Ontario Court of Appeal Clarifies Termination Liability When Building Service Providers Change
The Ontario Court of Appeal has provided important guidance on who may be responsible for an employee’s common law termination entitlements when a building services contract changes hands.
In Kondaj v. Crossbridge Condominium Services Ltd., 2026 ONCA 636, released September 10, 2026, the Court held that where a new building services provider takes over a contract but declines to continue the employment of an employee working at the premises, the incoming provider may be responsible not only for the employee’s minimum statutory entitlements under the Employment Standards Act, 2000 (“ESA”), but also for common law reasonable notice damages.
The decision addresses a previously unsettled question under Ontario employment law and has important implications for both employees and employers operating in the building services sector.
What Happened in Kondaj?
Gazmend Kondaj worked for Crossbridge Condominium Services Ltd. as a building manager. Crossbridge provided property management services at the SoHo Hotel & Residences in Toronto.
When the property management contract was retendered, Duka Property Management Inc. replaced Crossbridge as the new service provider.
Duka decided not to continue Mr. Kondaj’s employment. Crossbridge similarly advised that it would not assign him to another property.
Duka paid Mr. Kondaj approximately three weeks of termination pay and continued his benefits during the statutory notice period, in accordance with the ESA. Neither Duka nor Crossbridge, however, initially paid his common law reasonable notice entitlements. Each company maintained that the other was responsible.
Mr. Kondaj commenced a wrongful dismissal action against both companies.
The motion judge concluded that Duka, as the incoming provider, was responsible for Mr. Kondaj’s common law damages and awarded him $78,925, representing approximately 10 months of reasonable notice, together with damages relating to lost benefits.
Duka appealed.
The Court of Appeal Upholds Liability Against the Incoming Provider
The Court of Appeal dismissed the appeal.
The central issue was the interaction between sections 56 and 75 of the ESA.
Section 75 contains special rules that apply when one building services provider replaces another. Where an incoming provider does not employ an employee of the outgoing provider who was working at the premises, the ESA requires the new provider to comply with the termination and severance provisions of the Act as though the new provider had terminated the employee’s employment.
The new provider is also deemed to have been the employee’s employer for those purposes.
Importantly, section 75 expressly addresses statutory termination and severance obligations. It does not expressly state that the incoming provider must pay common law wrongful dismissal damages.
That distinction was at the centre of the appeal.
The Court nevertheless concluded that sections 56 and 75 must be read together. By refusing to continue Mr. Kondaj’s employment, Duka was deemed to have terminated his employment. That termination could therefore give rise not only to ESA minimum entitlements, but also to common law reasonable notice damages.
The result was that Duka, as the incoming service provider, was responsible for Mr. Kondaj’s common law termination entitlements.
ESA Minimums and Common Law Notice Are Connected
An important part of the Court’s reasoning concerned the relationship between statutory termination rights and common law wrongful dismissal rights.
The Court rejected the suggestion that the two regimes operate entirely independently.
The ESA generally establishes minimum employment standards. Unless an enforceable employment agreement limits an employee’s entitlements, the common law may provide substantially greater notice or compensation.
As the Court explained, statutory and common law termination rights can arise from the same termination event. The fact that section 75 expressly imposes statutory obligations on an incoming provider did not prevent that same termination from also having common law consequences.
This distinction can be financially significant. ESA minimums may represent only a portion of the compensation available to a dismissed employee.
For a broader discussion of the distinction between statutory termination entitlements and common law reasonable notice, see our article on termination pay, severance pay and reasonable notice in Ontario.
Employees can also use Pelsmakher Law’s severance calculator for a preliminary estimate of the common law notice period that may apply to their circumstances.
Why Did the Court Place Liability on the New Provider?
The Court considered both the language of the ESA and the broader purpose of the legislation.
One purpose of the building services provisions is to promote employment continuity in an industry where service contracts frequently change hands.
The Court concluded that placing common law liability on the outgoing provider could create an incentive for an incoming provider simply to decline to retain existing employees. The incoming provider could potentially limit its exposure to statutory minimums while leaving the outgoing provider responsible for the larger common law liability.
The Court found that this would be inconsistent with the employee protection objectives underlying the legislation.
The Court also noted that prospective building services providers can obtain information about employees working at the premises before taking over a contract. This allows potential providers to evaluate employment related liabilities when deciding whether to bid on a contract and whether to retain existing employees.
What Does Kondaj Mean for Employees?
For employees covered by the ESA’s building services provisions, the decision provides important clarification.
An employee should not assume that receiving statutory termination pay from an incoming provider represents everything that may be owing following termination.
Depending on the employee’s contract and individual circumstances, additional damages based on common law reasonable notice may remain available.
The decision is particularly important where an employee has accumulated significant service. Under the ESA’s successor provider provisions, prior service may continue to be relevant even though the incoming provider did not previously employ the individual in the ordinary sense.
Employees presented with a termination package following a change in service providers should therefore carefully review the package and their employment agreement before signing a release or accepting that the statutory payment represents their full entitlement.
More information about employee termination rights can be found on our wrongful dismissal page and in our article, How Much Severance Am I Really Entitled to in Ontario?.
What Does the Decision Mean for Employers?
The decision is equally important for businesses bidding on or assuming building services contracts.
Incoming providers should consider potential employment liabilities as part of their due diligence before assuming a contract. Kondaj confirms that declining to retain an existing employee may create liability that extends significantly beyond ESA minimum termination requirements.
Information concerning existing employees, including their length of service and terms and conditions of employment, may therefore be important when evaluating the financial consequences of taking over a building services contract.
Employers should also review the employment agreements applicable to affected employees. The difference between ESA minimum entitlements and common law reasonable notice can be substantial, and a properly drafted termination provision may materially affect the amount ultimately owing.
The Ontario Court of Appeal has recently provided further guidance on the interpretation of termination provisions in employment agreements. Our discussion of those decisions can be found in At Any Time Is Legal: The Ontario Court of Appeal’s New Ruling Changes Termination Contracts.
Employers can also review our employer employment law services for information about employment agreements, terminations, severance and ESA compliance.
A Significant Decision in a Specific Statutory Context
Kondaj does not establish that every purchaser, successor business or new contractor automatically becomes responsible for another employer’s common law termination obligations.
The decision arises from the specific statutory regime governing replacement building services providers under Part XIX of the ESA.
Within that regime, however, the Court of Appeal has now provided significant guidance. Where an incoming provider refuses to continue an affected employee’s employment, the resulting termination may trigger both statutory obligations and common law reasonable notice liability.
The Court ultimately dismissed Duka’s appeal and upheld the finding that the incoming provider was responsible for Mr. Kondaj’s common law termination entitlements.
Key Takeaway
Kondaj confirms that Ontario employers operating within the building services regime must consider more than the minimum termination requirements of the ESA when taking over a service contract.
For employees, the decision reinforces an equally important principle: receiving statutory termination pay does not necessarily mean that the employee has received the full compensation available following termination.
For employers, the case highlights the importance of due diligence when bidding on building services contracts, reviewing the employment circumstances of incumbent employees and assessing potential termination liability before deciding whether those employees will be retained.
Employees or employers seeking advice about a termination, severance package or employment agreement can contact Pelsmakher Law to discuss their circumstances.
