Sale of a Business and Transfer of Work

An employer cannot extinguish the employees’ collective bargaining rights by simply selling the business. Certain provisions of the Labour Relations Code are specifically designed to preserve the collective bargaining rights of employees and unions when businesses change hands.

In the event of the sale of a business or shifts in the corporate structure of an employer, the code protects existing collective bargaining rights primarily through the application of successorship and common employer principles.

SUCCESSORSHIP PRINCIPLES

The successorship principles provided in the code are intended to preserve the collective bargaining rights of employees and unions when businesses change hands. Where a business or part of it is transferred, sold, leased or otherwise disposed of, the transferee, purchaser or lessee (the successor) inherits the certification and all of the collective agreement obligations that were binding on the transferor, vendor or lessor (the predecessor). This can occur even if none of the predecessor’s employees are hired by the successor, although the transfer of employees is an important factor.

The threshold requirement for a finding of successorship is the transfer of a business, or part of it, from one employer to another. A business is not a precise legal concept, but rather an economic activity that combines certain intangibles (goodwill, know-how), physical assets (contracts, inventory, equipment) and human assets (employees and their skills). Similarly, successorship legislation has been held to comfortably embrace just about any means by which a new employer takes over an enterprise that is left in a form in which earlier collective bargaining rights of the employees should be preserved.

However, the fact that some of the work may have transferred to another entity is not enough; the issue is whether a part of the business has been disposed of in some way, and whether that part has been carried on using the same or similar collection of physical assets and human initiative. In other words, the union follows the business, not the work.

As noted above, the effect of successorship is that the employer who obtains the business is bound by all the obligations pursuant to any collective agreement in force between the predecessor employer and its employees. As a result, an employer cannot get rid of a union simply by selling the business.

COMMON EMPLOYER

The code is also concerned with associated or related businesses that appear to be carried on by more than one employer under common control or direction. Where the board declares two separate entities to be a single employer for the purposes of the code, this is referred to as a “common employer” declaration. The intent of such a declaration is to preserve existing rights and obligations under existing certifications and collective agreements. Essentially, you cannot simply establish a new corporate entity, which is non-union, and then shift work from your unionized operations to your new non-union corporation in order to defeat your employees’ collective bargaining rights.

In order to have two or more entities declared to be a common employer, the applicant must establish that:

a. there is more than one entity carrying on business;

b. the entities are under common control or direction;

c. the entities are engaged in associated or related activities or businesses; and,

d. there is a labour relations purpose to be served by the declaration.

For more information concerning successorship and common employer principles under the code, see the material under those headings here: Guide to the Labour Relations Code – Chapter 4 – Certification Process.

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