Part XIX - Building services providers
The intent of the building services provisions contained in Part XIX (Building Services Providers) is two-fold. First, the provisions impose obligations for the payment of termination pay, severance pay and vacation pay (in respect of employees of the replaced provider) when there is a change in the provider of building services. Second, the provisions aim to ensure that the persons bidding on a contract in the building services sector have all the necessary information about the employees' wage rates, etc., in order to estimate their potential termination and severance obligations when preparing their bids and to make offers to employees of the replaced provider if they should win the contract.
Section 75 - New provider
New provider - s. 75(1)
Section 75(1) is similar to s. 13.1(2) of the former Employment Standards Act. Section 75(1) states that this Part applies if a building services provider provides building services at a building, stops providing those services and is replaced by a new provider. A building services provider may be replaced in the following situations:
- Contracting out - where the building owner or manager is using its own "in-house" staff to perform the building services, but then decides to have an outside contractor perform those services;
- Change of contractors - where the building owner or manager is using contractor A to provide the building services, but then decides to award the contract instead to contractor B; or
- Contracting in - where the building owner or manager is using a contractor to provide the building services, but decides instead to use its own "in-house" staff to perform those services.
In addition, the two providers (e.g., the replaced provider and the new provider) must be providing the same general category of building services at the premises. If, for example, a building owner discontinued its food service contract with A and contemporaneously entered into a security services contract with B, B could not be said to be "replacing" A at the premises.
New provider - s. 75(2)
This provision is substantially the same as s. 13.1(4) under the former Employment Standards Act. Section 75(2) provides that if the new provider does not employ an employee of the previous provider who was engaged in providing services at the premises, the new provider shall comply with Part XV of the Employment Standards Act, 2000 (Termination and Severance of Employment) with regards to the employee as if the new provider had terminated and severed the employee’s employment. An employee of the replaced provider who was not engaged in providing services at the premises would not be entitled to notice and or severance pay from the new provider if the new provider did not employ him or her. Those obligations would continue to lie with the replaced provider.
Note that the requirement that the employee be engaged in providing services at the premises is not mirrored in s. 10 of the Act. Consequently, continuity of employment will be afforded to employees of the replaced provider who are employed by a new provider, whether they were engaged in providing services at the premises or not.
The obligations imposed under this section are subject to s. 75(4) which states that the new provider is not required to comply with subsection (2) with respect to an employee retained by the replaced provider or any prescribed employees.
There is often a gap between the time a contract is awarded to a new provider and the date the new provider actually begins providing the services. The obligations to comply with Part XV (Termination and Severance of Employment) are imposed on the new provider and cannot be discharged until the changeover date. For a discussion of the definition "Changeover date" see O Reg 287, s. 2(5). It is the Program’s position that it is inherent in the notion of compliance with Part XV that the employees cannot be provided with notice by a new provider if they are still in the employ of the replace provider. Therefore, if a successful bidder purported to give notice to the current provider’s employees prior to the changeover date, such notice would be invalid.
One question that arises is when can it be said that the new provider has not employed the employees of the replaced provider, thereby triggering the obligations to comply with Part XV? Section 75(2) provides that a new provider will be required to comply with Part XV of the Act if he or she does not hire the employees of the replaced provider. It is Program policy that although there may be continuity of employment for employees of the replaced provider terminated before the changeover date in accordance with s. 10 of the Act (which provides for continuity of employment if the employees are hired by the new provider within the earlier of 13 weeks after the last day of employment with the replaced provider or the changeover date), the new provider’s obligations with respect to notice of termination and severance pay under s. 75(2) apply only to persons who were employees of the replaced provider as of the changeover date and who were not hired within 13 weeks of the changeover date. The new provider would have no liability for Part XV obligations under this section with respect to employees of the replaced provider terminated by the replaced provider either before the changeover date or more than 13 weeks after the changeover date.
However, the obligations to comply with Part XV are also subject to s. 75(4), which provides that no termination and severance obligations will be imposed on the new provider with respect to any "prescribed" employees (i.e., prescribed under s. 2(1) of O Reg 287/01) or if the employee continues to be employed by the replaced provider. See ESA Part IV for a more detailed discussion of s. 10 of the Act and further below in this section for a more detailed discussion of s. 75(4) of the Act.
Example:
- An employee worked 90 per cent of his time for the replaced provider at building A and 10 per cent of his time for the replaced provider at building B.
- Employee continued to work for the replaced provider at building B after a new provider took over the contract for building services at building A.
- The new provider would have no Part XV obligations with respect to the employee, even though it did not hire that employee within 13 weeks of the changeover date, because the employee continued to be employed by the replaced provider.
The commencement of a lay-off does not trigger the end of an employment relationship. If an employee is on temporary lay-off for the purposes of notice of termination or a lay-off for the purposes of severance pay or both, he or she is considered to be employed. Note that even though an employee may have ceased to be on temporary lay-off after 13 weeks for the purposes of the notice of termination provisions in the Act, if he or she remains on lay-off for severance purposes for a further 22 weeks, the employee will continue to be employed for that additional 22 weeks.
Example 1:
- If an employee were laid off one week before the changeover date and the lay-off ceased to be temporary 13 weeks later (and assuming the replaced provider had no severance obligations with respect to the employee), the employee’s last day of employment would be 12 weeks after the changeover date.
- Because the employee continued to be employed by the replaced provider as of the changeover date, the new provider would have Part XV obligations imposed under s. 75(2) if it did not hire the employee within 13-week period after the changeover date - unless the employee fell within one of the categories of exempt employees set out in s. 2(1) of O Reg 287/01.
Example 2:
- Employee A is placed on temporary lay-off 20 weeks before the changeover date and ceased to be on temporary lay-off for notice of termination purposes seven weeks before the changeover date but continued to be on lay-off for severance purposes until 15 weeks after the changeover date.
- In this case, employee continued to be employed by the replaced provider as of the changeover date. However, the employee also continued to be employed by the replaced provider for the full 13 weeks after the changeover date and under s. 75(4), the new provider would be exempt from the obligation to comply with Part XV even though it did not hire the employee in the 13-week period following the changeover.
It should also be noted that the deemed termination date as set out in s. 56(5), which provides that where an employee is temporarily laid off and the lay-off subsequently ceases to be temporary that his or her employment is deemed to be terminated on the first day of the lay-off, has no application with respect to assigning the liability for termination pay (which is determined under this Part), although it will be relevant in determining the quantum (which is determined under Part XV).
Example:
- Employer A loses contract for building services to employer B.
- Changeover date is June 14.
- A's employee is laid off one week before the changeover date (June 7). Temporary lay-off for notice of termination purposes ends September 6 (13 weeks after the lay-off began and 12 weeks after the changeover date). A's employee has no severance entitlement.
- Employer B did not hire employee on or before September 13 (i.e., 13 weeks after the changeover date).
- Employer B is liable for Part XV termination pay. However, the employee’s entitlement to notice of termination (or pay in lieu) will be determined on the basis of his or her employment ending on the deemed termination date under s. 56(5), i.e., June 7.
Same - s. 75(3)
Section 75(3) states that the new provider is deemed to be the employer of all employees of the previous provider whom it chooses not to employ, for purposes of Part XV (Termination and Severance of Employment). As a result, the entitlements to notice or termination pay and/or severance pay for those employees are based on the employees' service with the replaced provider. Even though the new provider did not enter into an employment relationship with the employee, the employee’s period of service with the previous provider will be used to calculate his or her entitlement to termination and severance pay. Note, however, that as the building service provisions under the former Act (continued in Part XIX of the ESA 2000) were retrospective to June 4, 1992, only, this section can only be used to credit an employee for his or her employment with a replaced provides prior to June 4, 1992, if the replaced provider was providing service at the premises on that date.
Exception - s. 75(4)
This provision is similar in effect to s. 13.1(4) and s. 1 of O Reg 138/96 of the former Employment Standards Act. Section 75(4) confirms that the new provider is exempted from the obligations in s. 75(2) (i.e., termination and severance obligations) with respect to employees retained by the previous provider or those employees prescribed by regulation. Section 75(4) must therefore be read in conjunction with the list of "prescribed employees" in s. 2(1) of O Reg 287/01. Employees retained by the replaced provider - s. 75(4)(a)
1. Employees retained by the replaced provider – s. 75(4)(a)
Section 75(4)(a) relieves a new provider of the obligation to comply with Part XV with respect to employees of the replaced provider that it does not employ, if they continue to be employed by the replaced provider. As noted in the discussion of s. 75(2) of the Act, s. 75(4) refers, in effect, only to employees who continue to be employed by the replaced provider more than 13 weeks after the changeover date.
An employee will continue to be employed by a replaced provider if he or she is retained by the replaced provider (e.g., to work at another building site). The employee will also be considered to be employed by the replaced provider if he or she is on a lay-off for the purposes of notice of termination (see s. 56(3) and/or severance pay (s. 63(2)).
Example:
- If an employee worked at two sites for the replaced provider prior to a changeover at one of the sites, or was moved to a new site by the replaced provider, and his or her regular non-overtime pay after the changeover date was:
- Not less than 50 per cent of what it was prior to the changeover (for purposes of termination of employment, s. 56(3)); and
- Not less than 25 per cent of what it was at the original site (for purposes of severance of employment, s. 63(2)),
- Then the employee will be considered to have been retained by the replaced provider and the new provider will not have any obligations under Part XV (Termination and Severance of Employment) with respect to that employee.
If an employee’s regular non-overtime pay with the replaced provider falls below the thresholds set out in s. 56(3) or s. 63(2), then the employee will be deemed to be on a lay-off and there will be a deemed termination or severance by the replaced provider after the lay-off has reached a certain point (i.e., 13 or 35 weeks in the case of termination pay, depending, for example, on whether benefits are continued [ss. 56(2) and 56(3)] and 35 weeks in the case of severance pay [s. 63(1)]). If the employee continues to be on lay-off for either both notice of termination or severance purposes 13 weeks after the changeover date, the employee will consider to have been retained by the replaced provider under s. 75(4) and the new provider will have no obligations under Part XV. In that case, liabilities for termination and/or severance will remain with the replaced provider.
2. Any prescribed employees - s. 74(4)(b)
Section 2(1) of O Reg 287/01 lists four additional classes of employees in respect of which the new provider is relieved of the obligation to comply with s. 75(2). For a detailed discussion of these employees, see O Reg 287/01, s. 2(1).
3. Other issues
Some other questions that arise concerning the Part XIX (Building Services Providers) obligations of the new provider, under s. 75(2) are as follows:
- For purposes of severance pay, is the $2.5 million payroll threshold determined with reference to the new provider’s payroll, or with reference to the replaced provider’s payroll?
- Answer: It is determined with reference to the new provider’s payroll.
- If the new provider is under federal labour jurisdiction, e.g., a bank, and contracts in services that were previously contracted out, does s. 75(2) apply?
- Answer: No, s. 75(2) does not apply. The Act only applies to employees and their employers who are provincially regulated, s. 3(2). Therefore, the employee would be considered terminated by the previous provider, which would be responsible for the Part XV (Termination and Severance of Employment) entitlements of the employees.
- Does the answer in "2" still apply if the replaced provider is under federal labour jurisdiction and contracts the work out to a new provider under provincial labour jurisdiction?
- Answer: Yes, it does, except that the replaced provider’s obligations would be under the Canada Labour Code, RSC 1985, c L-2.
- What if the owner or manager of the premises falls under federal jurisdiction (e.g., a Canadian Airport Authority) but both the replaced provider and new provider fall under provincial jurisdiction (e.g., they provide food services which are not integral to the operation of the airport)?
- Answer: Section 75 will apply to both the replaced and the new provider. In addition, the information requirements in s. 77 of the Act may be enforced against the building owner/manager, even though it operates as a federal undertaking. See UFCW, Local 1000A v Cara Operations Ltd., 2001 CanLII 18382 (ON LRB).
- What if the previous provider gave the employee notice of termination, or pay in lieu, and severance pay and the new provider does not hire the employee? Can the new provider receive "credit" for the termination notice/pay and severance pay given by the previous provider?
- Answer: Severance pay given by the replaced provider can be offset by the new provider under paragraph 3 of s. 65(8), which provides as follows:
- 65(8) Only the following set-offs and deductions may be made in calculating severance pay under this section:
- … 3. Severance pay that was previously paid to the employee under this Act, a predecessor of this Act or a contractual provision described in paragraph 2.
- There is no corresponding "offsetting" provision in respect of termination pay. The new provider therefore cannot rely on the notice, or pay in lieu thereof, that was given by the replaced provider to settle the successor’s s. 75(2) obligations.
- 65(8) Only the following set-offs and deductions may be made in calculating severance pay under this section:
- Answer: Severance pay given by the replaced provider can be offset by the new provider under paragraph 3 of s. 65(8), which provides as follows:
- What if the employees of the replaced provider were unionized and there was a collective agreement in place? The new provider does not employ the employees of the replaced provider (and is not exempted from its Part XV (Termination and Severance of Employment) obligations by Reg. 287/01). Are the employees prevented from filing a claim against the new provider because of s. 99 of the Act (which prohibits employees to whom a collective agreement applies from filing a complaint under the Act)?
- Answer: No. The collective agreement that applies to the employees is with the replaced provider, while the complaint is against the new provider. Generally speaking, under the Labour Relations Act, 1995, SO 1995, c 1, Sch 1, the collective agreement does not follow through to bind the purchaser in the building services sector, so it cannot be used by employees to enforce their ESA 2000 rights against the new provider. Accordingly, they are entitled to file a claim. See UFCW, Local 1000A v Cara Operations Ltd.
Section 76 - Vacation pay
Vacation pay - s. 76(1)
This provision is substantially the same as s. 13.1(6) of the former Employment Standards Act. Section 76(1) states that when a provider of building services is replaced by a new provider and ceases to employ an employee, the replaced provider shall pay the employee the amount of any vacation pay accrued (even though it may not yet be due).
The obligation to pay any accrued vacation pay (whether due or not) at the time the replaced provider ceases to employ the employee would ordinarily be imposed under s. 11(5) of the Employment Standards Act, 2000. Therefore, section 76(1) is assumed to have relevance only where such employees are hired by the new provider, triggering the continuity of employment obligations under s. 10 of the Act. In that case (i.e., where the new provider hires employees of the replaced provider), s. 76(1) eliminates the possibility of any argument that the new provider might have liability for the accrued vacation pay entitlements of the replaced provider’s employees.
Normally, a replaced provider would have built the cost of its employees' vacation pay into the amount of its original bid, and that cost, along with other costs, would be reflected in the contract price; it would therefore be a windfall for the replaced provider if the new provider were required to pick up the liability for any of the vacation pay that accrued during the term of the replaced provider’s contract with the building owner or manager.
See additional discussion on the Program’s policy regarding continuity of employment and vacation pay liability in the building services context in ESA Part IV, s. 10(2).
Vacation pay - s. 76(2)
This provision requires that the replaced provider pay accrued vacation pay to employees pursuant to s. 76(1) on or before the later of two dates:
- Seven days after the day the employee ceased to be employed by the previous provider; or
- The day that would have been the employee’s next regular pay day.
This provision is different from the corresponding provision (s. 13.1(7)) of the former Employment Standards Act which required the previous provider to pay accrued vacation pay within seven days after the earlier of: (1) the day the employee ceased to be employed by the previous employer or (2) the day on which the previous employer ceased to provide services at the premises.
Section 76(2) is consistent with the provisions in the ESA 2000 regarding the payment of wages when employment ends (s. 11(5)). Section 11(5) states that the employee’s wages must be paid no later than the later of seven days after employment ends or the day that would have been the employee’s next pay day.
Section 77 - Information request, possible new provider
Information request, possible new provider - s. 77(1)
This section is substantially the same as s. 13.1(10) under the former Employment Standards Act.
This provision is designed to ensure that bidders on a building services contract have the information they require to determine the amount of their bid. In particular, this subsection enables the bidders to estimate the extent of their potential liability under Part XV (Termination and Severance of Employment) of the Employment Standards Act, 2000. The reference to "prescribed" information means prescribed by regulation. Sections 3(1), (3), (4) and (5) of O Reg 287/01 set out the information that must be provided by the owner or manager of the premises under s. 77(1). If an owner or manager of the premises fails to provide the required information, an employment standards officer could issue a compliance order under s. 108 and/or a notice of contravention under s. 113. There is no authority however for issuing a compensation order under s. 104 in favour of a person seeking to become a new building services provider where that person suffers damages as a result of a failure on the part of the owner or manager to provide information under s. 77(1).
The definition of "request date" as it is used in these provisions, is set out in s. 3(6) of the same regulation as follows:
For information regarding sections 3(1), (3), (4) and (5) of O Reg 287/01, see O Reg 287/01.
Information request, new provider - s. 77(2)
This section is substantially the same as s. 13.1(9) of the former Employment Standards Act.
Section 77(2) provides that a new provider is entitled to additional information as prescribed. The prescribed information is set out in s. 3(2) of O Reg 287/01 as follows:
The new provider of services is consequently entitled to request additional and updated information regarding employees of the previous provider who are performing work at the premises. All information, including the information listed in paragraphs 1 to 8 of s. 3(1) (see O Reg 287/01, s.3(1) of the Manual for further discussion) which may have been provided at the time the new provider was bidding on the contract, must be accurate as of the date of the subsequent request under s. 77(2).
Paragraph 2 of s. 3(2) of O Reg 287/01 also allows the new provider to request the names, addresses and telephone numbers of the employees engaged in providing services at the premises on the date the request for information is made.
During the period from the time the new provider is awarded the contract to the "changeover date" of the contract, when the new provider begins to provide services at the building premises, the employees' names, residential addresses and telephone numbers can be used to:
- Contact employees to make job offers, or
- Arrange payment of termination pay and/or severance pay if applicable directly to the employees in question if they are terminated at the time of the "changeover date".
This subsection ensures that the new provider has access to the necessary information to determine the actual Part XV (Termination and Severance of Employment) entitlements for employees of the replaced provider. If an owner or manager of the premises fails to provide the required information, an employment standards officer could issue a compliance order under s. 108 and/or a notice of contravention under s. 113. There is no authority however for issuing a compensation order under s. 104 in favour of a new building services provider where the new provider suffers damages as a result of a failure on the part of the owner or manager to provide information under s. 77(2).
Request by owner or manager - s. 77(3)
This provision is substantially similar to s. 13.1(8) of the former Employment Standards Act.
The effect of this subsection is to require the incumbent or replaced provider to share certain information with the owner or manager of a building in respect of employees providing services at the premises.
This section is aimed at facilitating the flow of information from the incumbent or replaced provider to those who are bidding on the contract or who have won the contract. This is necessary so that bidders know the extent of their potential liability under Part XV (Termination and Severance of Employment) when they make bids. In addition, it is also necessary so that new providers can determine the precise amount of their liability under Part XV (Termination and Severance of Employment) upon assuming a new building services contract.
The information that is required to be provided under s. 77(1) or (2) is prescribed in s. 3 of O Reg 287/01 and is described in detail in O Reg 287/01, s. 3. If a provider or former provider fails to provide the required information, an employment standards officer could issue a compliance order under s. 108 and/or a notice of contravention under s. 113. There is no authority however for issuing a compensation order under s. 104 in favour of a new building services provider where the new provider suffers damages as a result of a failure on the part of the incumbent provider to provide information under s. 77(3).
Section 78 - Use of information
Use of information - s. 78(1)
This provision is substantially the same as s. 13.1(11) of the former Employment Standards Act.
Section 78(1) states that a person who receives information under s. 77 shall use the information only for the purposes of complying with Part XIX (Building Services Providers). This means that a building services company cannot, for example, use the information received under s. 77 to assess the profitability of a business for purposes of buying it.
Confidentiality - s. 78(2)
This provision is substantially the same as s. 13.1(12) of the former Employment Standards Act.
Section 78(2) states that a person receiving information under s. 77 shall not disclose it to anyone except as authorized this Part (i.e., by s. 77). This means that if, for example, a building owner or manager receives information from the incumbent provider about the wage rates paid to the employees, the building owner cannot disclose that information to any persons except as set out in s. 77. However, where the building owner or manager is a provincial or municipal government "institution" as defined under the Freedom of Information and Protection of Privacy Act, RSO 1990, c F.31 or the Municipal Freedom of Information and Protection of Privacy Act, RSO 1990, c M.56, the disclosure provisions of those Acts will prevail over the confidentiality provision in s. 78(2) in the event of a conflict.