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Talbot v. Nourse

In this matter Ken was co-counsel with Kristopher Stone on behalf of Louise Talbot, a plaintiff who was suing a former romantic and business partner Jeffrey Nourse and two corporations. Ms. Talbot provided services to the corporate defendants for which she claimed she was to be paid a combined $202,000 ($160,000 from 2255588 Ontario Inc. and $42,000 from 2207500 Ontario Inc.) Additionally, she lent money to Mr. Nourse and 225 Co. pursuant to two promissory notes of which $127,843 remained outstanding.

Ms. Talbot and Mr. Nourse met in 2002 and had been involved in a romantic relationship that eventually became a business relationship. Their business involved a chain of 57 spas that operated in Canada and in the United States.

Their romantic relationship eventually ended, but nonetheless, their business relationship continued until Ms. Talbot left the spa business in 2007 due to a difference of opinions.

After Ms. Talbot left the spa business, the two corporations were restructured and 225 Co. transferred its assets into 220 Co.

A few months after this transfer, Mr. Nourse got married to his new wife, Oxana Sergeeva. A few months after their marriage, the shares of 220 Co. were transferred to her for $2. Mr. Nourse and Ms. Sergeeva separated approximately three months before trial.

Ms. Talbot took the position that 220 Co. should be held liable for claims against 225 Co. for the compensation claim based on the common employer theory and for the promissory note claim based on the successor corporation theory.

220 Co. took the position that the common employer and successor corporation theories did not apply and that there was no evidence that Ms. Talbot did not repay herself the amounts she was claiming.

This matter also had a long procedural history with many delays dating back to 2013. Ms. Talbot had also been granted summary judgment on the promissory notes in 2016.

The Honourable Justice Koehnen considered the facts of the case and Ms. Talbot was granted judgement for $160,000 against 220 Co., 225 Co., and Mr. Nourse for services rendered to 225 Co. and $42,000 against 220 Co. for services rendered to it. Justice Koehnen decided not to hold 220 Co. liable for the amounts outstanding on the promissory notes.

His Honour also discussed the purpose of the common employer theory and set out factors to be considered while ruling in favor of Ms. Talbot:

“73     The purpose underlying the common employer theory is to protect people who give their labour to an employer. It is contrary to any sense of justice to permit someone to take that labour but not pay for it by denuding the corporation of assets. The inequitable nature of that conduct does not turn on whether the employer or employee chooses to structure the relationship as a formal employment relationship or as a consulting relationship. If it were that easy, unscrupulous employers could avoid wage claims by structuring employment relationships as consulting arrangements.

74     There is no doubt that, as a matter of fact, Ms. Talbot’s relationship to 225 Co. was one of employment. She worked full time for 225 Co. and 220 Co. She did so under the direction of Mr. Nourse. This was not a case of Ms. Talbot providing advice to Mr. Nourse like a business consulting firm would. Her role was more in the nature of a chief operating officer. She had some independence but ultimately worked under Mr. Nourse’s direction.

75     220 Co. submitted that Ms. Talbot’s efforts amounted to “sweat equity” rather than employment. That submission would have greater force if there were actual equity. Here, there was much sweat but no equity. Sweat without equity sounds more like employment than a share of a business.

76 In my view, 225 Co. and 220 Co. have a sufficient degree of relationship to warrant application of the common employer theory. Evidence of this at trial includes the following:

(i) The two corporations were treated as interchangeable.

(ii) Equipment was moved back and forth between spas of the two corporations based on needs at any given time.

(iii) The two corporations paid each other’s suppliers.

(iv) The corporations paid each other’s employees based on cash flow at the time. Ms. Sergeeva admitted on crossexamination that she was paid by 220 Co. from time to time while she was employed by 225 Co.

(v) The visa terminals of 220 Co. were used to collect payment of funds from customers of 225 Co.’s spas.

(vi) The two corporations maintained a single malpractice insurance policy.

(vii) In May 2012, shortly after Ms. Talbot commenced this action, all of the employees of 225 Co. received a letter from 220 Co. indicating that they will be deemed to have been employed by 220 Co. from January 24, 2012, onward. Ms. Talbot’s termination letter was dated January 23, 2012.

(viii) The employment letter referred to in subparagraph (vii) above began by stating:
As part of our ongoing efforts to properly organize the Company following the events of the last few months, we are reviewing all employment relationships and having all employees sign a new employment agreement with the Company.

(ix) At approximately the same time, the spas of 225 Co. were, in effect, transferred to 220 Co. It appears that 220 Co. simply began running the spas of 225 Co. When leases were renewed, they were renewed in the name of 220 Co. That transfer appears to have occurred without documentation or consideration. At least no evidence of documentation or consideration was introduced at trial.

77     In my view, the factors set out above demonstrate a sufficient degree of relationship between 225 Co. and 220 Co. so as to hold 220 Co. liable for the wage claims against 225 Co.”

It is very likely that this decision will be used as future precedent in cases where employers attempt to use multiple entities such as corporations to attempt to avoid liability to employees. The common employer theory is an important tool when trying to establish the liability of an employer that operates via multiple corporations.

This decision was appealed and the Ontario Court of Appeal denied the appeal and awarded the Ms. Talbot costs in the amount of $10,000.

Ken and Kris were successful in winning at both the Ontario Superior Court of Justice and the Ontario Court of Appeal.

Full citations:
Talbot v. Nourse et al, 2018 CarswellOnt 3134, 2018 ONSC 1061, 291 A.C.W.S. (3d) 296
Talbot v. Nourse, 2019 CarswellOnt 7970, 2019 ONCA 436, 305 A.C.W.S. (3d) 330