New Contract, New Liability- Ontario Court Clarifies the Rules for Building Service Providers

When a building changes service providers, the incoming company may inherit more than the contract. It may also become responsible for substantial termination liabilities if it decides not to employ the outgoing provider’s workers.

This has been the case for notice and severance obligations under the Employment Standards Act, 2000 (the “ESA”), but the question of who would bear potential common law notice obligations has remain uncertain. That is the central issue resolved by the Ontario Court of Appeal in Kondaj v. Crossbridge Condominium Services Ltd., 2026 ONCA 636.

Background

Gazmend Kondaj worked as a building manager for Crossbridge Condominium Services Ltd. at the SoHo Hotel & Residences. When the property management contract was retendered, Duka Property Management Inc. replaced Crossbridge as the service provider.

Duka decided not to employ Mr. Kondaj. Crossbridge also did not place him at another property. Duka paid his minimum termination entitlements under the ESA, but neither company paid him the additional compensation that may be required under the common law.

Mr. Kondaj sued both companies for wrongful dismissal. Although everyone agreed that he was entitled to common law reasonable notice, the companies disagreed about which one was responsible for paying it.

The Successor Provider is Liable

The Court of Appeal held that the incoming provider was responsible.

Under the ESA’s special rules for building service providers, a new provider that does not employ an affected employee is treated as though it terminated that employee. The Court concluded that this responsibility is not necessarily limited to the ESA’s minimum termination and severance requirements. It can also include the employee’s broader common law reasonable notice entitlement. The incoming provider was held responsible for 10 months of reasonable notice, together with damages for lost benefits.

The Court explained that the legislation is intended to promote employment continuity in an industry where service contracts frequently change hands. A narrower interpretation could encourage incoming providers to avoid hiring existing employees simply to limit their obligations to the minimum amounts required by the ESA.

What This Decision Means for Building Service Providers

This decision provides clear direction that an incoming provider inherits the employees of the outgoing provider for both ESA obligations and common law obligations. This is important because common law notice can be significantly greater than the minimum amounts required under the ESA. The financial consequences of declining to employ an existing worker may therefore be much larger than an incoming provider anticipates when preparing its bid.

Companies taking over building service contracts should not assume that their exposure is limited to a few weeks of statutory termination or severance pay. Before submitting a bid or deciding which existing employees to retain, an incoming provider should consider:

• the number of employees currently providing services at the premises;
• each employee’s length of service, position, compensation and benefits;
• whether the employees have enforceable contracts limiting their termination entitlements;
• the potential cost of common law reasonable notice if any employees are not retained;
• whether those costs have been reflected in the contract price;
• whether the tender documents or service agreement address employee information, transition responsibilities or termination-related costs; and
• whether retaining some or all of the existing workforce may reduce liability and support a smoother operational transition.

This information related to the workforce will be a critical part of the successor building service provider’s due diligence and bidding process and should not be left until after the new contract has been awarded. Incoming providers will need to obtain sufficient employee information, assess potential termination exposure, and build that risk into their pricing and transition plans.