Successorship

A purchaser of a business may be required to recognise and bargain with the incumbent union, even in an asset transaction structured to avoid liabilities.

The test. Substantial continuity of the business — same operations, facilities, products or services, supervisors, working conditions and customers — and a workforce in which a majority of the successor’s employees in an appropriate unit came from the predecessor.

Timing. Measured when the successor has hired a representative complement of its workforce.

What the successor must do. Recognise and bargain. It is generally not bound by the predecessor’s collective agreement and may set initial terms unilaterally — unless it is perfectly clear that it plans to retain all of the predecessor’s employees, in which case it must bargain before setting terms.

Discriminatory hiring. Refusing to hire the predecessor’s employees to avoid successorship is unlawful, and the remedy is an order to bargain plus reinstatement and back pay.

Withdrawal liability for multiemployer pension plans is a separate and frequently larger exposure, with statutory rules on whether an asset sale triggers it and on the conditions for the sale exemption.

Diligence. In any acquisition of a unionised business, the labour analysis should be done before the structure is fixed.