|
Printable version
Court of Appeal holds that transfer of workforce amounts to sale of a business
In a decision released on September 30, 1998, a unanimous panel of the
Ontario Court of Appeal has upheld a ruling by the Ontario Labour Relations
Board that the hiring by an employer of a substantial part of the workforce
of another employer was a sale of a business under the Ontario
Labour Relations Act. The Appeal Court’s ruling in
Town of Ajax v. C.A.W. - Canada, Local 222
reversed an order of the Divisional Court, which had quashed the Board’s
decision as being patently unreasonable. (For more recent developments, see "Supreme Court of Canada: transfer of workforce is sale of a business" on our Publications page.)
For some 16 years, the Town of Ajax contracted with Charterways Transportation
Limited to provide the workforce to run its transit system. In 1993, the Town
took back the operation of the system, cancelling its contract with Charterways
and hiring its own employees, the vast majority of whom had been employed by Charterways.
The C.A.W., the union which had represented the Charterways employees, applied to the
Board to preserve its bargaining rights by declaring that there had been a sale of a
business under the Act. A majority of the Board held that the declaration should be granted.
BOARD: SKILLED LABOUR FORCE IS "PART OF A BUSINESS"
In holding that a sale of a business had occurred, the Board rejected the
employer’s contention that there had been no transfer of any going concern,
but merely the transfer back to the Town of work previously contracted out.
The Board held rather that the Town had acquired from Charterways its most
valuable asset and an essential part of its business: an identifiable, skilled
and stable complement of employees.
DIVISIONAL COURT: NO TRANSFER, NO "NEXUS", NO BUSINESS
The Divisional Court quashed the Board's ruling, noting that, in Labour Board case law
on sale of a business legislation, what was required to grant a declaration was a
finding that there had been a transfer of the essential parts of a business as
a "going concern". Further, a "business" was not the same as the employees or the work
they perform. More than a mere continuity of work was needed to find a sale of a
business; some form of "organizational nexus" had to exist between the two
employers. There was no such nexus in this instance: Charterways had merely terminated
employees who were then hired by the Town of Ajax. Charterways could not be said to
have "relinquished" or "conveyed" the employees to the Town.
The Court also held that the Board had erred in concluding that the employees
hired by the Town were so essential an element of Charterways’ business that
they could be considered a "part" of a business under the Act. When its contract
with the Town ended, Charterways lost work, not a part of its business.
COURT OF APPEAL: A REMEDIAL PROVISION, A BROAD INTERPRETATION
The Court of Appeal disagreed, holding that the Board had offered a reasonable
interpretation of the legislation in both of its conclusions.
The Court observed that the statutory definition of "sale" was inclusive:
"'sells' includes leases, transfers and any other manner of disposition". Further, the
provision had a remedial purpose, the preservation of bargaining rights, and therefore
should be given a broad and liberal interpretation. The Court held that, based on these
principles, the Board’s conclusion that a sale had occurred was not unreasonable:
"Charterways had developed a skilled and experienced group of employees w
hich operated the transit system for the Town. ... When Ajax terminated
the contract, Charterways relinquished this work force, most of which
was acquired by Ajax. The nexus between Charterways and the Town is the
commercial history without which the Town’s acquisition of the work force
would not have occurred. This acquisition represents a
'transfer' to the Town of that work force."
Nor was the Board’s conclusion that, in hiring the employees,
the Town had acquired a "part" of Charterways’ business unreasonable. What
made this conclusion reasonable was the special quality of the workforce:
"In essence, the Board found that what was transferred was not just the
work formerly done by the Charterways employees nor the employees themselves.
There was the added value that came with the continuity, experience and
stability of this work force. Hence, there was a reasonable basis for the
finding that what was transferred to Ajax was a significant part of the
business which Charterways conducted for Ajax."
As a result, the appeal was allowed and the decision of the Board restored.
In Our View
The Supreme Court of Canada has noted the liberal interpretation applied in
various Canadian jurisdictions to sale of a business legislation, given its
purpose of preserving bargaining rights. Specifically, the Court has stated
that the word "disposition" has been interpreted to include almost any mode of
transfer, and is not restricted to legal forms of business transactions. Despite
this broad approach, virtually all labour boards require that something be
relinquished by the predecessor business and obtained by the successor to
bring a case within the legislation. In this case,
the 'something' was a skilled and experienced workforce.
For further information, please contact George Rontiris
at (613) 563-7660, Extension 275,
or Steven Williams
at (613) 563-7660, Extension 242.
|
