Deloitte Restructuring Inc. v. United Food and Commercial Workers Int’l Union Loc. 175, 2021 ONSC 1260

Is a receiver a successor employer subject to the collective bargaining rights of employees?

Rose of Sharon operated a 60-bed long-term care facility on Maplewood Avenue in Toronto. United Food and Commercial Workers International Union, Local 175 (the “Union”) was certified as bargaining agent for certain employees of Rose of Sharon on September 22, 2011. On September 27, 2011, Deloitte was appointed as Receiver and manager of all the assets, property and undertaking of Rose of Sharon. The Receiver refused to recognize the Union as the bargaining agent of the employees over whom it assumed control and refused to engage in collective bargaining with the Union.

On February 21, 2017, the automatic stay of proceedings that followed the Receiver’s appointment was lifted to permit the Union to initiate an application before the Ontario Labour Relations Board for a related- or a successor-employer declaration against the Receiver. The Receiver had been operating Rose of Sharon’s retirement home business for more than six years.

Receivers are not liable for pre-appointment liabilities or post-appointment liabilities that accrued pre-receivership. But a receiver who operates an insolvent business may be found to be a successor employer under the Bankruptcy and Insolvency Act, and thereby be subject to the collective bargaining rights of the employees prospectively.

The Board found that the Receiver was a successor employer within the meaning of the Labour Relations Act. The Board then examined the relevant provisions of the BIA to decide whether those provisions precluded a finding that the Receiver was a “successor employer” under the BIA, and concluded that they did not. The Receiver subsequently brought this application for judicial review.

An assignment or petition into bankruptcy terminates the employment of the bankrupt’s employees. This termination applies to unionized employees as well as non-unionized employees. Termination of the employment of all unionized employees does not, however, terminate a collective agreement or bargaining rights.

Explicit statutory language would be required to immunize the Receiver from successor employer liability. Section 14.06(1.2) of the BIA does not contain “explicit statutory language” precluding a declaration that the Receiver is a successor employer. The text of s.14.06(1.2) presumes that a trustee may be a successor employer and immunizes the trustee, as a successor employer, from certain pre-appointment “liabilities” for which it might otherwise be liable, in its capacity “as a successor employer”.

Collective bargaining rights granted to a trade union are not “liabilities” within the meaning of s.14.06(2.1), but rather are a “vested right” to bargain on behalf of represented employees. Indefinite suspension of bargaining rights pending completion of a sale of the business would be unduly prejudicial to the union and the employees. As a successor employer, a trustee is generally bound by an existing collective agreement and will have continuing obligations arising from certification if the collective agreement expires. A trustee is also obliged to negotiate an initial collective agreement in good faith or to negotiate a new agreement if a collective agreement expires while the trustee is operating the business.

The Receiver argued that it would be placed in a position of conflict if it were required to negotiate a collective agreement. The Court saw no conflict. A trustee who continues to operate a business must make all sorts of arrangements, from purchasing supplies, to paying rent, and negotiating the prices of goods and services bought and sold. The ongoing business is subject to the collective bargaining rights of employees. Those rights are inherent in the business as a going concern. If the business is worth more as a collection of assets than as a going concern, then it may be sold as such. Its value, as a going concern, may be affected by the collective bargaining rights of employees, but that is no reason to abrogate those collective bargaining rights.

The Court determined that the Board’s decision was reasonable on the facts and the law and correct in its interpretation and application of s. 14.06(2.1) of the BIA. The Receiver’s application was therefore dismissed.

Judges: Honourable Mr. Justice G.S. Dunlop

Counsel: Patrick Shea and Christopher Stanek of Gowling WLG for the Receiver; Douglas J. Wray and Jesse Kugler of CaleyWray for the Union; Aaron Hart and Andrea Bowker for the Ontario Labour Relations Board