Ontario has recently permitted professionals to operate as corporations. Ontario was careful to say that these professionals are held to the same negligence standards as if they were operating in their personal capacity and not as a corporation.
Nevertheless many professionals, particularly dentists and lawyers have taken advantage of the ability to set up as corporations. Corporate status provides limited liability. That is generally the main reason for such a set up. Corporate status allows the business to be divided up into shares and managed according to a shareholders agreement. Often professionals set up a corporation in order to manage their everyday business like rent, wages, buying computers and shoveling the parking lot. For example, if someone falls in the dentist’s parking lot, it is the landlord corporation, not the dentist, personally, who is sued. This takes a great weight off of the professional’s shoulders.
Now sometimes the dentist decides there can never be too much of a good thing. If my corporation get me free of liability for slip and fall, why can’t I make my old employees sign on new employment agreements with the ‘corporation’ so that I don’t personally employ them anymore?
Kutcher the dentist thought this would be a great idea so he made his long suffering assistant (Theberge-Lindsay) sign a ‘new’ employment agreement with the ‘new’ corporate employer (even though the same old dentist kept signing all the cheques). Theberge-Lindsay had been working for the dentist since 1993. Kutcher made her sign on with the new corporation in 2011 then he terminated her in 2012 and paid her one week wages (according to the Employment Standards Act).
The Court of Appeal said: No! All of the new corporate employment agreements were void because there had been nothing new given from the corporation to Theberge-Lindsay (lack of ‘consideration’). Therefore the old common law rule of paying wages upon termination without cause (one month per year) applied.
Kutcher v. 3395022 Canada Inc. (Kutcher Dentistry Professional Corporation), 2019 ONCA 469
Daniel Ebady
www.edwardconway.ca
