If a business, or a part of it, is sold, leased, transferred, or otherwise disposed of, the purchaser, lessee, or transferee is bound by all proceedings under the Labour Relations Code (such as an application before the Labour Relations Board or an existing bargaining relationship). This means the proceedings, including any union bargaining rights and/or a collective agreement that is in force, continue as if no change has occurred and will automatically bind the purchaser, lessee, or transferee. This is called an employer successorship.
In addition, if certain contracts for services are re-tendered, and substantially similar services continue to be performed, in whole or in part, under the direction of a new contractor, a union's bargaining rights and any collective agreement are transferred to the new contractor. This is also called a successorship.
What are the effects of successorship?
If the Board decides there has been a successorship, the new employer effectively steps into the shoes of the old employer. For example, the new employer will be bound by the union's certification, the collective agreement, and any other proceedings under the Code.
This means the new employer must follow the collective agreement, the Code, and the employment practices of the previous employer.
How does the Board decide if a successorship has occurred?
If there is no dispute that a successorship has occurred, the parties are encouraged to apply to the Board to update the union's certification.
However, sometimes there is a dispute about whether there has been a successorship. Either party can apply to the Board to resolve it.
Was there a sale, lease, transfer, or other disposition of the business (or a part of it)?
In deciding this issue, the Board may consider whether:
- there has been a transfer of:
- customer lists
- accounts receivable
- existing contracts or inventory
- the alleged successor agreed to keep the predecessor's good name
- the predecessor agreed not to compete
- the same employees are performing the same work
- there has not been a gap in time in the operation of the business by the predecessor and alleged successor
- the customers now fall under the alleged successor
Not all these factors must be present for the Board to decide there is a successorship. There must be enough to show a discernible continuity in the business. The Board doesn't only consider the technical or legal form of the transaction--other forms of disposition can result in a successorship.
Was there a contract re-tendering?
A successorship where a contract is re-tendered only applies to:
- building cleaning services
- security services
- bus transportation services
- food services
- non-clinical services provided in the health care sector
- any other services designated by regulation
The Board will assess whether the services continue to be performed by the new contractor, in whole or in part, and whether they are substantially similar to the services performed under the old contract.
When can a party apply for a declaration of employer successorship?
The Board does not make advance rulings on whether possible scenarios create a successorship. The facts need to crystalize before the Board will make a decision. Generally, this means the sale or contract re-tendering has occurred. An exception is where making a decision in advance serves a labour relations purpose, such as:
- where there is a serious prospect of a labour relations dispute
- where a successorship is agreed to or not opposed
- where there are compelling reasons such as substantial economic consequences
How can a party apply for a declaration of employer successorship?
To apply for a declaration of employer successorship complete Form 35:
- Complete Form 35: Application for a Declaration of Employer Successorship
What orders can the Board make if it finds a successorship has occurred?
When the Board finds there has been a successorship, it has broad powers, including deciding what rights, privileges and duties have been acquired or are retained, dealing with the collective agreement, or holding a vote.
Leading decisions provide useful information on how the Labour Relations Board applies the Labour Relations Code (the Code) and information on what is or is not covered by the Code.