Union Successorship At The End Of The Outsourcing: Getting it Right

In a recent decision relevant to outsourcing in a unionized environment, Hospitality & Service Trades Union ¹, Local 261 v Service Star Building Cleaning Inc., the Ontario Labour Relations Board has rejected a successorship application in a building services case. The Hospital & Services Trade Union, Local 261 (“HSTU”) brought an application under Section 69 of the Labour Relations Act, 1995 ². HSTU maintained that the sale of a business had occurred when Service Star Building Cleaning Inc. (“Service Star”) assumed a cleaning and maintenance contract previously held by ARAMARK Canada Ltd. (“ARAMARK”). HSTU had representation rights for the building cleaning employees of ARAMARK and sought a declaration that Silver Star was a successor employer to ARAMARK. As a successor employer, Silver Star would be bound by the collective agreement in place between HSTU and ARAMARK. Section 69 of the Labour Relations Act, 1995 provides in part:

“69.(1) In this section, “business” includes a part or parts thereof; “sells” includes leases, transfers and any other manner of disposition, and “sold” and “sale” have corresponding meanings. (2) Where an employer who is bound by or is a party to a collective agreement with a trade union or council of trade unions sells his, her or its business, the person to whom the business has been sold is, until the Board otherwise declares, bound by the collective agreement as if the person had been a party thereto … .”

In assuming the cleaning and maintenance contract previously held by ARAMARK, Silver Star took over the employees, including three managerial personnel, who had been working for ARAMARK. According to HSTU, the employees were also directed to continue using some of the equipment they had used when working for ARAMARK, although the employees were issued with new uniforms, mops and pails. The Service Employees International Union Local 2, Brewery, General & Professional Workers’ Union (“SEIU”) was the union representing Silver Star’s employees. It brought a preliminary motion, supported by Silver Star and ARAMARK, asking that HSTU’s application for a successorship declaration be dismissed on the basis that HSTU had failed to make out a prima facie case entitling it to the declaration. The Ontario Labour Relations Board granted the motion and dismissed HSTU’s application, notwithstanding that in the context of determining whether a prima facie case has been pled, attention is paid to only the allegations contained in HSTU’s application. The Board relied on the two part test set out in paragraph 28 of Canadian Union of Public Employees v. Metropolitan Parking Inc. ³ for determining whether a sale of a business had occurred:

“28. A section 55 (now section 69) application really involves two related questions: has there been a “sale” within the extended statutory definition of that term; and does what has been “sold”, “transferred” or disposed of” constitute a “business” or “part of a business”. …”

The Board was not persuaded that HSTU had pled anything that would allow the Board to answer the first question, whether there had been a sale or transfer between ARAMARK to Silver Star, in the affirmative. HSTU’s pleadings relied primarily on the continued employment of ARAMARK’s employees by Silver Star and the continuity of the work. However, the continued employment of the employees was a factor to be considered in dealing with the second phase of the inquiry, whether what has been sold or transferred is a “business” instead of being just the transfer of assets. The Board was unable to find a link between ARAMARK and Silver Star that would support a determination that there had been a sale, transfer or other disposition between the two companies. The Board found at paragraph 57 that HSTU did not plead “any allegations that suggest the assumption of janitorial work … was anything other than a “loss of work to a competitor”.” Further, the Board was not persuaded that the two decisions HSTU was relying on were applicable in the circumstances:

1. In Ajax (Town of) v. National Automobile, Aerospace and Agricultural Implement Workers Union of Canada ⁴, the Board had granted a successorship application, preserving the CAW’s representation rights, where the Town of Ajax terminated its contract for the operation of the municipal transit system and elected to operate the transit system on its own. The Town of Ajax, in addition to owning all the assets, controlled how the work was performed. In the circumstances, the Town’s decision to in-source the work triggered the necessary “transfer”. In the case of ARAMARK and Silver Star however, there were no allegations of a “commercial history” between the two companies to suggest the companies were something other than competitors in the janitorial industry. Nor was there a nexus between ARAMARK and Silver Star that could be interpreted as resulting in a transfer from ARAMARK to Silver Star.
2. In Thunder Bay Ambulance Services Inc. ⁵, after two Thunder Bay hospitals decided to discontinue their ambulance operations, the Ministry of Health, who owned all of the assets required for the operation of the ambulance services, issued a Request for Proposal seeking a new operator. The successful bidder was the former Director of Ambulance Services at one of the hospitals and all of the employees of the new service provider were former employees of the ambulance services of the two hospitals. The union that had held bargaining rights for the employees when they were providing ambulance services through the hospitals brought an application for a successorship declaration. In that case, the Board found at paragraph 18 that, in light of the transfer of the exclusive right to use the assets of the Ministry of Health, the transfer of managerial skills and the uninterrupted continuation of identical job functions, the Ministry of Health had served as the “necessary link” in the transfer of a business. In the case of ARAMARK and Silver Star, the Board was unable to find a “necessary link” which could facilitate or support a sale of ARAMARK’s business to Silver Star.

This decision will be of interest to customers and service providers seeking to answer the question of whether successorship principles will apply at the end of the term of an outsourcing agreement when work performed by one service provider’s unionized employees transitions to a new service provider. The Ontario Labour Relations Board’s decision suggests that: (i) the answer to the question may well depend on whether there is a commercial history or a nexus or necessary link between the two service provider firms; and (ii) whether the nexus or necessary link exists depends not just on the relationship between the two service providers but also on the extent of the customer’s involvement in the transition of work to the new service provider.

1. 2013 CanLII 34400 (ON LRB)
2. S.O. 1995, c.1, as amended
3. [1979] O.L.R.B. Rep. 1193; 1979 CanLII 815 (ON LRB)
4. 1998 CanLII 7179 (ON CA), (aff’d [2000] 1 SCR 538)
5. 1978 CanLII 569 (ON LRB)