By Christina Catenacci and Yosie Saint-Cyr

On November 8, 2012, Ritu Mahil, Vice-Chair of the British Columbia Labour Relations Board decided that there was not a continuity between Zellers’ business at the Brentwood Mall in Burnaby, B.C. for its employees to be successively employed by Target in Canada. Although the employees would perform similar jobs at Target stores as they had at Zellers, and the transaction agreement confirmed the transfer of leases, pharmacy records and the brand waiver, these things were not sufficient to conclude that there would be a handover of these employees. As a result, the union’s application under Section 35 of the Labour Relations Code (“Code”) for a declaration that Target is a successor employer to Zellers with respect to the business carried on by Zellers at the Brentwood Mall in Burnaby, B.C. was dismissed.

Summary of Findings
As it has been widely publicized, Target transacted with Zellers in 2011 with a purchase price of $1.825 billion dollars to have the right to select up to 220 leasehold interests held by Zellers. The goal was to convert the locations into Target stores.

The union at the one location at the Brentwood Mall represented 137 employees in the bargaining unit. There was a collective agreement in force up until March 31, 2013, and Zellers continued to operate 223 stores in Canada.

Subsequently, in July 2012, Zellers announced the closure of the Brentwood Store effective March 14, 2013.

The Vice-Chair found that Target was not a successor employer and stated:

A significant feature of this case is the enormous amount of evidence led regarding Target’s unique position in the retail sector, its marketing strategies and the high amount of consumer recognition of its brand. I find that Target is bringing its own highly successful business to Canada. It did not need Zellers for anything but the lease or the opportunity to negotiate a new lease in a new area of Brentwood Mall. Though the employees may perform similar jobs in both stores and the Transaction Agreement confirmed the transfer of leases, pharmacy records and the Brand Waiver, I find those are not sufficient for me to conclude there is a discernible continuity of Zellers’ business. This is particularly the case in light of the hiatus of six months to three years between the closure of Zellers’ Brentwood Store and the opening of Target’s store in the Brentwood Mall.”

What Can One Take From This?
Interested stakeholders (i.e. employers, unions, legal counsel) must remember this was a specific case dealing with a particular transaction and union. What we can take from this is, where there is a transfer of all or part of a business, the purchasing employer (the successor employer) takes on the employment responsibilities of the selling employer (the predecessor employer), so that the unionized employees are not left in the dust. The employees continue working assuming business as usual, and do not lose all of their accumulated employment entitlements.

In British Columbia, the Employment Standards Act deals with successor employers and non-unionized workplaces. It confirms that the employment of an employee is deemed to be continuous and uninterrupted when a business, undertaking, or other activity or part of it is sold, leased, transferred, or merged, or if it continues to operate under a receiver or receiver-manager.

The British Columbia Labour Relations Code deals with successor employers and unionized workplaces. It confirms the existence of succession rights when a business is sold, leased, transferred, or merged with another business or part of it, or . The control, management, or supervision of it passes to the purchaser, lessee, transferee, or person acquiring it and the purchaser, lessee, transferee, or person is bound by those proceedings. The certification of any existing trade unions remains in effect and applies, and any collective agreement in force binds the purchaser, lessee, transferee, or person acquiring the business.

It is important to note that there may be different implications when dealing with a share purchase versus an asset purchase. A share purchase involves a complete transfer of a business; therefore, there is typically no change in the status of the employment relationship, and there is continuity of employment. An asset purchase involves the transfer of some or all of the assets of a business; therefore, contracts of employment cannot automatically be assigned to the purchaser. This means that with an asset transfer, each of the employees may be considered dismissed by the vendor, and the vendor would be liable for any claims of wrongful dismissal. However, the usual course of action with an asset transfer is that the purchaser agrees to offer employment to most, if not all, employees of the vendor upon the closing of the purchase and sale on the same terms as the employees were employed by the vendor. An employee who refuses the offer of employment by the purchaser would not likely have a claim for wrongful dismissal against either the vendor or the purchaser. If the purchaser later decides to terminate some of the employees the purchaser would be responsible for any claims of wrongful dismissal.

In addition, if terminations were necessary and involved the dismissal of employees during the time surrounding the business transfer, both the predecessor and successor employers should be advised that they still must comply with proper termination procedures pursuant to governing legislation.

Also, where a business merges with an existing business, the new employer may already be bound by a certification and a collective agreement with another union. The relevant governing Labour Board determines whether it is appropriate to combine the two bargaining units into one unit, and which certification and collective agreement apply to all employees in the new bargaining unit.

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Christina Catenacci and Yosie Saint-Cyr are editors at HRinfodesk.com–Canadian Payroll and Employment Law News.

Originally published in HRinfodesk–Canadian Payroll and Employment Law News and Developments November 2012.

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