appropriate notice period

The Court assessed the usual Bardal factors applicable to Mr. Kondaj, including his age at the time of the termination of his employment (42 years), length of service (three years and five months), and the characteristics of his position as a Licensed Condominium Manager earning CAD86,100.00 annually. Notably, the Court placed particular emphasis on Mr. Kondaj’s mitigation efforts, and the impact of broader economic circumstances on those efforts.

Mr. Kondaj applied for 170 positions and took 11 months to find new employment. At paragraphs 65 and 66 of the decision, the Court cited a report from July 2024 that described the state of the condominium market in the Greater Toronto Area as being 'in a state of economic lockdown' with 'conditions deteriorating to levels not seen in decades.' The Court concluded that Mr. Kondaj had fulfilled his duty to mitigate his damages and emphasised the impact of the condominium market on his difficulty in securing new employment.

While the Court hesitated to award Mr. Kondaj damages based on his entire period of unemployment, given the circumstances, the Court assessed his entitlement to common law reasonable notice to be ten months.

Takeaways

Kondaj establishes that where a new building services provider replaces another building service provider in Ontario, the new provider will be responsible for the termination and severance pay entitlements owed to the employees of the former provider that they do not employ, not only under the ESA, but also under the employee’s contract with the former provider or the common law (which can be materially greater), as applicable.  It is important to note that the employee in this case did not have a binding contract limiting the employee’s entitlement to reasonable notice at common law.

While Kondaj is particularly relevant for Ontario building services providers, the decision also considered the impact of an economic downturn on the Plaintiff’s ability to mitigate his damages. While the economic circumstances assessed were specific to the condominium market in the Greater Toronto Area, the decision reiterated that an employee’s entitlement to common law reasonable notice is based on a holistic assessment, that must also be careful not to overemphasise the employee’s subjective circumstances. However, in Kondaj, extreme economic conditions resulted in a relatively short-service employee being awarded damages for a disproportionately long period of common law reasonable notice.