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

A recent decision (Hospitality & Service Trades Union etc v Service Star Building etc 2013 CanLII 34400) of the Ontario Labour Relations Board (OLRB) will be of interest to customers and service providers who need to answer this important question: will successorship principles 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 case suggests that: (i) the answer to this key question may well depend on whether there is a commercial history or a nexus 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. In the decision, the OLRB 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 Ontario Labour Relations Act, 1995. 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 Service Star was a successor employer to ARAMARK. As a successor employer, Service Star would be bound by the collective agreement in place between HSTU and ARAMARK. In assuming the cleaning and maintenance contract previously held by ARAMARK, Service 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) had been the union representing Service Star’s employees. It brought a preliminary motion, supported by Service 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 OLRB granted the motion and dismissed HSTU’s application, notwithstanding that in the context of determining whether a prima facie case has been pleaded, attention is paid to only the allegations contained in HSTU’s application. The OLRB relied on the two-part test set out in paragraph 28 of Canadian Union of Public Employees v Metropolitan Parking Inc 1979 CanLII 815 (ON LRB) 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 asserted anything that would allow the Board to answer the first question, whether there had been a sale or transfer between ARAMARK to Service Star, in the affirmative. HSTU’s pleadings relied primarily on the continued employment of ARAMARK’s employees by Service 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 simply the transfer of assets. The OLRB found at paragraph 57 that HSTU had not pleaded “any allegations that suggest the assumption of janitorial work … was anything other than a “loss of work to a competitor”.” There were no allegations of a commercial history between the two companies and the Board was unable to find a nexus or “necessary link” between ARAMARK and Service Star that would support a determination that there had been a sale, transfer or other disposition between the two companies. For a longer version of this mini-article, follow this link. Summary by: Richard Austin