Legal

February 6, 2024 Published by Toronto and Area Chapter - By Quintin Johnstone

Bill 7 Is One Of The Least Understood Ontario Laws

From the Winter 2023 issue of CCI Toronto Condovoice Magazine.

Successor Employee Obligations for Building Service Provider Employers

LEGACY (or successor employee) obligations for building service provider employers (or Bill 7 as it is commonly known) under the Employment Standards Act, 2000 in Ontario is probably one of the most misunderstood laws in Ontario. Very often company owners, property managers and even Board members quickly and easily get drawn into disputes related to Bill 7. What should be a very easy process can become a nightmare for everyone involved if not handled properly.

Building service provider employees are a rare commodity in the current manic Greater Toronto Area marketplace especially for security and cleaning services. Companies for the most part compete for the same pool of people. “Poaching” is a commonly used industry term and describes the soliciting of employees who work for other companies. Poaching in itself is not illegal in Ontario.

In fact, companies hire talent acquisition specialists to openly poach employees from competitors. Employers in turn have to hire talent retention specialists to combat such activities. Is it fair? Is it ethical?

For the purpose of this discussion, we will leave that open for interpretation.
Companies that struggle with capacity issues and take on too much business without necessary supporting resources often engage in such practices out of desperation.

This infuriates affected company owners who spend countless hours and money training their employees only to have them poached by another firm.

Board members who become fond of some employees working at buildings often become involved in poaching exercises either directly or by way of instructing others such as property managers to engage in such practices. This unfortunately is where the line gets crossed. The risk increases the more involved Board members and property managers become in poaching exercises. Civil actions for breach of contract, are becoming more prevalent as affected building service provider companies have had enough of such business practices.

The Intention of Bill 7

Between 1992 and 1995, the Ontario government became inundated with public complaints about unscrupulous business owners leaving their employees stranded (orphaned) when building service providers changed. All of the hard work and dedication of these employees was lost without recourse as new service providers would not recognize tenure, pay rates, and benefits, etc. In creating successor employee rights in 1995 through Bill 7, the Ontario government made a very clear statement to all employers that if employees are going to be left behind, they must be looked after.

Some company owners believe that they are legally entitled to hire employees of an outgoing company. That, however, is not the intention of Bill 7 is nor a requirement in law. Nothing in the law forces a new building service provider to hire anyone. An incoming building service provider only has obligations towards employees that the outgoing building service provider does not intend to continue employing.

Michael Smyth, a labour and employment lawyer at Hicks Morley, suggests that, while building service providers must recognize that they will have obligations where the outgoing building service provider does intend to leave employees at the site, they need to exercise caution when pursuing employees of a building service provider that is planning on retaining its employees. The new provider has no obligation towards such employees, and could risk causing a breach of contractual restriction in the employee’s employment agreement.

Role Based Obligations: What Is Allowed & Not Allowed

Simply put under Bill 7, the only obligation of an incoming service provider is to determine whether the outgoing company will leave behind any employees. That’s it. Nothing more. It makes perfect sense that any new incoming service provider should know the jeopardy they face regarding financial and other implications of legacy employees, before a new contract is signed.

Asking the property manager to determine this is the most appropriate method of fulfilling all obligations under Bill 7. Outgoing service providers often provide declarations indicating that no employees will be remaining, which completely satisfies all Bill 7 requirements. If there are employees that will be left behind, the outgoing service provider has a clear obligation to submit the information to the new provider, through property management.

Property managers should not under any circumstances become an active participant in poaching activities, as it puts their reputation and that of their company in jeopardy. Property managers who claim that they were just following direction of their Board does not provide sufficient protection and would not pass the ‘Smell Test,’ subjecting themselves and their property management firm to unnecessary scrutiny and brand stigmatization and sometimes very costly legal consequences.

Incoming service providers should not approach employees actively engaged in their workplace to offer employment. Employers have a right and a duty to ensure that employees are not interfered with at their workplace. Such activities would likely lead to harsh responses from the outgoing company and courts have found that such activities are not only uncalled for but do, in fact, interfere with existing employer / employee relationships.

Alex Young a lawyer at Gardiner, Miller, Arnold, LLP advises, “Where a condo corporation hires a new service provider, the condo corporation should avoid compelling the new provider to interfere with the contractual relationship between the previous service provider and that provider’s employees as there may be legal liability where the condo corporation oversteps its bounds.”

The Ontario government has set out clear obligations and rights under the Employment Standards Act when taking over a new site. According to, “Your Guide to the Employment Standards Act” published by the Ontario government:

• The obligation of the incoming service provider is to request information through the property manager. “If a company becomes the new provider of the services at a building, it has the right to ask for the name, residential address, and telephone number of each employee.”
• The obligation of the property manager is to ask for, receive and provide the information. “If a building owner or manager receives a request for information from a new or potential new services provider, it has the right to get the necessary information from the current or former services provider.”
• The obligation of the outgoing service provider is to provide information on any employee that they plan to leave behind. That is the intention of the law and the outgoing service provider must provide this information when applicable.
• The obligation of the Board is to leave the process to the building service providers. The Board has no role in this process and should remain removed from the process.

What Happens When Employees Want to Stay

There are no ownership rights of employees by employers in Ontario. However, some companies may have a prohibition on their employees remaining at a site for a set period of time after they leave employment.

Restrictive covenants in employment and client agreements will limit the ability of employees to use confidential information, or solicit employees after employment is terminated. Such restrictions have been considered to be reasonable given the time, money and effort that the outgoing company has spent to train employees on site operations. Incoming service providers often greatly benefit from such poaching activities without having paid for such benefit.

If there is no prohibition in an Employment Agreement or Client Agreement, employees are free to choose their own destiny and remain at a site. If there is such a prohibition the employee may choose to work for the incoming service provider, but must adhere to contractual obligations including non-compete, good faith and confidentiality requirements. Employers who hire such employees must also recognize their years of service with the previous employer.

The Takeaway

Sage advice from lawyers in the industry, including labour relations experts, agree that people should stay within their roles and abide by the law when building service providers change hands.

Stepping outside of roles can have serious consequences and lead to lengthy and expensive litigation. Always seek professional advice from legal experts prior to deciding on a strategy to change service providers.

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Quintin Johnstone
CEO, Samsonshield Inc. / Riskboss Inc.