Aug 8

Ontario Court Highlights the Importance of Defining Employment Terms in Family Businesses

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In Seepersaud-Singh v. Pet Social, 2023 ONSC 4174, the Ontario Superior Court of Justice awarded $130K in unpaid wages to the Plaintiff who was an unpaid employee of a family business owned by her common-law partner and his brothers.

Background

The Plaintiff was involved in a common-law relationship with one of the defendants (“the Defendant”). The Defendant, along with his two brothers, who are also defendants in this claim, served as directors of the company, Pet Social Inc. (“company”). Each of the Defendant’s brothers owned a 50% share of the company.

The Plaintiff claimed that the company’s idea originated from another dog breeding business she had previously started, with all profits from her prior venture being funneled into this company. Furthermore, the Plaintiff argued that her abusive relationship with the Defendant led to her performing unpaid work at the company. Following the end of their relationship in 2015, she filed a lawsuit to claim unpaid wages, including overtime and vacation pay.

The Plaintiff was an employee

The Plaintiff stated that she did not sign an employment contract as she believed she was an owner of the company. In addition to her responsibilities in sales, daycare, and grooming, she was actively involved in the groundwork before the company started and presented herself as the owner in media interviews. Furthermore, she engaged in making deals and served on the Residents’ Association to promote the business.

However, the Court of Justice found that the Plaintiff had not established, with sufficient evidence, that she had an ownership interest in the company. Moreover, no evidence was presented in court regarding the amount of money invested from her previous venture into this company.

Although the court could not confirm the Plaintiff’s ownership interest, they did recognize her in a managerial position. The Plaintiff played a role in negotiating with contract employees and took charge of managing and supervising the store over a period of four years.

Remuneration

The Plaintiff’s claim that she was never paid any salary, portion of profits, or any other form of remuneration was not challenged. In fact, the Plaintiff was not allowed to have money at home or at work. She was told by the Defendant that she had a roof over her head, and they were family. The Defendants also did not provide any evidence to demonstrate that that Plaintiff was compensated for her services. Pursuant to the Ontario Employment Standards Act, 2000 (“ESA”), employers are required to establish a recurring pay period and pay wages earned during that period to their employees.

In the absence of an employment contract, the court concluded that unpaid wages shall be based on the statutory minimum wage in the ESA, which was $10.25 an hour. The Plaintiff’s damages for unpaid wages were calculated by assuming full-time work at 40 hours per week for 52 weeks per year, along with vacation pay calculated at a rate of 4% of gross wages. This calculation resulted in a total of $22,172.80 per year.

Although the Court acknowledged the Plaintiff’s managerial position, there was no evidence at trial regarding the typical earnings of a manager. Consequently, the court agreed to award an additional $10,000.00 a year above the minimum wage to account for her role, resulting in a total of $32,572.80 per year in unpaid wages. This amounted to a total of $130,291.20 in damages. 

The Court of Justice also granted 15 hours a week for overtime in the first year and 10 hours a week in overtime in the subsequent years. 

Takeaway

This case serves as a reminder that family businesses must clearly define the terms of an employment relationship with family members to avoid exploitation and legal complications. 

This article was written by Dharshani Arumugam. Dharshani is licensed by the Law Society of Ontario and is an Employment Lawyer at Monkhouse Law.