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Mar 1, 2012 | Article 

Successor Building Service Provider - Bill 7

Co-authored and published in the Spring 2012 edition of CondoVoice Magazine.

Bill 7, which amended the Employment Standards Act of Ontario (the “Act”), has been with us for over 15 years and is known by most contractors, property managers and condominium corporations. Recently, several of our condominium clients have been asking about it and its potential impact if they replace a service provider such as its security or cleaning contractor. Accordingly, we thought it would be beneficial to provide a brief overview of the successor building service provider regime in Ontario under the Act.

Many may not know the history or purpose behind Bill 7 and yet use the reference in everyday discussions. In the 1990’s the government became aware of the lack of employee protection when employees were terminated due to their employer (a contractor) losing a contract to provide services to a building and having no other location or work for the employee. Therefore, between 1992 and 1995, the government amended the Act and stipulated that where one building service provider (a contractor such as a security or cleaning company) is replaced at a building by another building services provider, the employees of the predecessor contractor had a right to continued employment with the successor. In other words, back then the new successor contractor was obligated to hire or take on the employee(s) in that building. This was, and is, referred to as “continuity of employment”.

Bill 7 was introduced in 1995 and removed the mandatory obligation on the successor building service provider to hire the predecessor’s employees. However, Bill 7 did not get rid of the “continuity of employment” protection altogether. What it did was replace the obligation to hire the employee with one of being liable to pay the employee’s termination and severance pay if it did not take on that/those employee(s) and the outgoing contractor terminates their employment.

In such cases, the amount of termination and severance pay would be based on the employee’s history with the outgoing company (i.e. their length of service, pay scale, etc.). Subsequent legislative and regulatory changes cleaned up these provisions to what we presently have in section 10 and 75 of the Act, but did not make any substantive changes.

Therefore, from the successor building service provider’s point of view, the Bill 7 amendments made no practical difference. If they did not hire the employee and he/she was terminated by the outgoing company then the new provider would still have to pay termination and severance pay as if they were the outgoing company. This is why today some contractors approach this situation as if they still have a mandatory obligation to hire the employee(s), when technically they do not. If they do take on that employee then it is with all the seniority, etc. he/she had with the previous company (thus continuity of employment). For a condominium corporation, this means that whenever it changes its building service providers, such as its security or cleaning contractors, then the new service company has obligations with respect to the employees of the previous/outgoing company.

If a condominium corporation were to replace its building service providers, such as the security contractor, the replacement process has essentially three steps. First, companies consider bidding for the contract. For the bidding companies to be able to tender a  bid, they most likely will need information about the employees who are presently working in the building. This information will assist the bidders in deciding whether, and on what terms, to the building, and the number of employees, if any, it will retain if it wins the contract.

The outgoing security company should be prepared to provide certain information to the bidders including but not limited to:

  • A description of the each employee’s job including specifics such as wage rates, description of benefits, number of regular and overtime hours;
  • The seniority of each employee.

The second step is when the condominium corporation signs the contract with the successful bidder, at which time the new contractor becomes the “successor building service provider” pursuant to the Act. At this point, the new company has the right to ask for personal information from the previous contractor about each employee  including their name, residential address and telephone number.

The third step is the successor building service provider requirements, i.e. any of the employees in the building who lose their employment as a result of this process must be paid termination and severance pay by the new contractor if this contractor does not hire them.

If the new contractor hires the employee(s), whether to stay in your building or to be located elsewhere, then in accordance with Section 10 of the Act, the employee’s employment is deemed not to be terminated, no termination or severance pay needs to be paid, and the employee’s service is deemed to be continued uninterrupted.

It is important to note that the role of the condominium corporation in the above process is minimal because the interaction is essentially between the outgoing and the incoming (successor) contractors. This does not mean, however, that a corporation may not be asked for the information outlined above. In such circumstances, the corporation may choose to defer the request to the outgoing service provider or ask them directly for the information. Remember that anyone who receives such information must use it only for the purposes set out in the Act and must ensure that the information remains private and confidential.

The above was a general review of the legal regime, but what about the following situations:

I. We like the “employee” but not the “company” – what can we do?

In this situation the corporation wants to keep the employee in the building but do not want to continue with that contractor (i.e. they like the security guard but not the security company).

It should be remembered that there is nothing in the Act that obliges the new building service provider to hire the employee and nothing to force the employee to change employers, so you could still lose your favourite employee. However, the corporation could try to make it a condition of awarding the contract that they hire that employee and keep them in the building. The new contractor is then clearly motivated to try its best to ensure that that employee does change employers.

II. Can the condominium corporation become the “new building service provider”?

In other words, what if the corporation wants to take over the service, e.g. take the security or cleaning “in-house”. Pursuant to the Act, a “building services provider” or “provider” means,

“…a person who provides building services for a premises and includes the owner of manager of a premise if the owner or manager provides building services for premises the person owns or manages…..”

The case of Rotrust Investments Inc. [2006] provides some guidance on this question. Although it is not a condo case, the court determined that the federal government, which owned the building and took on the services in house, became the new building service provider. Therefore, if a condominium corporation decides to hire its own staff for security or cleaning, it will become the successor building service provider and will therefore have to comply with the same employee protection provisions found in the Act. Thus, be prepared to retain the previous employees or pay termination or severance pay if you do not retain them.

III. What happens when we discontinue the contract but do not immediately replace the building service provider?

It is quite reasonable for a corporation to terminate a service contract without necessarily replacing it with another company right away. For example, what happens if a corporation terminates a security company, waits some appropriate period of time and then hires another contractor (or took the services “in-house”)? Would this circumvent the continuity of employment provisions under the Act?

To the best of our knowledge this has not yet been tested by the courts, but in our view it could be considered by the courts as a maneuver designed to circumvent or avoid the provisions of the Act and thus the successor building providers provisions could apply, particularly if there was only a short time interval before the new service provider started at the building. So be careful if you are contemplating doing this and seek legal advice before proceeding.

In conclusion, Bill 7 brought reform for the protection of employees of certain contractors, which protection continues to this day. The importance and significance of the Bill 7 amendments focus on the obligations that a new building service provider has with respect to the employees of the outgoing provider. Although it is always useful to understand this process, the obligations on condominium corporations, and thus potential liability, are quite minimal.

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