In most cases employees are not overly concerned about the precise legal identity of their employer. It does become an important issue when the employment relationship breaks down and the employee is seeking a remedy.
I can’t count the number of times I’ve asked an employee client who their employer is – only to receive a partial answer like John Doe Motors or Jane Doe Enterprises. These names are merely trade names – they do not identify legal entities. To be a legal entity, the words "Limited/Ltd. or "Incorporated/Inc.” have to be included in the name.
The practice of not using the precise legal name of the employer in contracts is a dangerous for employers as well. In such cases the directors of the company may well be held personally liable for obligations to employees and others contracting with the entity.
Some employees are hired by an individual or corporation and believe they are working for the individual or corporation but are paid by a third party (a different individual or corporation). The legal employer is not necessarily the entity which is paying the wages.
Many large corporations have complex corporate structures including foreign parent companies and distinct operating divisions. Globalization is increasing this trend. An employee in Canada might actually be working for a division of a shell company which is a wholly-owned subsidiary of a multinational corporation.
This can be a vexing issue for employment lawyers and can add greatly to be complexity of claims for damages arising out of employment relationships. It is an important issue since:
- naming an incorrect defendant could result in the claim being dismissed;
- naming a defendant which is merely a shell company could result in an uncollectible judgment;
- naming a defendant not resident in British Columbia causes inconvenience and expense. It is necessary to serve the defendant out of the jurisdiction. More importantly, enforcing a judgment in another country is a time consuming and expensive undertaking.
A recent case in the British Columbia Court of Appeal, Stanley v. Advertising Directory Solutions Inc., dealt with an employee who had been dismissed and sued for wrongful dismissal. The first question the court had to address was the identity of the employer. The employee had worked for several related entities for a number of years. The court came to the conclusion that there was more than one employer liable even though the employee was providing services primarily to one company. The court restated that it is well-established that an employee may have more than one employer at the same time.
The moral of the story is that employees and employers should put their mind to the legal identity of the true employer. Corporations should, to protect their directors, diligently use their full corporate name on documents related to the hiring of employees. Employees should pay attention to who will be responsible for the employer’s obligations under the contract.
Alf Kempf is the Chair of Pushor Mitchell’s Employment Law Group. He can be reached by phone at (250) 869-1215, or by email at [email protected].
