• Post category:Court Cases

United Food and Commercial Workers International Union, Local 175 v Rose of Sharon (Ontario) Community cob as Rose of Sharon Korean Long-Term Care Home

Can a court-appointed receiver be considered a successor employer?

Rose of Sharon (Ontario) Community (“ROS”) operates a 60-bed long-term care facility in Toronto, Ontario. Since 2011, most of ROS’ employees have been represented by the United Food and Commercial Workers International Union, Local 175 (the “Union”). Pursuant to an Order dated September 27, 2011, Deloitte Restructuring Inc. was appointed receiver and manager (the “Receiver”) of all of the assets, undertaking and property of ROS (the “Property”). The Receiver assumed control and responsibility for ROS, including the employees represented by the Union.
A stay of proceedings was instituted, preventing the commencement or continuation of claims as against the Receiver, ROS or the Property. The Receiver obtained Court approval of a sale process that will hopefully result in the purchase of the Property.

Since its appointment, the Receiver had—despite repeated requests by the Union— refused to meet with the Union to bargain a collective agreement or consult in any way with the Union regarding the terms and conditions of employment of the employees who are represented by the Union.

 On February 21, 2017, the stay of proceedings imposed by the appointment order was lifted to permit the Union to initiate an application under s. 60 of the Labour Relations Act (“LRA”) at the Ontario Labour Relations Board (the “Board”), seeking a declaration that the Receiver was a successor employer to ROS. The Union did not seek any other remedy against the Receiver. The Board noted that the facts supported a finding that the Receiver was a successor employer. However, the issue before the Board was whether s. 14.06(1.2) of the Bankruptcy and Insolvency Act (“BIA”) precluded the Board from making such a declaration pursuant to s. 69 of the LRA.

The Receiver argued that although the Board had the jurisdiction to grant a successor employer declaration, it must interpret and apply s. 14.06(1.2) of the BIA with regard to the role of a court-appointed receiver. After all, receivers are appointed to be neutral custodians of business assets that need independent stewardship under the auspices of the court. They have “no skin in the game”. Any concession granted by the Receiver to the Union in negotiations for a collective agreement could potentially impact the recovery of creditors in favour of the employees—contravening the Receiver’s obligation to treat all parties equally. 

The Receiver further argued the intent of s. 14.06(1.2) is to protect receivers from liabilities that may be imposed under applicable labour legislation. The provision requires that the Union wait and negotiate with the permanent employer—that is, the eventual purchaser who will become the successor employer.

 By contrast, the Union noted that the objective of its application was to preserve its bargaining rights, and it did not request any relief that may have imposed liability on the Receiver. It argued that the bargaining rights continue independent of the appointment of the Receiver, and recognition of the bargaining rights did not create a liability. The Union also argued that recognition of its bargaining rights and negotiation of a collective agreement would not automatically increase the rights of the employees relative to other creditors. As such, the rights of the employees ought not be in limbo indefinitely pending the sale of the Property to an ultimate successor.
This is the first case to consider the application and effect of s. 14.06(1.2) in the context of a court-appointed receivership. The Board quoted the Supreme Court of Canada in GMAC Commercial Credit Corp.: “explicit statutory language is required to divest persons of rights they otherwise enjoy at law…federally regulated bankruptcy and insolvency proceedings cannot be used to subvert provincially regulated property and civil rights”.

The issue for the Board to determine was whether s. 14.06(1.2) met the standard of explicit statutory language. It found that the provision does not meet the standard, and does not preclude the Board from making a declaration of successor employer in respect of the Receiver. Subsection (1.2) expressly contemplates that a trustee may be a successor employer. There is no dispute that the Receiver falls within the definition of “trustee” in s. 14.06. If Parliament had intended to preclude a finding that a trustee was a successor employer, much of the provision would have no meaning. Rather, the wording of the provision recognizes that the trustee may be declared a successor employer but is immunized from certain liabilities for the actions of the debtor concerning its employees that predate the trustee’s appointment. The Board also concluded that such immunization from liability applied only to the trustee as a successor, and not to the eventual purchaser of the Property.
The Board also noted that bargaining rights are a vested right of a trade union which allows it to bargain with respect to wages, hours and other conditions of employment. The ability to bargain collectively does not guarantee increased wages or other terms detrimental to creditors. An indefinite suspension of bargaining rights until a sale is completed would unduly prejudice the Union and the employees.
The Board declared the Receiver to be a successor employer pursuant to s. 69(3) of the LRA.

Counsel: Jesse Kugler of CaleyWray for the applicant and Patrick Shea of Gowlings WLG for the responding parties 

  Full case: http://canlii.ca/t/hrklb