Anonymised, illustrative composite. The contractor won a downtown tower on price and hired fourteen of the twenty-two incumbent cleaners. Part XIX of the Employment Standards Act, 2000 made it liable to the eight it did not hire, as if it had employed and then severed them.
At a glance
A building-services contractor with $19,400,000 of payroll bid for the nightly cleaning contract at a downtown Toronto office tower. The incumbent had held it six years; before that it had changed hands twice. Twenty-two cleaners worked the premises, averaging 9.2 years of service once the periods attributed to earlier providers under ESA s.10 were added up, at regular wages of $1,010 a week.
The contractor won on price. Its bid model carried one line for labour — fourteen cleaners at its own rates — and it planned to leave the rest with their existing employer.
That is not how Part XIX works. Section 75(1) applies whenever a building services provider is replaced by a new provider, and s.75(2), marginal note Termination and severance pay, provides: “The new provider shall comply with Part XV (Termination and Severance of Employment) with respect to every employee of the replaced provider who is engaged in providing services at the premises and whom the new provider does not employ as if the new provider had terminated and severed the employee’s employment.” Section 75(3) closes the circle: “The new provider shall be deemed to have been the employee’s employer for the purpose of subsection (2).”
So the eight cleaners the contractor did not hire were, for Part XV purposes, its own employees whom it had just terminated and severed — people it had never met, paid or employed. “Building services” is defined at s.1(1) as “services for a building with respect to food, security and cleaning and any prescribed services for a building”, so nightly cleaning is squarely inside it.
A second liability rides alongside. Labour Relations Act, 1995 s.69.1(3) provides that “For the purposes of section 69, the sale of a business is deemed to have occurred, (a) if employees perform services at premises that are their principal place of work; (b) if their employer ceases, in whole or in part, to provide the services at those premises; and (c) if substantially similar services are subsequently provided at the premises under the direction of another employer.” On a retender all three limbs are met by definition, so bargaining rights and any collective agreement follow the contract.
The contractor’s payroll of $19,400,000 satisfies s.64(1)(b), and each of the eight had more than the five years the opening words of s.64(1) require. Severance under s.65(1) is 9.2 × $1,010 = $9,292 a head. Notice at the top of the s.57 scale is eight weeks, or $8,080. Per employee $17,372; across eight, $138,976.
Set that against a bid whose whole annual labour line was $712,000 and the contract was loss-making from the first night.
One more cash item gets missed. Section 76 requires the outgoing provider to pay accrued vacation pay to any employee it ceases to employ, and s.76(2) fixes the timing as “the later of, (a) seven days after the day the employee’s employment with the provider ceases; or (b) the day that would have been the employee’s next regular pay day.” The later of, not simply seven days. The same changeover therefore produces continuity of service under s.10(2) and a vacation cash-out by the outgoing provider — two provisions that look contradictory and are not.
The counterweight to s.75(2) is an information right that only works if it is used before the bid. Section 77(1) provides: “Where a person is seeking to become the new provider at a premises, the owner or manager of the premises shall upon request give to that person the prescribed information about the employees who on the date of the request are engaged in providing services at the premises.” O. Reg. 287/01 s.3(1) sets out what must be given — job classification, the wage rate actually paid, benefits and their cost, regular hours, hire date, any period attributed under s.10, and weeks worked at the premises in the last 26.
That is the only way to price a bid, and the only way out of the liability, because O. Reg. 287/01 s.2(1) prescribes, at paragraph 4, “An employee who refuses an offer of employment with the new provider that is reasonable in the circumstances.” Whether an offer is reasonable is then tied back to the information request by s.2(2): “if the new provider requested information under subsection 77 (1) of the Act, the terms and conditions of the employee’s employment with the replaced provider on the date of the request are one of the circumstances that shall be taken into account in determining whether the offer is reasonable”.
Ask for the information and you can build an offer measurable against the incumbent’s terms, and prove it. Do not ask, and the exclusion is available in theory and unprovable in practice.
The contractor made the request — late, after award but before the changeover date — and used it to offer all eight the incumbent’s recorded wage rate and hours, three of them at a different building in the same portfolio. Those three declined, and on the record the request produced they fell within paragraph 4.
That left five, at $17,372 each: $86,860, funded out of the first year’s margin. The contractor now files a s.77(1) request as the first step of every bid and treats the reply as the labour line rather than as diligence.
Never making the request would have cost the full $138,976, because the paragraph 4 exclusion would have been arguable on all eight and provable on none. Making it before the bid would have been better still: the labour line would have been $138,976 higher on the day the price was set, and the contractor says it would not have bid at that number.
The sector line matters too. LRA s.69.1(2) excludes construction, “Maintenance other than maintenance activities related to cleaning the premises” and “The production of goods other than goods related to the provision of food services at the premises for consumption on the premises”. A target on the wrong side of that line is a different transaction entirely.
The bid model had one labour line and it was forward-looking: fourteen people at the bidder’s own rates. A building-services bid with no line for the incumbent’s workforce has not been priced, because Part XIX makes the people the bidder declines the largest single cost on the contract.
The second tell was the absence of a s.77(1) request in the bid file. British Columbia’s net is wider still: Labour Relations Code s.35(0.1) defines a contract for services as “(a) building cleaning services; (b) security services; (c) bus transportation services; (d) food services; (e) non-clinical services provided in the health sector”, and s.35(2.2) applies successorship “If a contract for services is retendered and substantially similar services continue to be performed, in whole or in part, under the direction of another contractor”. A school-bus or hospital-support retender is a successorship event in BC and is not one under Ontario’s building-services definition.
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