What due diligence applies to a unionized workplace in a business sale?

A unionized workplace changes what a buyer has to check, because the union relationship can travel with the business. Labour relations statutes in several provinces tie a sale to the bargaining rights and collective agreement already in place, so diligence is less about whether those obligations exist and more about what they say and what is already in motion under them. Does a union follow the business to a new owner? covers the rule itself; this page covers what to review.

Start with what binds the employer

Ontario’s Labour Relations Act says that when an employer bound by a collective agreement sells its business, the buyer is bound as if it had been a party, until the labour board declares otherwise, and the union stays bargaining agent for the employees. The Act treats part of a business as a business for this purpose. Québec’s Labour Code says alienating an undertaking does not invalidate a certification or a collective agreement. Ask for the certification, the bargaining-unit description and the current agreement, and have counsel confirm which statute governs.

Read the agreement for what it will cost

The agreement sets wages, hours and the order of layoff and recall, so read it for its expiry date, any clause dealing with a sale, and the seniority rules. British Columbia’s Labour Relations Code, for example, lets its board modify or restrict a collective agreement provision in order to define the seniority rights of employees affected by a sale, so how seniority carries over is a question to settle early. Ask for the current seniority list and the bargaining history too.

Find what is already in motion

Proceedings that began before the sale can become the buyer’s. British Columbia’s Code says a purchaser is bound by all proceedings under the Code before the date of the disposition, which then continue as if no change had occurred, and Québec’s Labour Code protects proceedings for certification or for carrying out a collective agreement. Request every open grievance and arbitration, any labour board application or complaint, and recent settlements, because the grievance history shows how the agreement works in practice.

Add employment-standards obligations

Employment standards law applies alongside the agreement. In British Columbia, the Employment Standards Branch says a purchaser must treat employees’ employment as continuous and assumes the seller’s liabilities and obligations under that Act toward them. Ask for accrued vacation and overtime balances and for the benefit and pension arrangements the agreement requires, then check who administers them.