Employment Matters Relating to the Sale of a Health Business or Clinic

What are some of the possible repercussions when you sell a health practice?

Recently I received a call from Dr. Dash. Two years ago he purchased a general practice from a retiring dentist. All employees continued to work for Dr. Dash after the sale. Dot, a dental hygienist worked 3 days a week. Dr. Dash soon discovered that Dot was not thorough when assessing patients. She did not carry out periodontal examinations, and her chart entries were devoid of clinical findings. He was very unhappy with her performance. Dot did not respond well to Dr. Dash’s constructive criticism. Dr. Dash repeatedly told Dot that her record keeping was unacceptable. According to Dr. Dash, Dot had an attitude problem.

A year and one half after the purchase of the practice Dr. Dash had had enough. He decided to terminate Dot. He consulted his business lawyer. Although he felt justified in terminating her employment he took his lawyer’s advice and offered Dot two months pay in lieu of notice. Dot rejected the offer and promptly served Dr. Dash with a Statement of Claim. She alleged that she was wrongfully dismissed.

This case raises several important issues for employers and employees.

JUST CAUSE

1. When does an employer have just cause to terminate an employee’s employment without notice of termination or pay in lieu of notice?

In 1967 the Supreme Court of Canada provided a response to this question: The court outlined the kind of employee behaviour, which may constitute cause for dismissal.

If an employee has been guilty of serious misconduct, habitual neglect of duty, incompetence or conduct incompatible with his duties, or prejudicial to the employer’s business, or if he has been guilty of willful disobedience to the employer’s orders in a matter of substance, the law recognizes the employer’s right summarily to dismiss the delinquent employee.

During 1999 the Ontario Court of Appeal decided the following cases and found:

Just Cause for Dismissal

1. An employer had just cause to terminate an employee who participated in an illegal tax fraud scheme. The employee’s participation in the activity constituted a breach of her duty of fidelity to her employer, and was just cause for dismissal, even though the employee did not directly benefit from the scheme and acted on the instructions of her immediate supervisor.

2. An employer had cause to terminate an employee who continued to refuse to adhere to his employer’s policies, in spite of numerous warnings and opportunities to improve his work performance. The court appeared to be satisfied that the cumulative effect of the employee’s behaviour constituted just cause for dismissal

No Just Cause for Dismissal

1. Where an employee failed to report to work following a two day suspension 2. Where an employee refused to accept unreasonable disciplinary measures 3. Where an employee refused to swear an affidavit prepared by her employer, where the employer refused to disclose the nature of matter for which the affidavit was created 4. A single act of insubordination by an employee

What lessons that can we learn from these cases? Bearing in mind the guidelines provided by the Supreme Court of Canada and recent Ontario Court of Appeal decisions would Dot’s behaviour constitute grounds for dismissal ?

Determination of just cause is primarily based upon the facts of the case. However if Dr. Dash gave Dot numerous warnings and Dot had ample opportunity to improve her performance, Dr. Dash may have been justified in terminating Dot.

IMPORTANT EMPLOYMENT STATUTES

When the assets of a dental practice are sold the most important employment legislation to consider is the Employment Standards Act. (ESA). The ESA is the basic legislation providing minimum terms and conditions of employment for all employees in Ontario. Notice of termination, or pay in lieu of notice, as well as severance pay for qualifying employees are obvious provisions of the ESA that must be considered upon the purchase and sale of a business.

For example the general rule that applies to most transactions is outlined in Section 9 of the ESA. It stipulates that all employees hired by the purchaser are deemed, for the specific purpose set out in the section, to have been employees of the purchaser from the time that he or she commenced employment with the vendor. If the employees are not hired by the purchaser section 9 requires the vendor employer comply with the termination notice or pay and severance pay provisions of the ESA.

If the employment continues with purchaser, their employment is deemed by the ESA to have been entirely with the purchaser employer. If the purchaser employer does not wish to employ any or all of the vendor’s employee’s, or if the employees do not accept such employment, then the obligations for termination and severance pay are triggered.

Other sections of the ESA respecting continuity of employment state that a person employed by the previous employer who accepts a position offered by the successor employer is deemed to have been employed by the successor employer for the period during which he or she was employed by the previous employer.

However the Act also states, a person who declines a position offered by the successor employer and who ceases to be employed by the previous employer is deemed, for the purposes of the ESA, to have resigned his or her position with the previous employer. The person loses his or her right to notice or severance pay. Regardless of change in terms and conditions of employment associated with the offer, including greatly reduced pay.

The Government of Ontario has a website devoted to labour/employment matters including continuity of employment.

Always consult a lawyer who focuses on employment law when buying or selling a dental practice.