In common law, an agreement binds only the parties to the agreement. Over the years this notion has been altered as labour legislation in all Canadian labour jurisdictions permits collective bargaining rights to flow through changes in ownership as long as there is a continuation of the same business. Legislative provisions allowing for succession are aimed at preserving bargaining rights from being eliminated as a result of a sale, transfer or other disposition of a business. In essence, the union(s) retain(s) the bargaining rights and collective agreement(s) remain in effect in these circumstances.
Traditionally the concept of succession has been applied primarily where a unionized business is transferred from one private sector employer to another. In contrast, the legislative treatment of transfers from the Public Service to other sectors has been varied and irregular. Until recently, in the federal jurisdiction, Section 47 of the Canada Labour Code ( CLC ) was the only provision that preserved Public Service bargaining rights and collective agreements following the transfer of a Public Service undertaking to a Crown corporation subject to the CLC .
The increasing trend to divest government programs to other employers questioned the extent to which existing bargaining rights would be preserved in these situations. In order to enhance the concept of employment continuity, the government amended two statutes in spring 1996 to extend successor rights within federal jurisdiction.
This paper describes successor rights and the amendments brought to the federal Public Service Staff Relations Act ( PSSRA ) and the Canada Labour Code ( CLC ) in 1996. It also explores how the normal collective bargaining process interacts with successor rights provisions.
Successor rights are labour code provisions which allow a bargaining agent to continue to represent employees in a bargaining unit and also allow for the continuation of collective agreements (until the term expires) when a cohesive business or function is sold, transferred or otherwise divested. The successor employer becomes responsible for its predecessor's rights, privileges and duties towards the employees under the collective agreement. It should be noted, however, that discretion exists in determining whether a collective agreement will remain in effect until its expiration date and whether all bargaining agents and units will continue in the same manner, especially in cases of intermingling workforces. These issues can be resolved by the parties, however, in cases of disputes or questions of procedure the relevant labour board will make the final decision.
The specific application of successor rights varies across Canada, according to the labour code in force (e.g., that of Canada, the province, or, in some cases, the provincial Public Service). The applicable labour code establishes the conditions for:
Successor rights provisions provide for:
For these reasons, in the spring of 1996, the Government of Canada extended the application of successor rights to the following situations:
Both the Public Service Staff Relations Act and Canada Labour Code were amended in the Budget Implementation Act, 1996. As a result, in relation to Public Service functions, successor rights now apply in all situations above and, at the time of writing, to the provincial jurisdictions of Saskatchewan and British Columbia.
Two provisos were introduced, however, to the manner in which the Public Service collective agreements carry over:
More detailed analysis of the two provisos can be found below in sections E and F respectively.
The application of successor rights and determination of jurisdiction will depend invariably on the facts of each case. The determination will rely on very precise and detailed descriptions of the transferred business, the relationship between the predecessor and successor employer as well as the manner in which the activities will be performed by the successor.
When a federal agency is created from one part of the Public Service of Canada and remains in the Public Service, successor rights will apply. For example, a new agency created as a separate employer continues to be governed by the PSSRA and section 48 of that Act applies. If the new agency is created as an organization outside the Public Service, it may be governed by the CLC if the business, undertaking or work is federal according to section 2 of the CLC or section 91 of the Constitution Act. In this case, successor rights provisions of the CLC would apply to the agency.
It is not uncommon to face uncertainty in determining jurisdiction and application of successor rights. Although the question of whether an undertaking, service or business is a federal one depends on the nature of its operation, the subsidiary operations engaged in by the employees also come into question. If the subsidiary operations are, by their nature, inherent in or essential to the operation of the core federal undertaking, they too may be determined to be federal. In these cases, successor rights may apply.
Labour lawyers are best equipped to provide advice on the determination of jurisdiction and on the application of successor rights. Ultimately, finality on these issues is often provided by labour boards or other labour law administrators when dealing with specific proceedings, such as a declaration of transfer of business.
It should be noted that the responsibility to operate under the appropriate labour jurisdiction belongs to the successor employer. Departments must be interested, however, because they must factor in the overall cost of collective agreements in their negotiations with the successor employer and must ensure that employees receive the appropriate entitlements according to the Work Force Adjustment Directive ( WFDA ).
The trigger for successor rights is the sale, transfer or other disposition of a business (or part of a business) or undertaking (or part of the undertaking). In the case of section 48.1 of PSSRA this trigger is the action of deleting a portion of the Public Service from Schedule I, Part I and adding it to Schedule I, Part II. This may take place by Order in Council in accordance with section 5 of the PSSRA or by legislation.
In the case of section 47 of the CLC , if the part of the Public Service being transferred is listed in Part I, Schedule I of the PSSRA (i.e., it is a 'department'), it must be deleted from Schedule I. If the part of the Public Service being transferred is not listed (i.e., it is a branch, division or unit of a listed department), the actual transfer will be the trigger. For this reason, the transfer date should be clearly recorded in the transfer agreement or other formal agreement between employers.
Where successor rights may flow from a provincial statute, the trigger would also be the actual transfer, unless otherwise specified in the statute.
The sale, transfer and divestiture of Public Service functions may occur at any time during the normal collective bargaining cycle. Thus, successor rights provisions could apply when: 1) the collective agreement is still in effect on the date of transfer or 2) when notice to bargain has been given prior to the transfer date and the 'freeze' provisions of section 52 of the PSSRA are in effect. See footnote (1) The information provided below applies to successor rights provisions in the PSSRA and CLC only and should not be considered to apply to situations where successor rights flow from a provincial statute such as the British Columbia Labour Relations Code.
When the collective agreement is still in effect in the Public Service at the time of the sale or transfer of functions to another employer covered by the PSSRA or the CLC :
This application may be made only from the 121st to the 150th day after the transfer date. Neither the PPSRA nor the CLC provide any other opportunity for such applications.
0
30
60
90
120
150
180
210
240
Notice to bargain may be given any time after the transfer date if it is within the three months immediately preceding the expiry date of the collective agreements.
Waiting period ( PSSRA section 48; CLC section 47)
When either party has given notice to bargain prior to the date of transfer of functions under PSSRA or CLC :
Where the board makes a determination as to which bargaining units and which successor bargaining agent(s) is to represent the bargaining unit(s), either party may give notice to commence or recommence collective bargaining.
Note that all negotiations held between the previous employer and the bargaining agent which have not been formalized in a collective agreement do not bind the new employer or bargaining agent. In cases where bargaining has begun between the bargaining agent and the previous employer and is interrupted by the transfer, the new employer and bargaining agent will recommence bargaining.
0
30
60
90
120
150
Notice to bargain may be given any time after the transfer date if it is within the three months immediately preceding the expiry date of the collective agreements.
Waiting period ( PSSRA section 48; CLC section 47)
The standard provisions regarding a bargaining agent's application to the labour board for certification continue to apply in successor rights situations. Section 31 of the PSSRA and section 24 of the CLC provide a number of periods when application can be made. One window allowing for applications is the period immediately prior to the expiry of the collective agreement. During this period, trade unions may apply for certification as bargaining agents for units including employees affected by the transfer.
The successor employer may inherit many bargaining units from Treasury Board, which, in the successor employer's view, do not facilitate the conduct of operations in the new organization or protect the rights of employees. This is largely a result of the service-wide occupational-based bargaining unit structure of the Public Service. For example, the Canadian Food Inspection Agency has assumed responsibility for employees in 25 bargaining units, one of which had as few as five members. Most successor rights provisions give labour boards the authority to decide on a new unit structure, amend certification orders, negotiate scope clauses accordingly and decide which unions will represent the new units. As described above, applications may be made to the PSSRB or CLRB no earlier than 120 days after the transfer date.
The primary requirement is that the bargaining unit is capable of meaningful and harmonious collective bargaining. Labour board jurisprudence has defined, among others, criteria such as corporate structures, territorial scope of the employer's activities, industrial peace, history of certifications and collective bargaining, labour mobility, similarity of work, duties and working conditions, administrative efficiency and employee wishes. In all cases, the appropriate labour board makes the determination based on the facts related to the specific case.
Some factors identified by different labour boards in case law are:
Additional factors of particular relevance to the Public Service are:
The PSSRA requires that the Public Service Staff Relations Board has regard to the classification plan of the employer in determining the appropriateness of the bargaining unit. This plan must, however, permit the satisfactory representation of the employees to be included in it.
A classification plan for the purposes of the Act should include explicit labour relations objectives and should be based on the duties and responsibilities of the relevant employees. This notion of duties is carried through to:
United Steelworkers of America v. Usarco Limited, [1967] O.L.R.B. Rep. 526
Cablevision National Ltée v. Syndicat des employés techniques de Cablevision National Ltée , [1979] 3 Can.L.R.B.R. 267
Hospital for Sick Children, [1985] O.L.R.B. Rep. Feb. 266
Syndicat des employés des Banques Nationales de Rimouski v. National Bank of Canada, [1985] 11 C.L.R.B.R. (NS) 257
Canada Post Corporation v. Canadian Union of Postal Workers, [1988] 19 C.L.R.B.R. (NS) 129
U.F.C.W. v. Glengarry Transport Ltd., (1990), 81 di 64 (Can. L.R.B.)
Canadian Broadcasting Corp. v. A.C.T.R.A., (1991), 84 di 1 (Can. L.R.B.)
Canadian Museum of Civilization v. P.S.A.C., (1992), 92 C.L.L.C. 16,045 (Can L.R.B.)
Public Service Alliance of Canada, Professional Institute of the Public Service of Canada and the Association of National Energy Board Employees v. National Energy Board, P.S.S.R.B. Decision 142-26-297 to 301, Nov. 8, 1993
Council of Graphic Arts Unions of the Public Service of Canada, Association of Public Service Financial Administrators, Public Service Alliance of Canada and The Professional Institute of the Public Service of Canada v. Canada Communication Group, P.S.S.R.B. Decision 142-28-302 to 310, Dec. 13, 1994
Public Service Alliance of Canada and The Professional Institute of the Public Service of Canada v. National Capital Commission, P.S.S.R.B. Decision 142-29-312 and 313, Aug. 24, 1994
Brink's Canada Limited v. Independent Canadian Transit Union. Local no.1, (1994), 95 di 100 (Can. L.R.B.)
General Teamsters, Local Union no. 362 v. Brink's Canada Limited, (1996), 100 di 39 (Can. L.R.B.)
Many alternative service delivery ( ASD ) situations will involve a cross section of employees covered by collective agreements falling into three distinct groupings:
A number of issues have been raised with regard to the liability of new employers arising from successor rights in the general collective bargaining process, the application of the WFDA and potential retroactive employee compensation.
The key date for applying successor rights provisions to ASD situations is the transfer date.
Although the new employer assumes responsibility for the collective agreements associated with the undertaking being sold or transferred, the number of employees receiving job offers is outside the scope of successor rights and is strictly a matter for negotiation between the two employers. Traditionally, Public Service transfers involving succession have resulted in job offers to most affected employees.
The new employer is responsible for the terms of a collective agreement in effect or frozen on the transfer date but is in no way liable for agreements reached by the Treasury Board and its bargaining agents after the transfer date. Although a large portion of the original bargaining unit may remain in the Public Service, the new employer is not bound by agreements that are signed after the transfer date.
According to the WFDA , new employers must recognize years of service and continuous employment with the Public Service when successor rights apply in order to determine employee entitlements to benefits under the collective agreement. Accordingly, severance payments will not be made to employees on termination from the Public Service when the successor employer assumes liabilities for past and future severance payments.
In the case of organizations still governed by the PSSRA , the transfer of liabilities for severance payments is not an issue because the provision continues and the funding for these liabilities is centrally allocated. In the case of transfers to other employers, however, funding arrangements to transfer past service liabilities as well as annual leave credits or any other arrangements should be addressed in the transfer agreement. The Office of the Superintendent of Financial Institutions is responsible for preparing actuarial estimates of past service costs.
When the transfer of function occurs during the course of collective bargaining and the collective agreement is signed after the transfer date, transferred employees could benefit from the terms and conditions of the new collective agreement for their period of Public Service employment. If there are provisions for retroactivity contained in the new collective agreement, these will apply to the transferred employees up until the date of transfer.
Note that the same principle applies to pay equity settlements.
The NJC directives do not carry over to the successor employer. Although the collective agreements carry over due to successor rights, these agreements apply to a community of interests based on shared occupational activities and common terms and conditions of employment. Conversely, NJC directives apply to all Public Service employees and are negotiated based on the realities specific to the complexity of the employment conditions in the Public Service (i.e., 200,000 employees dispersed across the country occupying a multiplicity of occupational groups). For this reason, the government restricted the application of successor rights to only the collective agreement. Note that the exclusion of NJC directives from the collective agreements is linked directly to the termination authority in the FAA (section 11(2)(g.1) and section 11(9)). If Public Service employment were terminated via another mechanism such as enabling legislation, a similar provision to exclude the carry over of NJC directives with the collective agreement should be specified in that Act.
The rationale for transferring part of the Public Service to another employer, be it public or private, includes increased flexibility in the area of human resources management, consolidation of similar program activities, and streamlined program and management systems. Although the NJC directives and policies address issues common to many employers, the processes and procedures contained in them are specific to the requirements of the Public Service of Canada. Thus, the travel and relocation directives, for example, address a spectrum of situations, many of which would not apply to a smaller, more cohesive business unit.
When successor rights apply in the context of an intermingling work force, or when the receiving organization existed prior to the transfer, the successor employer will most likely have in place many policies which address the same issues covered by the NJC directives, such as employee travel.
However, when successor rights apply in the context of a new organization created specifically for the transfer, such as a federal agency, developing policies to 'replace' the NJC s may seem a difficult task. Although cloning the NJC directives in the new environment may foster an increased sense of continuity for employees, new organizations may find this step limits their future flexibility to meet operational requirements.
Other than creating completely new and tailored policies, the new employer could 'borrow' other Public Sector employer policies, such as the government of Alberta for example, for a transitional period. The employer could adjust them at a later time in consultation with the bargaining agent(s). This course of action would clearly demonstrate that the new environment will be different from the former (i.e., the federal Public Service), and that the new employer intends to tailor policies to operational requirements in a fair manner.
Another possibility is that the new employer could continue the monetary benefits only available to employees (in pay and in reimbursement of costs) contained in the NJC directives for a transitional period. This approach would then allow the new organization to separate the actual benefits from the body of rules and procedures contained in the directives. The organization would then be in a better position to tailor-make its own employer policies in consultation with the bargaining agent(s) at a later date. Note that the bargaining agent may wish to bargain issues traditionally covered by the NJC directives. It may be a challenge for the new employer to establish employer policies in these areas.
The opt-out provision is unique to the CLC in that it applies only to successor rights situations where a part of the Public Service is transferred to an employer under CLC jurisdiction. The PSSRA does not have such an opting-out provision. The Minister of the department effecting the transfer is responsible for initiating a proposal for opting-out of successor rights for that transfer.
The opt-out provision operates under the following terms:
It should be noted that although the responsibility to operate under the appropriate labour jurisdiction belongs to the successor employer, departments should be satisfied that an opt-out proposal is in the public interest.
Departments are advised to consult with the Labour Branch of Human Resources Development Canada should they consider using the opt-out clause. Rationales may include, but are not limited to, meeting public policy objectives, satisfying government and employee interests and business case arguments (e.g., risks to the viability of undertaking). Consultations with employees and their representatives are recommended.
It may be possible for departments, depending on circumstances, to opt out of the application of successor rights of the Canada Labour Code. Departments must persuade the Minister of Labour to seek Treasury Board recommendation from the Governor in Council for approval of opting out. This can be done in advance of the transfer date. The condition for this is that the transfer date has been specifically determined and that the primary conditions for transfer have been satisfied. The Order in Council cannot have a retroactive effect. Normally, the Governor in Council reviews the proposals on a case-by-case basis, although a series of orders could be sought where transfers are similar in nature. Separate Orders in Council and public interest rationales are required in relation to each transfer.
Return to footnote reference (1) Technically this could also happen when strike rights have already been acquired under the PSSRA in which case section 47.1 of the CLC reinstates the freeze of the terms and conditions contained in the collective agreement.
Date modified: 2011-10-14