Succession and transfer of businesses in Canada

AutorEric Tucker - Christopher Grisdale
Páginas92-101

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Introduction

Canada is a liberal market economy and as such the freedom of owners of capital to transfer businesses is not heavily regulated and the rights of workers affected by those transfers are limited. Before discussing those rights some preliminary matters need to be addressed.

First, labour and employment law is regulated at the level of the provinces and territories. As a result, there is no nationally applicable statutory labour or employment law. However, the laws of most provinces and territories are roughly similar. Because we cannot possibly canvas the laws of each Canadian jurisdiction, we have used the laws of Ontario, Canada’s most populous province, as the basis of our answer. The one exception is in the area of bankruptcy and insolvency, which is under federal jurisdiction. As a result, in that area, provincial labour and employment laws have to be coordinated with federal bankruptcy law.

Second, labour and employment rights are layered. Employment standards statutes establish rights for all workers, whether they are unionized or not. The common law, which is judicially made, only applies to non-unionized workers. Collective bargaining statutes only apply to unionized workers and only address the question of the continuity of collective bargaining rights as the result of a transfer. Currently, about 30% of the Canadian labour force is unionized, but unionization in the private sector, where the issue of transfer of a business is most likely to arise, is about 17%.

Generally speaking, employees may be terminated as the result of the transfer of a business and their principle protection is that they become entitled to notice, or termination pay if notice is not given, and severance pay. Employment standards laws establish minimum entitlements to notice/notice pay and severance pay based on years of employment with the terminating employer. Non-unionized employees may seek greater entitlements to notice/notice pay under the common law and unionized employees may have greater rights under the collective agreement. Where employees of the transferor are hired by the transferee then the law may also provide there is continuity in employment and that seniority for the purposes of calculating various entitlement is unaffected by the transfer.

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1.a. Does the legal system of Canada establish a specific regulation regarding the rights of workers affected by a transfer of businesses? If so, is this rule the result of a supranational agreement?

Yes. The individual rights of workers in the context of a transfer are regulated through the Employment Standards Act (ESA) (S.O. 2000, c. 41). Collective bargaining rights in the event of a transfer are regulated by the Labour Relations Act (LRA) (S.O. 1995, c. 1, Sched. A). As well, non-unionized employees may claim certain rights in the event of a transfer based on the common law, which is judge-made law. None of these rules were created as the result of a supranational agreement.

2. What are the situations that determine the situation of «transfer of businesses»? How does the legal system in your country regulate the phenomenon of a transfer of business established in a collective bargaining agreement? And how does it regulate the situation of transfer of business derived from a transfer of a group of workers?
2.1. Collective Bargaining

Collective bargaining law provides that the union enjoys successor rights when there has been the -sale of business-. The term is defined broadly to include -leases, transfers, and any other manner of disposition- (LRA, s. 69). The labour board is vested with authority to determine whether a sale has occurred so that a declaration of successor rights should be issued. Needless to say, the question of when there has been the sale of a business has been the subject of an enormous amount of litigation. Generally speaking, the board looks to see whether there is continuity between the business of the transferee and the business of the transferor by examining a number of factors including, whether there is continuity in the work being performed, whether the location has changed, whether there is the same management, whether tangible assets and goodwill have been transferred and whether the employees have been transferred (see Lester (W.W.) (1978) Ltd., [1990] 3 SCR 644). Successor rights can...

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