Together but apart: Supreme Court of Canada denies leave to appeal from corporate separateness and common employer decision

The Supreme Court of Canada has dismissed an application for leave to appeal from the Ontario Court of Appeal’s 2021 judgment in O’Reilly v ClearMRI Solutions Ltd. (O’Reilly),¹ a decision that clarified the common employer doctrine. O’Reilly was the Court of Appeal’s most in-depth analysis of the contentious employment law doctrine since its 1993 decision in Downtown Eatery.² The Supreme Court’s decision to deny leave to appeal O’Reilly brings certainty to this area of the law for employers and employees. 

Ontario Superior Court

In October 2014, William O’Reilly commenced a lawsuit for unpaid wages, vacation pay and other damages. In addition to claiming against his nominal employer, ClearMRI Solutions, Inc. (ClearMRI), O’Reilly also named a number of other defendants, including Tornado Medical Systems Inc. (Tornado), the parent of the parent company of ClearMRI. On a motion for summary judgment, O’Reilly was successful in obtaining judgment against Tornado. The motion judge held that Tornado was his “common employer” and therefore jointly and severally liable for the employment aspects of the judgment.

Ontario Court of Appeal

In June 2021, a unanimous panel of the Ontario Court of Appeal held that the motion judge had failed to apply the correct legal test for the common employer doctrine and overturn the lower court’s judgment against Tornado. The Court of Appeal clarified that the doctrine of common employer is only triggered if the purported common employer actually entered into an employment contract with the employee, a question that can be evidenced both by a written agreement or by other conduct, which, viewed objectively, demonstrates an intention to create an employment relationship.

However, consistent with the doctrine of corporate separateness, the Court of Appeal held that a corporation is not held to be a common employer simply because it is owned, controlled, or affiliated with a corporation that had a direct relationship with the employee.

Supreme Court of Canada

O’Reilly sought leave to appeal to the Supreme Court of Canada, arguing that the Court of Appeal had departed from established caselaw by creating a new test for the common employer doctrine grounded in principles of contract law and corporate separateness. O’Reilly also argued the decision conflicted with other provinces’ laws. In March 2022, the Supreme Court dismissed O’Reilly’s application, implicitly affirming the Court of Appeal’s treatment of the doctrine.³

Tornado Medical Systems was represented in both the Ontario Court of Appeal and the Supreme Court of Canada by Norton Rose Fulbright Canada LLP. The litigation team included Ted Brook, Paul Macchione and Jean-Simon Schoenholz.