A Question of Law Employment contract may not be transferred

In Manitoba case, management change should have had employee consent.

A free citizen, in the exercise of his freedom, is entitled to choose the employer whom he promises to serve, so that the right to his services cannot be transferred from one employer to another without his assent.” This is more than your wise thought for the day. It comes from a 1940 English judgment quoted in June 2000 by Manitoba’s highest court. And it serves as a reminder that, although employers may feel they’re doing employees a favour by automatically transferring employment contracts when the business changes hands, well, they’d better ask the employees first.

All told, Rose Bodnarus worked as a nurse-receptionist for physicians Roman Buchok and Zenon Matwichuk for 32 years. She started off employed by the doctors personally, but after the first six years, the doctors transferred her employment contract to their management company.

About 21 years later, their accountant told them to start paying Bodnarus personally again. After about four years of that procedure, they sold their management company, becoming employees, themselves, of the new owners. A term of the sale was that Bodnarus was also deemed to be an employee of the new company. The new company cut back on Bodnarus’s hours, so she claimed constructive dismissal and left, suing Buchok and Matwichuk, her original employers.

Q Who was Bodnarus’s employer?
A Bodnarus later added the doctors’ management company to her lawsuit, but the Manitoba Court of Appeal has found the doctors personally liable. They could not say that Bodnarus had ended up as an employee of their company, because at no time did they ask her if she wanted to work for the company.

Therefore, until the doctors sold the company, Bodnarus worked for them. There was no transfer of their contractual obligations when they sold the company, because still no one had asked Bodnarus’s consent for the transfer of her employment contract. So the doctors owed Bodnarus 18 months worth of salary, minus what she earned at the new company.

Q What about the new management company?
A Although Bodnarus of course knew the management company changed hands, it was the behaviour of the new owners of the company that amounted to constructive dismissal. So that company owed her additional reasonable notice, the court has held.

“Notwithstanding the relatively short duration of that employment,” Justice Kerr Twaddle has written for the court, “I am of the view that the period of reasonable notice to terminate that contract is six months. In deciding on this period, I have taken into account the fact that the company benefited by acquiring an employee who was not only experienced in the kind of work she was required to perform, but in doing the specific work required of her.”

On the issue of who was the employer before the transfer to the new owners, Justice Twaddle has ruled: “Where an employee is employed by a human person, the employee’s knowledge that the employer has started to pay the employee’s salary through a company is not by itself enough in law to effect a change of employer. There must be something more to signify acceptance of the substitution. The employee may be willing to accept payment of his or her salary by the company without surrendering his or her right to enforce the obligation, should there be default, of the person with whom the employee originally contracted. Where conduct is relied on as evidence of consent, the employee’s conduct must demonstrate an unequivocal acceptance of the company as the person obligated to fulfil the contract in future.”

more information: Bodnarus v. McGregor Centre Holdings Ltd., 2000 MBCA 53, docket no. AI 99-30-04110, June 7/00.

Jeffrey Miller is editor of Canadian Employment Law Today. For subscription information, call (416) 609-3800 or (800) 387-5164.

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