A recent decision from the Ontario Court of Appeal provides clarification on when the common employer doctrine will make a corporation liable for amounts owing to an individual employed by a related corporation.

The plaintiff, Mr. Reilly served as CEO for both ClearMRI Solutions Ltd. (“ClearMRI Canada”) and ClearMRI Solutions, Inc. (“ClearMRI US”). Mr. Reilly’s written employment agreement was with ClearMRI US, which was a wholly owned subsidiary of ClearMRI Canada. However, he reported to and had his performance goals set by ClearMRI Canada. Another company, Tornado Medical Systems Inc. (“Tornado”) was a majority shareholder in ClearMRI Canada. Tornado had specified rights in ClearMRI Canada but these rights did not extend to the management of ClearMRI Canada and its subsidiaries or overseeing employment agreements.

In 2013, Mr. Reilly agreed to loan $50,000 to ClearMRI Canada and defer part of his salary to help the company with cash flow issues that it was having at the time. In return, ClearMRI Canada promised that it would bring its product to market. The following year, it became clear to Mr. Reilly that ClearMRI Canada was no longer committed to bringing its product to market and he therefore took the position that he had been constructively dismissed. He demanded $281,385 in payment from ClearMRI Canada, ClearMRI US and Tornado for unpaid salary and the loans that he had made to ClearMRI Canada. He later brought a wrongful dismissal claim against all three...

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