Case In Point
Taking Over a Building Services Contract? Assess Employee Liabilities Before You Bid
Date: October 15, 2026
In Kondaj v Crossbridge Condominium Services Ltd., the Court of Appeal for Ontario confirmed that an incoming building services provider, such as a property manager, a cleaning contractor, a food provider, security providers and services relating to a parking garage or lot, or a concession stand, is responsible for common law reasonable notice when it does not retain an employee of the outgoing provider, in addition to statutory termination and severance obligations.
As this liability may not be apparent from the service contract alone, before pricing or accepting a contract, a prospective building services provider should identify the incumbent workforce and assess how much common law notice they might be liable for if they choose not to retain particular employees. That assessment may affect the incoming provider’s decision whether to proceed with the bid, or their bid price, transition plan, staffing decisions and contractual allocation of risk.
Background
The dispute arose when a condominium and property management contract for the SoHo Hotel & Residences (SoHo) in Toronto was transferred from Crossbridge Condominium Services Ltd. (Crossbridge) to Duka Property Management Inc. (Duka). The employee had worked as SoHo’s building manager for Crossbridge. Duka did not retain him, and Crossbridge did not place him elsewhere. Duka paid statutory termination pay and continued benefits, but neither provider paid common law reasonable notice, each arguing that the other was responsible. The employee commenced a wrongful dismissal action against both Crossbridge and Duka seeking damages in lieu of common law reasonable notice, and moved for summary judgment.
Relevant Legislation
“Building services” is defined in s. 1 of the Employment Standards Act, 2000 (ESA) as “services for a building with respect to food, security and cleaning and any prescribed services to a building.” Building Services Providers, O Reg 287/01 prescribes a parking garage or parking lot, and a concession stand as services for a building for the purposes of the ESA definition.
In part XV of the ESA s. 56 provides that an employee is terminated if “the employer dismisses the employee or otherwise refuses or is unable to continue employing him or her.”
Part XIX of the ESA (ss. 75 – 78) contains specialized provisions that apply specifically to the building services provider sector. These provisions are intended to protect employees by providing for continuity of employment in an industry where service contracts are frequently transferred between providers.
Section 75 applies when a building services provider is replaced. Pursuant to s. 75(2), when one service provider replaces another, the new provider must comply with the termination and severance provisions of the ESA with respect to every employee of the replaced provider who is engaged in providing services at the premises and whom the new provider does not employ, as if the new provider had terminated the employment relationship. Section 75(2) refers only to statutory termination and severance pay and says nothing about common law entitlements. Pursuant to s. 75(3), the new provider is deemed to have been the employee’s employer for the purpose of s. 75(2).
Section 77 allows a party that is seeking to become a building services provider to obtain from the existing provider, prior to bidding on the project, certain information about the terms and conditions of employment contracts.
Decision of the Motion Judge
The motion judge held that Duka was liable as the incoming provider and awarded the employee approximately 10 months’ reasonable notice plus benefits-related damages, totalling approximately $78,925. He found Duka’s liability consistent with the scheme of the ESA because: (a) the statutory and common law entitlement of employees’ are intertwined and the ESA “simply provides a floor from which common law protections operate;” and (b) section 77 of the ESA enables the new provider to assess, prior to bidding on the project, how much common law notice they might be liable for regarding existing employees.
Decision of the Court of Appeal
The Court of Appeal dismissed Duka’s appeal, seeing no error in the motion judge’s decision to hold Duka liable for payment of the employee’s common law entitlements. The Court found that the motion judge’s decision was consistent with the Legislature’s intention not to incentivize the new provider to terminate the old provider’s employees and to promote employment continuity in industries where service contracts are transferred often, the scheme of the ESA, and the wording in ss. 56 and 75 of the ESA.
The Court noted that s. 75 of the ESA requires incoming providers to comply with s. 56, and s. 56 allows an employee who has been terminated to claim common law damages. Significantly, the court read ss. 56 and 75 of the ESA together, and concluded that Duka’s exposure was not limited to minimum statutory entitlements and that Duka was responsible for paying the employee’s common law reasonable notice.
Employment considerations for building services providers when bidding on, pricing, or accepting a services contract
The Court of Appeal’s decision is a reminder that employment-related obligations can be a significant part of a building services contract transition. Incoming providers often look at the following issues as part of their due diligence and transition planning:
• The affected workforce. Who is currently assigned to the contract, and how retention decisions might affect those employees.
• Factors that can affect potential termination-related obligations. These commonly include the terms of any employment agreements, as well as compensation, benefits and length of service.
• The business impact. How retention decisions and potential termination-related obligations may affect pricing, transition costs and operational planning.
Contractual arrangements between the parties involved in a transition may also bear on how employee-related costs are handled. The right approach will depend on the specific facts, agreements and circumstances involved.
For assistance with a building services contract transition, employment due diligence or a related contractual dispute, please contact your Hicks Morley lawyer.
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