Supreme
Court of Canada Affirms that Transfer of
Employees Can be a "Sale of a Business"
The Supreme Court of Canada, in its recent
decision, Ajax v. National Automobile and Agricultural
Implement Workers Union of Canada (CAW-Canada) and its Local 222,
has confirmed the Ontario Labour Relations Board’s (the
"Board") broad and liberal interpretation and
application of section 69 of the Ontario Labour Relations Act,
1995 ("OLRA" or the "Act"). In
dismissing the Town of Ajax’s appeal the Supreme Court has
affirmed the approach taken by the Board in finding that a
"sale, transfer or other disposition" had taken place,
pursuant to the Act, when the Town of Ajax decided to
terminate its contract with Charterways Transportation Limited
("Charterways") and operate Ajax Transit directly, by
rehiring a substantial portion of the Charterways’ workforce.
The Corporation of the Town of Ajax (the
"Town") had provided a public transit system known as
Ajax Transit since the mid 1970’s. Although the Town owned
buses, shelters, bus stops and virtually all of the other assets
necessary to operate the system, it never directly operated the
service prior to 1993. Instead, from 1977 to December 31, 1992,
the Town entered into a series of contractual agreements with
Charterways, whereby it provided the drivers, mechanics and
cleaners to operate the transit system.
By mid 1992 the Town Council voted to terminate
the contract with Charterways and operate Ajax Transit on its own,
as of January 1993. The intention of the Town was to alter the
operation as little as possible. The Town retained many
Charterways employees, with the majority of the resultant
complement of the workforce being made up of former Charterways’
Ajax Transit system employees.
Ontario Labour Relations Board Decision
The question for the OLRB was whether "a
sale of a business" had occurred sufficient to trigger
successorship under s. 64 of the Act. The only asset that
transferred was the workforce. The Board found:
In summary, we are satisfied that by
acquiring the substantial part of the work force previously
employed by Charterways to perform its obligations under its
contract with the Town, the Town transferred to itself an
essential element of that business. Consequently, we conclude
that in so doing, Charterways and the Town have transacted a
sale of part of a business within the meaning of section 64 of
the Act.
Ontario Divisional Court Decision
The Town sought judicial review of the Board’s
decision before the Ontario Divisional Court which found that the
decision was patently unreasonable in two respects: first, that it
was patently unreasonable to conclude that there was a sale of a
business; and second, it was clearly irrational for the Board to
have concluded that in taking on the employees, the Town had
acquired a "part" of the business of Charterways within
the meaning of the Act.
Ontario Court of Appeal Decision
The Union appealed the decision of the
Divisional Court to the Court of Appeal of Ontario. In a unanimous
decision given by Justice Goudge, that Court allowed the Union’s
appeal and restored the Board’s decision, finding that the Board’s
decision could not be said to have been clearly irrational or
patently unreasonable.
The Supreme Court of Canada Decision
In a majority judgement written by Chief
Justice McLachlin, (with Justices Bastarache, L’Heureux Dubé,
and Binnie dissenting), the Supreme Court of Canada dismissed the
appeal finding:
In my view, the historical and functional
connection between Charterways and the Town of Ajax constitutes
evidence upon which the Board would rationally have based its
conclusion of successorship. I would agree with Goudge J.A. that
the conclusion of the Board was not "clearly
irrational".
This decision by the Supreme Court of Canada
affirms the broad and liberal interpretation and application of
successorship provisions of the Act used by the Board. This
means that, where skilled employees are the major asset of the
business, the transfer of those employees alone may be sufficient
to support union successorship. This could be significant in cases
where the prior employer loses a contract or ceases to exist but a
group of skilled employees transfer to the new employer. An
example might be BPS ambulance service or Young Offenders facility
contract changes.
