The Court Provides Clarity on Successor Employer Obligations and Potential Liabilities

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In Manthadi v. ASCO Manufacturing, the court found that the recent purchaser of a company was on the hook for all 36 years of service for wrongful dismissal damages. The Plaintiff employee, Ms. Manthadi had worked as a welder for ASCO Manufacturing Ltd. since February 1981. In September 2017, Ms. Manthadi was advised that ASCO had been acquired by the Defendant employer, 2603420 Ontario Inc. (the “Purchaser”) and provided her with termination pay in exchange for executing a release. In the Asset Purchase Agreement, ASCO assured the Purchaser that it had provided notice of termination to all its employees and agreed to indemnify them in the face of any claim. Ms. Manthadi commenced employment with the Purchaser without interruption but was subsequently terminated due to a “shortage of work” after only six weeks. The Purchaser argued that Ms. Manthadi was not entitled to notice, as she was still within her probationary period. However, the court disagreed. The court indicated that the Purchaser had failed to explicitly notify Ms. Manthadi that her prior service with ASCO would not be recognized. As such, relying on a recent decision in Ariss v. NORR Limited Architects & Engineers, the court indicated that in the absence of such notice, Ms. Manthadi was deemed to be an employee for 36 years and awarded Ms. Manthadi damages representing a notice period of 20 months! This case serves as a reminder to employers to seek out legal assistance (both employment and corporate counsel) when handling the purchase or sale of a business. This will ensure you are not met with any costly and unnecessary surprises down the line!

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