It often seems like a good idea to hire an owner,
resident or tenant of the building to perform a job required by the strata
corporation (e.g., resident manager or caretaker, construction manager,
accounting, painting, roofing, plumbing, electrical, landscaping, etc.). After
all, these individuals have an interest in the building, they are likely to do
a good job, they know the building and it is convenient for the strata
corporation. However, there are several considerations that should be addressed
before the strata corporation decides to hire an owner, resident or tenant.
By retaining an individual who is an owner, resident or
tenant of the building, the strata corporation, in most cases, is entering into
an employer-employee relationship. This is a considerably different situation
than where the property management company directly employs an individual to
provide services for the building or the strata corporation retains the services
of an independent contractor.
Some of the concerns that the strata corporation may have
in entering into an employer-employee relationship are: (1) the strata
council’s capacity to enter into an employment contract; (2) who can be hired;
(3) whether there should be a written contract of employment; and (4) the
potential liabilities of the strata corporation that will result from the
employment relationship. This article will address all four of these issues.
1. The Strata
Council’s Capacity to Enter into an Employment Contract
The
Strata Property Act provides that the strata council has the capacity to enter
into a contract on behalf of the strata corporation with respect to the strata
corporation’s powers and duties as provided under the Strata Property Act. The
Strata Property Act also provides that the strata corporation is responsible
for managing and maintaining the common property and common assets of the
strata corporation. Accordingly, the strata council has the capacity to enter
into employment contracts for managing or maintaining the common property and
common assets of the strata corporation.
Prior to
entering into an employment contract, it is important to ensure the strata
council has the necessary authorization. Otherwise, the council may be liable
to the owners. Although the strata council does not require authorization from
the owners to enter into a contract it does require authorization from the
owners, by a resolution passed by a 3/4 vote at an annual general meeting or
special general meeting, to pay the employee pursuant to the contract unless
the amount is: (a) authorized in the budget; (b) a minor expense (as defined by
the bylaws); or (c) an emergency expense (s.98 of the Strata Property Act).
Therefore, before any employment offers are made, the
strata council should meet and decide whether a 3/4 resolution will be
necessary. If a resolution is necessary and the annual general meeting is not
going to occur in the near future, a special general meeting will be necessary.
At this meeting, the owners should pass a resolution allowing the council to
spend up to a certain amount of money to hire an individual for a particular
position.
2. Who Can be
Hired?
There is
nothing in the Strata Property Act that prevents the strata corporation from
hiring an owner, resident or tenant of the building to provide services
required by the building.
There is
also nothing in the Strata Property Act that prevents the strata corporation
from hiring a strata council member as employee of the strata corporation.
However, the strata council member must abide by the standard of care and
disclosure requirements set out in the Strata Property Act (s. 31 and s.32 of
the Strata Property Act).
Section
31 of the Strata Property Act requires a strata council member to “act honestly
and in good faith with a view to the best interests of the strata corporation.”
Accordingly, the strata council member cannot be hired if they would be in
violation of this section.
Section
32 of the Strata Property Act requires a strata council member who has a direct
or indirect interest in a contract with the strata corporation to disclose
fully and promptly the nature and extent of his or her interest, abstain from
voting on the contract and leave the council meeting when the contract is
discussed and voted on. Obviously, in most employment contract arrangements the
interest in the contract will be apparent, however the council member should
still comply with this requirement in order to prevent the strata corporation
from obtaining an order to set the contract aside.
If full disclosure does not occur and there is a failure
to comply with s.32, the strata council or an owner can apply to the court to
do any or all of the following: (1) set aside the contract; (2) require the
council member to pay compensation to the strata corporation; and (3) require
the council member to pay any profits made from the contract to the strata
corporation. Another alternative is to ratify the contract, after the fact, by
a resolution passed by a 3/4 vote at an annual general meeting or special
general meeting.
3. Should there be
a Written Contract of Employment?
The strata corporation should enter into a written
contract of employment. This is true even for smaller contracts. By entering
into a written contract, the terms of the agreement are clear and discernable
in the event of a dispute between the employee and the strata corporation. A
written contract also confirms for both parties the nature of the relationship
and their respective liabilities.
At a minimum, the employment contract should address the
following issues: (1) the employee’s duties; (2) salary and benefits; (3)
vacation; (4) expenses; (5) length of employment; and (6) termination.
4. Potential
Liabilities of the Strata Corporation
A strata corporation entering into an employer-employee
relationship has liabilities to the federal and provincial governments and the
employee, plus potential liability to third parties who may suffer damage at
the hands of the employee. It is important to note that simply designating
someone as an independent contractor does not necessarily relieve the strata
corporation from any of the liabilities discussed in the following paragraphs.
For further information in this regard please contact the author.
As an
employer, the strata corporation has obligations to the government and the
employee including the requirement to withhold statutory deductions, such as
Income Tax and contributions to the Canada Pension Plan and Employment
Insurance Commission. Also the strata corporation is required to pay a premium
for Workers’ Compensation Insurance pursuant to the Workers Compensation Act,
which provides protection in the event an employee is injured or killed on the
job.
The
strata corporation also has obligations to the employee under the Employment
Standards Act (i.e. payment of wages, providing a statement of wages and
maintaining employee records). Even after the employment relationship has
ended, the strata corporation may be liable to the employee for further
compensation, such as holiday pay, overtime, or even work performed by the
employee’s spouse.
It is
after the employment relationship has ended that the strata corporation is most
likely to be sued for breach of the Employment Standards Act. Accordingly, it
is important for the strata corporation to keep a detailed record of the
employment relationship, the hours worked, holidays taken, etc. in order to
comply with the Employment Standards Act and to have adequate records in the
event there is a dispute between the employee and the strata corporation.
The
strata corporation may be liable for a breach of the Human Rights Act if it has
discriminated against the employee on the basis of sexual preference, religion,
gender, race, disability or age. Also, if the employee was a tenant, the strata
corporation may have to deal with potential liabilities under the Residential
Tenancy Act.
Last, and perhaps the least obvious, is that the strata
corporation can be held vicariously liable to third parties for the acts of its
employees, including statutory violations, breaches of contract, negligence and
- in some cases - physical and sexual assault. Accordingly, great care should
be taken in selecting and supervising employees.
In light of the foregoing, a strata corporation should ensure
that it has appropriate insurance coverage to address all potential
liabilities. A judgment against the strata corporation is a judgment against
all the owners, except the owner who may have sued the strata corporation.
In summary, the strata council has the capacity to enter
into a contract of employment on behalf of the strata corporation. However, it
may be necessary to obtain a resolution from the owners to authorize payment of
wages pursuant to the contract. The strata corporation can enter into an
employment contract with an owner, resident or tenant of the building and it
can also enter into an employment contract with a council member, provided the
council member acts in good faith and in the best interests of the strata
corporation and the council member discloses to the strata council his or her
interest in the contract.
The strata council should always ensure that it has
authorization to pay the employee and the employment contract terms are set out
in writing. Written contracts will confirm the relationship between the parties
and the responsibility for any liabilities that may ensue. Finally, a strata
corporation cannot necessarily escape liability by simply designating an
individual as an independent contractor.
If the strata corporation is ever in doubt as to whether
entering into an employment contract is advisable, they should contact legal
counsel for an opinion in this regard. An early opinion could save the strata
corporation at lot of time, money and hassle.
Keri
Grenier
Clark
Wilson LLP.